The Impact Of Credit Management On The Profitability Of A Manufacturing Firm

Get the Complete Project Materials Now! ยป

THE IMPACT OF CREDIT MANAGEMENT ON THE PROFITABILITY OF A MANUFACTURING FIRM

CHAPTER ONE
1.0 INTRODUCTION
1.1 BACKGROUND OF THE STUDY
Credit management is a term used to identify accounting functions usually conducted under the umbrella of accounts receivables. Essentially, this collection of processes involves qualifying the extension of credit to a customer, monitors the reception and logging of payments on outstanding invoices, the initiation of collection procedures, and the resolution of disputes or queries regarding charges on a customer invoice. When functioning efficiently, credit management serves as an excellent way for business to remain financially stable.
Competent credit management seeks to not only protect the vendor from possible losses, but also protect the customer from creating more debt obligations that cannot be settled in a timely manner.
Several factors are used as part of the credit management process to evaluate and qualify a customer for the receipt of some form of commercial credit. This may include; gathering data on the potential customer’s, current financial condition including the current credit score.
11
BRIEF HISTORY OF UNILEVER NIGERIA PLC ABA
Unilever Nigeria Plc is a public liability company quoted on the Nigerian stock exchange since 1973 with Nigerian’s currently having 49 percent of equity holidays established in Nigeria. Unilever Nigeria Plc started as a soap manufacturing company and is today’s one of the eldest surviving manufacturing organization in Nigeria. The company changed its name to “Unilever Nigeria Plc” in 2001.
The company is into the manufacture and marketing of household toiletries and favorites which are manufactured in their various factory locations in Nigeria. This is because they are so deeply committed to meet the everyday needs of people everywhere in Nigeria. Such factors are located at Lagos, Agbara, Oregun and Aba. Its staff strength is about one thousand eight hundred (1,800) employers. They also have indirect employees like contract staff and others who range from our forty thousand employees throughout the country.
The company has also made provision for assistance in fields of health, education, children welfare and potable water hygiene as part of its social responsibility programme in the Nigerian communities.
12
Conclusively, Unilever Nigeria Plc from research has been found to be involved in both credit and cash transactions with its customers.
1.2 STATEMENT OF THE PROBLEM
There are many problems companies encounter as a result of poor credit management. Thus, the problems inherent in this research study as investigated are as follows:
(1) There is a high rate of bad debts because some corporations take advantage of the credit that is extended to them and find themselves not able to pay debt later.
(2) The poor level of trade credit management is reflected in the liquidity and profitability position of the firm.
(3) The inability of business policy makers to certainly say how effectively, credit management other makes or mars the performance of the business in terms of profitability.
(4) Furthermore, lack of experienced staff or officers to tackle onerous and vital duties of managing debts appropriately.
(5) Also, limitation and inadequate training opportunities for key treasury or supporting staff.
13
(6) Finally, failure to comply with the agreed terms of agreement with the company upon when paying the debt.
1.3 OBJECTIVE OF THE STUDY
The main objective of this study is to appraise the impact of credit management on the profitability of manufacturing firms and also providing effective means of reducing default in collection of accounts.
Other objectives include the following:
(1) To appraise the effects of the credit management on the profitability of the company.
(2) Identifying the problems associated with credit management in manufacturing firms.
(3) To investigate the advantages of effective and efficient management of trade credit.
(4) To also show how to reduce losses caused by bad debt through the use of effective and sound collection policy and procedures.
(5) It is also very necessary for a firm to critically evaluate the individual account of the customers to enable it obtain the necessary credit
14
information about them and to devise appropriate collection procedures for effective collection of account.
(6) To examine whether the credit management principles applied by the firm is appropriate and effective.
(7) To encourage staff to always be at an alert in respect of knowing who their debtors are.

Download The Impact Of Credit Management On The Profitability Of A Manufacturing Firm Research Materials

Be the First to Share On Social