MANAGEMENT OF ACCOUNTS RECEIVABLES AND ITS EFFECT ON FIRM’S

PERFORMANCE: A CASE STUDY OF KOSEL LOGISTICS.

BY

Kuffour Selorm Kofi

Isearch Consultancy Services

Research coordinator

www.isearchconsultgh.com

2014
 TABLE OF CONTENTS

CHAPTER ONE…………………………………………………………………………… 1

INTRODUCTION…………………………………………………………………………. 1

1.0 Background of the study…………………………………………………………. 1

1.1 Statement of the problem…………………………………………………………. 3

1.2 Objective of the study ……………………………………………………………….4

1.2.1 Specific objectives…………………………………………………………. 4

1.3 Research Questions. ………………………………………………………………. 5

1.4 Significance of the Study…………………………………………………………. 5

1.5 Scope and Limitations of the Study…………………………………………..…… 6

1.6 Definition of Terms…………………………………………………………………7

1.7 Organisation of the study…………………………………………………………. 8

CHAPTER TWO………………………………………………………………………….. 9

LITERATURE REVIEW…………………………………………………………………. 9

2.1 Introduction……………………………………………………………………………. 9

2.2 Accounts Receivables………………………………………………………………….. 9

2.3 Justification for Investment in Account Receivables………………………………… 10

2.4. Account Receivables Management Policy…………………………………………… 11

2.5 Performance and Profitability of an Organisation…………………………………… 14

2.6 Relationship between Accounts Receivables Management and Profitability………… 15

2.7 Conclusion……………………………………………………………………………... 16

CHAPTER THREE………………………………………………………………………... 17

METHODOLOGY………………………………………………………………………… 17

3.1 Introduction……………………………………………………………. ………………17

3.2 Research design………………………………………………………………………... 17

3.3 Study population……………………………………………………………………….. 17

3.4 Sample size and sample procedure……………………………………………………. 18

3.5 Sources of data…………………………………………………………………………. 18

3.6 Data collection methods and techniques. ……………………………………………… 18

3.7 Data presentation and analysis. ……………………………………………………… 19

CHAPTER FOUR…………………………………………………………………………. 20

DISCUSSION OF FINDINGS……………………………………………………………. 20

4.0 Introduction……………………………………………………………. ………………20

4.1 Demography……………………………………………………………. ………………20

4.2 Accounts receivables management policy used by KOSEL …………………………..25

4.4 key factors about the accounts receivable management used at KOSEL ………………32

4.5 Accounts receivables management and performance of KOSEL ………………………41

4.6 Discussions…………………………………………………………………………….. 50

CHAPTER FIVE…………………………………………………………………………... 53

SUMMARY, CONCLUSIONS AND RECOMMENDATIONS………………………… 53

5.0 Introduction……………………………………………………………. ………………53

5.1 Summary……………………………………………………………………………….. 53

5.2 Conclusion……………………………………………………………………………... 55

5.3 Recommendations……………………………………………………………………… 57

REFERENCES……………………………………………………………. ………………58
 ABSTRACT

Accounts receivables refer to a legally enforceable claim for payment from a business by a
company for services rendered or for goods supplied to the business. According to Kakuru (2000),
when a company renders a service or sells its goods and does not receive cash for it, the company
is said to have granted trade credit to clients. The general objective of the study was to identify
the effect of management of accounts receivables on the performance of KOSEL Logistics. The
study adopted a descriptive cross-sectional survey in which questionnaires were given to a selected
sample of respondents from a target population of the management, staff and the customers of
KOSEL. Purposive sampling was used to select ten (10) management staff and simple random
sampling was used to select forty (40) employees. Also, simple random sampling was adopted in
selecting thirty (50) customers of KOSEL. The data collected was processed using SPSS. The
results of the study revealed that majority of the customers ask for credit from KOSEL and they
do not need to present any collateral to qualify for a credit. Majority of the customers of KOSEL
said they have defaulted in the payment of their credit obligations. The findings of the study also
shows that KOSEL does not undertake formal credit investigation before granting credit to their
customers and customers’ bank reference are not checked. The study revealed that discount
payment for early payment of debt increases revenue. The findings of the study revealed that the
efficient management of accounts receivable increases sales, reduces cost associated with bad debt,
and also increases the profitability of the company. The failure of customers to pay back their
credit was found to affect profitability. It was also observed that KOSEL usually faces liquidity
problems. The study recommended that KOSEL must have a receivables management policy that
will assist in selecting customers for credits since this can help in the selection of customers who
will be able to pay their credit on time.
1.2 General Objective of the study

The general objective of the study is to identify the effect of management of accounts receivables
on the performance of limited liability companies using KOSEL as a case study.

1.2.1 Specific objectives

To achieve the general objective of this study, the following specific objectives are made use of;

i. To identify the accounts receivables management policy used by KOSEL.

ii. To determine the effect of accounts receivables management on the performance of

KOSEL.

iii. To establish if there is a relationship between accounts receivables management and

performance of an organisation.

1.3 Research Questions.

i. What accounts receivables management policy is applied by KOSEL Ghana limited?

ii. What is the effect of accounts receivables management on the performance of KOSEL
Ghana limited?

iii. What is the relationship between accounts receivables management and performance of
KOSEL Ghana limited?
1.4 Significance of the Study

The result of the study will assist the management of KOSEL Ghana Limited to identify the
effectiveness of accounts receivable management policy instituted by the company and will serve
as a road map in improving the policy. The findings will also assist management to better access
the credit worthiness of potential customers or clients before transactions. It is also expected that
the findings of the study will highlight the benefits of formulation and implementation of better
credit policies in organisations and the adverse effects of an inefficient management of account
receivables on the performance company. The study will add to the wealth of knowledge in this
field and will provide literature for review by researchers and students who wish to conduct further
research in the same field of study.

1.6 Definition of Terms

Trade Credit: selling of goods or rendering services to Customers or clients on the condition that
they pay in the near future

Accounts receivables: refers to an amount of money to be received from customers in payment

for goods and services provided to them on credit terms.

Credit policy: The criterion on which an amount of credit to be given out is based on.

Liquidity: The ease and speed which current asset are converted into cash to meet current
liabilities.

Bad debts: a debt that cannot be recovered

1.7 Organisation of the study

Chapter one - Introduces the research study, providing the background to the study, statement of
the problem, objectives and research questions, the significance of the study, definition of terms,
scope and limitation of the study.
Chapter two - A review of literature is presented. An overall review of the existing literature on
the subject from journals, books and articles are examined and discussed.

Chapter three - Presents the methodology used for the research. The chapter also presents the
research design, population, sample and sampling procedure, instrument, data collection procedure
and data analysis.

Chapter four - Examines and discusses the research results and findings. The chapter focuses on a
discussion of the findings in relation to the results obtained by other researchers on similar topics.

Chapter five - Presents the summary, conclusion, recommendations, and direction for future
research.

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