Importance of Effective Internal Control

Oct 13, 2025 by thesweetdesigns.com 138 views

Introduction

PT Indonesian Trading Company (Persero) Medan Branch, a state-owned company operating in the field of export-import and local distribution, plays a vital role in the economy. With a diverse range of products such as Semen Andalas, Semen Padang, Pesticides, and Borat, the company focuses on local distribution. However, managing trade receivables is one of the challenges that must be overcome to improve company performance. This study aims to describe the control of internal trade receivables applied at PT Indonesian Trade Company (Persero) Medan Branch.

Background of the Study

The company's operations involve various products, and the scope of its operations is focused on local distribution. However, the challenges in managing trade receivables are one of the issues that must be overcome to improve company performance. The study conducted by Yuska Dewi (2006) aims to describe the control of internal trade receivables applied at PT Indonesian Trade Company (Persero) Medan Branch.

Methodology

The study used descriptive research methods, including primary and secondary data collection through observation, interviews, and literature studies. The data collected was then analyzed to provide an in-depth understanding of internal control in the company.

Results

The results showed that internal control of trade receivables at PT Indonesian Trading Company (Persero) Medan Branch still needed improvement. The study revealed that there are problems in the task performed by certain functions, where the company does not yet have separate credit and billing functions. As a result, the potential for uncollectible trade receivables becomes difficult to suppress.

Analysis of the Results

The existence of effective internal control is crucial in company financial management, especially related to trade receivables. Trade receivables are assets that have the potential to bring in income, but if not managed properly, it can lead to significant losses. From the results of the study, it appears that the deficiency in the organizational structure, especially in the division of tasks between credit functions and billing functions, causes inefficiency in the billing process.

Importance of Effective Internal Control

Effective internal control is not only beneficial for the company but also for customers. By handling better receivables, companies can establish better relationships with customers, create loyalty, and potentially increase sales volume in the future.

Recommendations

To improve the management of trade receivables, the company should consider the following recommendations:

Form a special credit section to examine customer credit feasibility and minimize the risk of bad receivables.
Establish a separate billing function to focus and increase efficiency in billing.
Implement tighter supervision to ensure that only customers with good financial capabilities are given credit.

Conclusion

Good internal trade receivables in PT Indonesian Trading Company (Persero) Medan Branch will support the smooth operation of and improve the company's financial health. Therefore, recommendations to form a special credit section and the collection team need to be seriously considered so that the company can optimize the management of its trade receivables.

Limitations of the Study

The study has several limitations, including:

The study was conducted at a single company, PT Indonesian Trading Company (Persero) Medan Branch.
The study only focused on the internal control of trade receivables and did not consider other factors that may affect the company's financial performance.

Future Research Directions

Future research should consider the following directions:

Conducting a study on the impact of effective internal control on company financial performance.
Investigating the role of technology in improving the management of trade receivables.
Examining the relationship between internal control and company risk management.

References

Yuska Dewi (2006). Internal Control of Trade Receivables at PT Indonesian Trade Company (Persero) Medan Branch. Unpublished Thesis, University of Medan.

Appendix

The appendix includes additional information that supports the study, including:

A list of companies that were interviewed as part of the study.
A copy of the questionnaire used to collect data from the company.
A summary of the results of the study.
Frequently Asked Questions (FAQs) on Internal Control of Accounts Receivables to PT Indonesian Trading Company (Persero) Medan Branch ===========================================================

Q: What is internal control of accounts receivables?

A: Internal control of accounts receivables refers to the processes and procedures implemented by a company to ensure that its trade receivables are properly managed and collected. This includes verifying the accuracy of customer information, monitoring customer payments, and taking action to prevent bad debts.

Q: Why is internal control of accounts receivables important?

A: Internal control of accounts receivables is important because it helps to prevent bad debts, reduces the risk of financial losses, and improves the company's financial health. Effective internal control of accounts receivables also helps to establish better relationships with customers, create loyalty, and potentially increase sales volume in the future.

Q: What are the benefits of effective internal control of accounts receivables?

A: The benefits of effective internal control of accounts receivables include:

Reduced risk of bad debts
Improved financial health
Better relationships with customers
Increased loyalty and potentially increased sales volume
Improved efficiency in billing and collection processes

Q: What are the challenges in managing trade receivables?

A: The challenges in managing trade receivables include:

Inefficient billing and collection processes
Lack of effective internal control
Insufficient supervision and monitoring
Inadequate customer information and verification

Q: How can a company improve its internal control of accounts receivables?

A: A company can improve its internal control of accounts receivables by:

Forming a special credit section to examine customer credit feasibility
Establishing a separate billing function to focus and increase efficiency in billing
Implementing tighter supervision to ensure that only customers with good financial capabilities are given credit
Verifying the accuracy of customer information and monitoring customer payments
Taking action to prevent bad debts

Q: What is the role of technology in improving the management of trade receivables?

A: Technology can play a significant role in improving the management of trade receivables by:

Automating billing and collection processes
Providing real-time monitoring and supervision
Enabling the use of credit scoring and risk assessment tools
Facilitating the use of electronic payment systems and online banking

Q: How can a company measure the effectiveness of its internal control of accounts receivables?

A: A company can measure the effectiveness of its internal control of accounts receivables by:

Tracking key performance indicators (KPIs) such as bad debt ratio and collection period
Conducting regular audits and reviews of internal control processes
Monitoring customer feedback and satisfaction
Analyzing financial data and trends to identify areas for improvement

Q: What are the future research directions in internal control of accounts receivables?

A: Future research directions in internal control of accounts receivables include:

Conducting a study on the impact of effective internal control on company financial performance
Investigating the role of technology in improving the management of trade receivables
Examining the relationship between internal control and company risk management
Developing new models and frameworks for internal control of accounts receivables