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THE IMPACT OF ACCOUNTS RECEIVABLE MANAGEMENT ON THE

PROFITABILITY OF SMALL AND MEDIUM-SIZED ENTERPRISES

BARROMA, Dian Irish B.

RABY, Alexander Maxteode R.

TAPAGANAO, Jade D.

Independent Variable: Accounts Receivable Management

Dependent Variable: Profitability

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Background of the Study

Making a sale in a competitive marketplace is difficult. In some cases, payments for

products purchased or services rendered may not collect immediately because of

unavailability of cash. For this reason, some businesses offer a credit sale which is

one of the tools used in persuading and retaining potential customers.

Accounts receivable is the balance of money due to a firm for goods or services

delivered or used but not yet paid for by customers (Kenton, 2020). The process of

collecting the payments owed to a business is called Receivable Management. It is

important to collect them in a timely manner because it is a big part of calculating

the business' profits. In most firms, receivables represent a large financial source,

that’s why efficient receivable management in businesses is relevant not only to

ensure the collection of payment but also to guarantee a better cash flow, to have a

higher available liquidity and to increase profitability.

Small Medium Enterprises (SME’s) in the Philippines play a critical role in economic

growth and industrial development because they make up a large part of the

business landscape. The management of accounts receivable is becoming more

important especially during crises when SMEs are weak or having difficulty in
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generating earnings (Gu & Xu, n.d.). They sometimes experience bad days where

expected collections are not being collected especially now that there’s pandemic

and everyone gets affected financially. Some businesses tend to have inefficient or

poor management of accounts receivable that results in high bad debts or low

collection of payments. On the other hand, some have efficient and effective

management of accounts receivable that results in better cash flow. Accounts

receivables management is a crucial field of finance because it affects firm’s

profitability and therefore affects the firm’s value (Ksenija Denčić, 2013).

The researchers want to study this topic to see how kinds of accounts receivable

management of selected SMEs affects their profitability which may help other

businesses to decide if having accounts receivable is good or not for their company

and also to give insights and advices on the proper management of accounts

receivables to avoid losses and shortage of funds.

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References:

Adda, A., (2020, May 30). What is receivable management? Retrieved from February
24, 2021, https://abcadda.com/what-is-receivable-management/

Aldaba, Rafaelita M. (2008) : SMEs in the Philippine Manufacturing Industry and

Globalization: Meeting the Development Challenges, PIDS Discussion Paper
Series, No. 2008-15, Philippine Institute for Development Studies (PIDS),
Makati City. Retrieved from
https://www.econstor.eu/bitstream/10419/126740/1/pidsdps0815.pdf

Kenton, W. (2020, August 29). Accounts receivable (ar). Retrieved February 26, 2021,
from
https://www.investopedia.com/terms/a/accountsreceivable.asp#:~:text=Acco
unts%20receivable%20(AR)%20is%20the,for%20purchases%20made%20on%2
0credit.

Ksenija Denčić, M. (2013, May). IMPACT OF ACCOUNTS RECEIVABLE MANAGEMENT

ON THE PROFITABILITY DURING THE FINANCIAL CRISIS: EVIDENCE FROM
SERBIA. Retrieved February 25, 2021, from
https://www.researchgate.net/publication/283716261_IMPACT_OF_ACCOUN
TS_RECEIVABLE_MANAGEMENT_ON_THE_PROFITABILITY_DURING_THE_FINA
NCIAL_CRISIS_EVIDENCE_FROM_SERBIA

Gu, L., & Xu, Y. (n.d.). Accounts receivable management of small and medium
enterprises in the post-crisis era: Based on the factoring perspective. Retrieved
February 26, 2021, from https://www.infona.pl/resource/bwmeta1.element.ieee-
art-000005882295
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LEADER:

Barroma, Dian Irish B.

MEMBERS:

Raby, Alexander Maxteode R.

Tapaganao, Jade D.

10/10 - Mahirap po talaga gumawa ng papers lalo na baguhan po kami pero nakikita

ko po yung effort nila na may maitulong kahit minsan di kami nagkakaintindihan.

Malaking help na po yung nag-try kame lahat at nag-suggest ng kanyakanyang ideas

po.