Effects Of Management Of Accounts Receivables On The Performance Of Public Corporations


Effects Of Management Of Accounts Receivables On The Performance Of Public Corporations

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  • Name: Effects Of Management Of Accounts Receivables On The Performance Of Public Corporations
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Chapter One

1.1 BACKGROUND OF THE STUDY Ordinary, the significance of granting trade credit by firms and organisations in current day activities in Nigeria cannot be over-stressed. This is because trade credit acts as an indispensable marketing device providing the easier ‘bridge’ through which goods and services are conveyed from the producers through the wholesaler and retailers to the consumers. This granting of credit to customers through mostly used by commercial/private enterprise is in no way restricted to them alone as it is also used extensively by public corporations of these public corporations in National Electric Power Authority (NEPA), the Nigeria Telecommunications Plc (NITEL), Water corporation etc. The reasons these public corporations also grant credit to their customers are not too far to fetch, the first being that it gives them the advantages of billing their customers for services provided to them based on actual consumption rather than on mere estimates. The import of this is corporations are saved the trouble of petitions, protest and even legal actions that would have taken much of their time and money too. The second reason being for these public corporations to take full advantages of the economics of scale since for them to have insisted on cash payment the point of consumption would have been undisputedly led to avoidable lower sales being recorded. Also, insisting on cash-based transactions would have amounted to putting themselves at a very disadvantages position as they would have lost most of their customers to other competitors or even to substitutes being produced in large quantities all over the country. National Electric Power Authority (NEPA) for instance, people would have gone for generators, rechargeable laterns lamp etc in place of service provided by NEPA. These in no doubt would have led to diseconomies of scale and its apparently consideration of all these that most public corporations in Nigeria seem to have consistently over-looked or even ignored adopting payment on cash basis as the solution to their numerous financial problems as being touted by some people. However there is a problem usually associated with trade credit and that is, how to management it to avoid creating problems for the business vis-à-vis its per. For instance, from the financial reports of public corporation like NEPA, it could be virility be seen that receivables make up a larger portion of their current asset figure and this not without its attendant problem recovery risk. NEPA for instance has recently been battling with the over increasing debt (over N5b) owed to it by various calibers of consumers nationwide. These have been the bane that public corporations especially NEPA in their quest to provide qualitative and unbearable service to entire populace and hence, the need to appraise their performances vis-a-vis the management of their book debts.

1.2 STATEMENT OF THE PROBLEM Long over the years, there has been a general and widespread agitation by the Nigerian populace for efficient performance by public corporations most especially those of them that have a direct and equally noticeable impact on their lives like the National Electric Power Authority, (NEPA). Agreed that this corporation have to provide essential service even on credit basis to the citizenry just to make up, it is disheartening to note that it has instead ended up accumulating a huge amount of debt apparently more huge than it could management effectively. For instance, NEPA alone is being owed to the turnover N5b as reported in the fourth page of business times of 16th February 1999. This can be appreciated if it is realized that this amount being owned NEPA is greater than even the entire budgetary allocation to the power and steel sub sector. Though public corporations are generally believed to be engaged in the production essential goods and services to the entire populace at relatively low prices, it should be noted that for this function to be performed creditably, adequate provision of tools, equipment and other necessary material have to be made in addition to a sound management team. Howe very, with the usually so noticeable financial constrains, these never materialize that easily as efficiency no doubt, is most times faceable to availability and good management of funds. Availability of fund here is a necessity. Therefore there is no gain saying the fact that the gigantic debt being owed NEPA has had a rather adverse on its performance generally as this corporation among other problem have found it extremely difficult replacing broken – down strategic facilities used for the generation, transmission and proper distribution in NEPA due to lack of funds and this has in a way crippled the effort of this corporation towards making greater impact on the lives of generality of the populace. In view of the foregoing, the researcher intends to find out. a. Whether exogenous factors may be responsible for the level of accounts receivables of public corporations. b. Whether exogenous factor may be responsible for the level of accounts receivables of public corporations. c. Whether the level of accounts receivables will influence the performance of public corporation.

1.3 PURPOSE OF THE STUDY The main task this research work set out to accomplish can be articulated as follows: a. To find out how exogenous factor influence the level of accounts receivables of public corporations. b. To determine how endogenous factor influence the level of accounts receivables of public corporation. c. To identify the relationship between the management of account receivables and the performance of public corporation. d. To recommend workable solutions that will alleviate the problem of debt arising from account receivable being encountered by public corporation.

1.4 SIGNIFICANCE OF STUDY The result of this would be of primary importance to public corporation since the management are interested in preferring solutions to reduce if not entirely eliminate the huge amount of book detor as a result of credit granted to customers. Specially, it will highlight the importance of good management of receivable to the survival, growth and efficient performances of public corporation. It will also highlight even for these involved in formulation and implementation of credit policies in private enterprise, the adverse effects of an inefficient management of trade credit on the performance of this companies and conversely, the benefits to be derived from proper management. For the general public, this study will show the importance of consume interest and awareness in the performance of public corporation as it will create an awareness on the obligation that consumers owe to the survival of public corporation. This no doubt will for ters the ideal producer consumer relationship which is newspaper for growth and efficiency of this corporation. Lastly the research will serve as a reference material that will aid financial managers in credit management as well as providing a valuable source of information for future researcher.

1.5 FORMULATION OF HYPOTHESIS The following hypothesis stated in null form will be tested in this study. 1. Exogenous factor have no relationship with the level of accounts receivable of public corporation. 2. Endogenous factor have no relationship with the level of account receivable of public corporation. 3. Poor management of account receivable and efficient performance of public corporation are directly correlated.



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