Management of account receivables and financial performance in an organization

Abstract

The major aim of the study was finding the relationship between management of account receivables and financial performance of a firm. The dimensions of management of account receivables used were: credit policy, factoring of account receivables and systems to track account receivables while those of financial performance were profitability, liquidity and sales volume. The study focused on examining the relationship between credit policy and financial performance, evaluating the relationship between factoring and financial performance and lastly assessing the relationship between systems to track account receivables and financial performance of a firm. The study used a case study research design of a sample of 42 respondents out of a population of 45 employees chosen by use of stratified random sampling method. Primary source of data used to collect data was structured questionnaire and the secondary source of data used were audit reports and financial statements of the case study. The data collected was analyzed by using SPSS 16.0, correlations, frequency, graphs and tables were used to present the data. The findings of the study revealed that there was a relationship between management of account receivables and financial performance of the firm. The findings of the study also indicated a negative relationship between factoring of account receivables and financial performance, negative relationship between credit policy and financial performance and a positive relationship between systems to track account receivables and financial performance. The researcher recommends that for the case of Nile Breweries Ltd (case study), the firm shouldn’t use factoring instead it is appropriate for an organization that is small in size or medium in size. The firm should also periodically review its credit policy in-order to maximize the benefits of granting credit sales. Since the study was for a limited time and it considered limited dimensions, further studies should be carried out about the topic of the study in relation to other dimensions