The Impact of Receivables Management On the Growth of Shareholders’ Value, A Case Study of Small and Medium Enterprises (Smes) In Jinja District

ABSTRACT Whenever a business extends a credit to its clients through credit sales definitely it creates the accounts receivables, the background of this study depicts that at first; most of the SMEs depended on the collaterals as a security to the debts that it has advanced to its client. Currently, due to economical changes brought out by the competition has forced these SME5 to start issuing credit without attaching much on the notion of collaterals and most have ended winding up. The objective of the study was to find out if SMEs really invest on receivables; in addition to examine the way these receivables are managed and the factors that affect its management. Lastly, also there was a quest to understand the impact of receivables management on the growth of the shareholders value within the SMEs where Jinja district was used as a case study. The methodology used in the study was a descriptive design where data was collected and analyzed both quantitatively and qualitatively, the data was presented by use of tables and graph. The findings revealed that few of the SME5 invest on receivables. Secondly, the findings showed that over half of the respondents admitted having knowledge on receivables management although their credit policies was still lacking. Due to these facts, most of the SMEs were seen as not able to increase the growth of their shareholders value due to poor receivables management. In concluding as per the finding of the research, the researcher noted few SMEs invest on receivables, few had investment on receivables yet they all offered credit to their clients in addition to incurring doubtful and bad debts which means that there’s still poor receivables management within the SME5. Lastly as per the findings, their were few of these entities which realized growth in their shareholders value through accounts receivables which implies that to most SMEs, receivables management is poor and has not seen them adding growth to their shareholders value. Therefore the researcher recommended that, the SMEs should enact policy to aid them in investing on receivables, they should also adopt modern methods of receivables management by employing better credit policies, in addition to that the stakeholders in the business field especially the government and Ngo’s should give a hand to this SME5 in order to make them realize growth of their shareholders value through receivables management.

TABLE OF CONTENTS

DECLARATION .1

APPROVAL .11

DEDICATION iii

ACKNOWLEDGEMENT Iv

TABLE OF CONTENTS V

LIST OF TABLES Viii

LIST OF FIGURES ix

ABBREVIATION x

ABSTRACT xi

CHAPTER ONE: GENERA INTRODUCTION

1.0 INTRODUCTION 1

1.1 Background of the study 1

1.2 Statement of the problem 4

1.3 Purpose of the study 4

1.4 Research objectives 5

1.4.1 General objective 5

1.4.2 Specific objective 5

1.5 Research questions 5

1.6 Scope of the study 5

1.6.2 Geographical scope 6

1.6.3 Studyscope 6

1.7 Significanceof the study 6

1.8 Conceptual framework 6

CHAPTER TWO: LITERATURE REVIEW 8

2.0 Introduction 8

2.1 Receivables management 8

2.1.1 Definition 8

V

2.1.2 Elements of receivables management 9

2.1.3 Relationship between accounts receivable and receivable

Management 9

2.2 Rationale for the receivable creation (extension of credit) 10

2.3 Determining the appropriate receivable policies 10

2.3.1 Sources of credit information 14

2.3.2 Credit analysis and decision 14

2.3.3 Monitoring the accounts receivable policy 16

2.4 Major issue off consideration in attaining receivables management

Success 17

2.4.1 Credit standards 17

2.4.2 Creditterms 17

2.4.3 Collection procedures 18

2.5 Share holders value 20

2.5.1 Cost volume profit analysis 21

2.5.2 Accounting ratios 22

2.5.3 Comparative income statements 23

CHAPTER THREE : METHODOLOGY 24

3.0 Introduction 25

3.1 Research design 25

3.2 Study area 25

3.3 Sampling design 26

3.4 Sampling framework 27

3.4.1 Sample selection 27

3.4.2 Sample size 2~3 2~i

3.5 Data collection 29

3.6 Instruments and techniques used in data collection 30

3.6.1 Primary data 31

3.6.2 Secondary data 31

3.7 Executing the survey 32

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3.7.1 Ethical issues .33

3.8 Data processing survey 33

3.8.1 Editing 34

3.8.2 Coding 34

3.8.3 Statistical computation 34

3.9 Data presentation 35

3.10 Limitation of the study 35

CHAPTER FOUR: DATA PRESENTATION, ANALYSIS AND

INTERPRETATION 50

4.0 Introduction 55

4.1 The findings of the survey 55

CHAPTER FIVE: DISCUSSION OF MAJOR FINDINGS, CONCLUSION

AND RECOMMENDATION 66

5.0 Introduction 66

5.1 Investment receivables 66

5.2 Receivables management policy 67

5.3Theimpactofreceivables 68

5.4Conclusion 70

5.5Recommendation 72

5.6 Area for further research 73

REFERENCES 71

Appendix A: Questionnaire -1-

Transmittal letter a