The Application of Markov Chain Model in Bad Debt Management

With the increasing scale of modern enterprises, the accounts receivable are more and more important, so how better to manage the bad debt of the accounts receivable has become a focus of attention. In this paper, the advantages and disadvantages of various accounts receivable bad debts management practices, such as percentage of accounts receivable balances, aging analysis, the percentage of sales method, method of individual identified, will be discussed with the characteristics of accounts receivable, and proposed as a Markov Chain Model for new ways to estimate bad debt losses. Therefore, the Markov process model can be used as the accounting in the accounts receivable of a provision for bad debts method.