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.
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.
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.
(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
Firm’s do not make some profits when trade
credit questions Firm’s do make some profit when they extend credit to
customers.
|
Its credit information about customers does not
help in reducing bad debt losses.
|
Its credit information about customers help in
reducing bad debt losses. Firms that sale on credit to their customers do not
make more sales than those who sale in cash.
|
Firm’s that sale on credit to their customers
do make more sales than those who save in cash.
|
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.
1.4
FORMULATION OF RESEARCH
HYPOTHESES
The
following hypotheses are formulated for the purpose of this research work.
Ho:
H1:
Ho:
H2:
Ho:
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