Chicken Run Case Study

Topics: Accounts receivable, Balance sheet, Audit Pages: 9 (3077 words) Published: May 6, 2013
Excel Poultry & Meat Sdn Bhd (EPM) was established in 1998 to carry on chicken farming and supplying of whole chickens to various outlets in Malaysia. The company was one of the members of the Federation of Live-stock Farmers’ Associations of Malaysia (FLFAM). It was small and medium sized enterprise (SME) located in Kluang, Johor. Encik Selamat, a Certified Public Accountant (CPA) had been the General Manager of EPM. He was transferred from another subsidiary of the same group which dealt in the transportation business. At first, he was reluctant to accept the current position, however he began his function as the General Manager as he considered the job as a promotion that would add to his basket of skills and expertise. The career track had been smooth until the closing of the year 2008 when the company he presently helmed faced operational crises. This case highlighted the rule and regulation, leadership skill, and internal control system of this company.

1. Problem and issue facing by the company.
There are several problems and issues facing by the company. One of the problem is related to poor account receivable system. The balance amount in the account receivable of the company is not match with the confirmation sent to the customer. These things happen when Mr. Siva, one of the retail customers complaining that the figures on the statement of accounts sent to him was incorrect. He had made cash payment and paid all outstanding balance but the transaction was not recorded by Encik Munir, one of the former staff at the finance department. It shows that the company’s accounts are not in a proper order. Another problem arose is the rising cost of chicken feed gave big impact to this company and also to the country. As by August 2008, costing of chicken feed was increased from RM54.50 to RM88. The rising cost has automatically effect the cost of production which is had risen about 56.5%. Then, the sellers of chicken also did increased the retail price resulted drop in demand. The customers tend to buy another meat compared to chicken meat in order to fulfill their needs.

Besides that, EPM has lack of internal control system. This can be seen where the company’s operating cash was systematically running low. This is due to the company that still continued supply the product to Cold Gold Sdn Bhd although it has reached the credit limit. This may in turn increase the financial obligations of the company in terms of interest payments. Moreover, Cold Gold Sdn Bhd is the major customers that exacerbated the existing operating loss faced by the company. In addition, the aging analysis prepared shows that Mr Siva had outstanding balance in his account even though he already paid the amount by cash. Another problem is related to Encik Selamat and Encik Azman where there is a conflict of interest between both of them. Encik Selamat had a meeting with Encik Azman, the executive directors of Cold Gold Sdn Bhd who was his best friend during at college. Thus, the possibility of Cold Gold to extend their credit limit with authorization from En Selamat is higher. 2. Who are the stakeholders and what their stakes are?

The obvious stakeholder for this company is employee. As Encik Selamat, he is the manager. He currently looks for satisfaction and he wants to retain his position. As employees, they want to be paid based on the energy spent. They also concerned about the risk of losing their job. They have to make sure the company status is doing well in order to increase their job security. The other stakeholder of this company is government. The main target for the government in its plans is to support large- scale processing projects in an area known as the East Coast Economic Region (ECER). Therefore, the government relies on poultry industry to succeed in this project. Customer is also the stakeholder. They relied on the product supply with high quality and they can buy at the reasonable price....
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