INTRODUCTION
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. It is a subsidiary of PCK Holding since 2005. The set up was a small and medium sized enterprise (SME) located in Kluang, Johor. EPM was a member of Federation of Livestock Farmers’ Association of Malaysia (FLFAM).
Since there is no dietary prohibitions and religious restriction against chicken consumption, it was the most popular and cheapest source of meat protein among Malaysians. In addition, the surge of quick-service-restaurants (QSR) had facilitated significant growth in chicken consumption. Also, the traditional Malaysian delicacies were equally popular with patrons. Hence, EPM business was doing well.
EPM starts the business with an initial capital of RM3.6 million and with 20 employees. Now, EPM had more than 200 employees and started positioning itself as the top 5 chicken suppliers within mid-tier producers in the country. The company was able to maintain its operations and started to make profits in the poultry and meat industry since the demand for chicken remained buoyant.
Encik Selamat expand his business to the superstores that mushrooming throughout the country like Giant, Tesco, Macro, Carrefour and the like. Together with his management team, he established good promotional strategies and closely managed all functional units. Demand from superstores continued and was spread to institutional retailing, hospitals, hotels as well as university colleges.
RECOGNIZING SYMPTOMS AND TRUE PROBLEMS
Since 2008, the company has been facing the problem of increasing in the chicken feed cost where the price of the chicken feed had been increased from RM54.50 per bag to RM88 per bag. This shows an increase of 61.5% in the cost of chicken feed. This has ultimately increased the company’s production cost almost about 56.5%. This is turn made the operating cash of EPM running low.
Although EPM had growing in their revenue, they still cannot improve their operating profit mainly due to less significant difference between cost of sales and revenue. Hence, the company resort to borrow short-term borrowing to meet their operating obligations. However, this had increased their financial obligations in terms of interest payments and caused more losses to the company. This in turn made their operating cash systematically running very low.

Furthermore, their financial position becomes worse as their receivables collection is out of control. EPM continues to supply products to Cold Gold Sdn Bhd even though their credit limit had already exceeded. This shows that EPM did not collect its customers’ debt well and also cannot pay their own debt (interest from short-term borrowing). Hence, this in turn increases their trade receivables as well as trade payables.
Encik Selamat had a close relationship with Encik Azman, the executive director of Cold gold Sdn Bhd. This relationship had enabled Cold Gold Sdn Bhd to extend their credit limit with an authorization from Encik Selamat. This situation leads to conflict of interest as Encik Selamat did not disclose this matter to the Board of Directors. This in turn proves that EPM has lack of internal control which creates a hole for Encik Selamat and Encik Azman to cause this problem.
Lastly, EPM also had improper books of account. This is because one of their retailers, Mr Siva complained that the figures on the statement of accounts sent to him were incorrect. He claimed that he had no outstanding balance as cash payments had been made to Encik Munir, former staff in finance department. Encik Munir had not disclosed the receipt of payments from customers. The lack in internal control had gives opportunity for this problem to occur.
SWOT ANALYSIS
Excel Poultry & Meat Sdn Bhd shows their strength in poultry industry as they become one of top 5 chicken suppliers. They also able to sustained their profit and growth. Other than that, EPM has a qualified accountant, Encik Kassim and reliable credit controller, Ms Choy. Encik Selamat also has a good reputation in community.
However, Encik Selamat is lack of expertise in poultry and meat industry which shows the company’s weaknesses. EPM also lack of focus in their business operation, cash flow issue, conflict of interest and possible error or fraud or fictitious transaction.
Poultry industry especially chicken meat is Malaysian’s highest consumption rates which give EPM opportunity in their business. Furthermore, there were lot of Quick-Service-Restaurant (QSR) and government’s supported through the East Coast Economics Region (ECER).
The threats for Excel Poultry & Meat Sdn Bhd is when the production cost had risen ultimately by increase in the chicken feeding cost. If they increase the chicken price to the market, they will face the drop in demand. The exceeded in credit limit of Cold Gold Sdn Bhd also become their threat.

RECOMMENDATION
EPM is low in operating cash. Therefore, in order to resolve this matter, it is recommended that EPM can increase the chicken production as side income or develop more chicken products to sale. For example, EPM can propose other products such as eggs, chicken manure and feather.
Other than that, for solving the increase in the production cost due to increase in the chicken feeding cost, it is recommended that EPM can produce their owns chicken feed. They can mix the ingredients such as corn, soybean meal, wheat and others. This not only can save their cost in chicken feeding, but also resulting a healthy chicken. Besides that, instead of borrowing short-term borrowing, EPM can apply for long-term borrowing which offers longer lending term.
For solving the problem in increasing the trade receivables, EPM should manage their cash flow system. As EPM allows their customers to purchase by credit, hence before approving the customers’ order, EPM should check on their credit account and any related relationship pertaining to creditors. This is to avoid any personal interest in the company management team. In addition, EPM should prepare a specific contract that includes the credit term in collecting the debt. EPM also can send reminders to customers with outstanding balances in respect of their accounts. Also, EPM can reduce credit term payment. This can prevent high in trade receivables.
For the conflict of interest that is happening in the company which show the lack of internal control, EPM should establish policies for clear ethical conducts, job scopes and management of EPM to solve the ethical problems. Other than that, company should develop whistle blowing policy to encourage the members of EPM to disclose any conflict of interest or issues or irregularities that happen in the company.
For the improper books of account problem, EPM need to have proper documentation system to record every transaction occurs. The documents need to be maintained for future reference. Each document should comes with pre-number system and must be recorded exactly at the time of the transaction occur.
CONCLUSION
In conclusion, the main issue in EPM is low liquidity of cash flow and lack in internal control. Internal control and cash flow are very important for organization. If the company has lack in internal control and low operating cash flow, it will cause the company facing serious problem in conducting their business. However, there some recommendation that EPMM can take place to solve the problems.