International Journal of Management and Commerce Innovations ISSN 2348-7585 (Online) Vol. 7, Issue 2, pp: (202-209), Month: October 2019 - March 2020, Available at: www.researchpublish.com
FACTORS AFFECTING ACCOUNTS RECEIVABLES IN PRINTING INDUSTRIES IN KENYA 1
JAMES NYAMU NYAGA, 2Dr. AGNES NJERU
1
Student of PhD Finance Option in the school of Entrepreneurship, Procurement and Management of Jomo Kenyatta University of Agriculture and Technology, Kenya,
2
Lecturer in the school of Entrepreneurship, Procurement and Management of Jomo Kenyatta University of Agriculture and Technology, Kenya,
Abstract: Accounts receivable constitute a significant portion of current assets in industrial firms. Management therefore have to formulate strategies of effectively managing this important yet sensitive asset. This study was to investigating the factors that affect Accounts receivables in printing Industries at Nairobi Industrial area. The study further established how credit policy affect accounts receivable in printing Industries at Nairobi Industrial Area, The study was descriptive in nature and targets a population of 10 printing firms in Nairobi’s industrial area. A sample of 50 respondents was selected using stratified random sampling in each of the printing industries there were five strata. The strata were that of key management staff, chief finance officer, finance staff, head of delivery and credit control staff where information was collected using semi structured questionnaire administered to the five respondents in the selected firms to collect both qualitative and quantitative information. Where necessary, personal interviews and documentary analysis ware conducted to enhance validity of information gathered using questionnaires. Data was analysed using descriptive statistics where measures of central tendency and measures of dispersion were computed to give results. Charts, tables and graphs were used to report findings. The study findings indicated that there were credit policies in place. The study concludes that the credit policy in place should be followed to the letter as it influences accounts receivable management. Keywords: Accounts receivable, industrial firms, printing firms.
1. BACKGROUND OF THE STUDY Credit policy refer to guidelines that spell out how to decide which customers are sold on open account, the exact payment terms, the limits set on outstanding balances and how to deal with delinquent accounts, (Krueger, 2005). According to (Brigham, 1985) credit policy is defined by the credit period, credit standards, the firm’s collection policy and any discount given for early payments in an organization. According to Jian, Yang &Tsung (2011), firms may extend credit more aggressively to promote sales, resulting in a positive correlation between sales and accounts receivables. Following Petersen &Rajan (1997), there will be a positive correlation between sales and accounts receivables. Firms with more inventories are likely to extend more credit than other firms (Jian, Yang &Tsung, 2011). Both inventories and accounts receivables are current assets and thus are substitutes from the viewpoint of asset management.
2. STATEMENT OF THE PROBLEM The major objective of any organisation is to make profits regularly. The objectives can be achieved by making sufficient sales. This is possible only when there is no disruption in the supply of required goods. The required goods may be supplied to the market, only if there is no disruption in the production of these goods by the organization. There will be no disruption in the production of goods only if there is sufficient machinery through permanent capital and if the firm has enough working capital, Otley D. (2008)
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