ABSTRACT
This research work surreyed the effect of
Account Receivable in the management of government parastatals, with particular
reference to the Enugu state water
coperation this research work endeavoured to probe into where the problems lie.
The objective was to find out the effect of these accounts receivables. The
financial record of the Enugu state water corporation (ESWC) was obtained to
compare its accounts receivables with the total revenue greeted by that
paraststal over a given period. It was the opinion of the researcher that since
various governments regulate the functions of their parastatals by not allowing
full commercialization, those governments should line up to their own
obligations by remitting adequate statutory duties of rendering services to the
populace.
TABLE OF
CONTENTS
Title page
ii
Approval page
iii
Dedication
iv
Acknowledgement
v
Abstract
vi
Table of contents
vii
CHAPTER ONE:
INTRODUCTION
1.1
Background of the study 1
1.2
Statement of the problem 2
1.3
Objectives of these study
3
1.4 Hypothesis
5
1.5
Research question
6
1.6
Significant of the study 7
1.7
Scope of the study
9
1.8
Limitations of the study 9
1.9
Definition of terms
10
CHAPTER TWO:
REVIEW OF RELATED LITERATURE
2.1
The concept of account receivables 11
2.2
The objectives of accounts receivables management 14
2.3
The concept of bad debts
19
2.4
Credit procedures for individual customers 21
2.5
Analysis credit risks
23
2.6
Credit policy
26
2.7
Accounts receivables managements 33
2.8
Summary
35
2.9
Corporate profile
37
CHAPTER THREE:
METHODOLOGY
3.1
Research design 45
3.2
Area of study
46
3.3
Population of the study 46
3.4
Sampling method 47
3.5
Research instrumentation 49
3.6
Sources of data
49
CHAPTER FOUR:
PRESENTATION AND ANALYSIS
4.1
Presentation and analysis of data 51
4.2
Test of hypothesis
53
CHAPTER FIVE:
SUMMARY OF FINDING, RECOMMENDATION AND
CONCLUSION
5.1Findings 67
5.2
Conclusion
69
5.3
Recommendation
71
References
73
Appendices
75
LIST OF TABLE
Table 4.1 distribution of questionnaire 53
Table 4.3
Staff respondents 54
Table 4.4
default of payment of water bill 56
Table 4.5
level of service rendered by ESWC 59
CHAPTER ONE
1.0
INTRODUCTION
1.1
BACKGROUND OF THE STUDY
According to Ajasa (2007), many business
organizations in Nigeria have experienced liquidity problem largely because of
the effects of the high inflationary rate.
This has been necessitated by the various economic measure introduced in
the country ranging from auxsterity measure introduced in 1982 to the
structural adjustment program and the deregulation of the economy. As a result
of these, it then becomes more necessary than ever to get money promptly from
trade debtors for the day-to-day operations, because of uncertainty in the
fluctuations of prices.
He further suggests that if all trade
transactions were to be made on cash basis the companies in Nigeria would
hardly do well in terms of sales turnover. This results form the fact that at
the time of consumption, the liquidity position of the consumers may be such as
not to allow the availability of enough cash to make on- the – spot payments in
cash for such goods and services to be consume now and to pay at a later date,
resulting in accounts receivable.
According to Bass (2006) accounts receivables
represent claims usually stated in terms of a fixed amount arising from the
sale of goods, the performance of service, the lending of fund or some type of
transactions which establish relationship whereby one party is indebted to
another. These claims result from the sale of goods or services and are
sometimes neither supported by a written note or secured by specific
collaterals. In that case, creditors have no right to lay hands on specific
assets.
1.2
STATEMENT OF THE PROBLEM
Despite the indispensability of water to
mankind and the amount of investment by state governments, water in urban and
some rural areas has been a very scarce commodity yet its consumption rate has
not abated.
The issue of water has become a very strong
slogan for politicians and they use same in building the political manifestoes.
The electorate on the other hand are always respectable to mere promises of
better water facilities, there is still an unwillingness to pay bills. Water
managers accuse both the consumers and government of deliberate refusal to
co-operate in making their dream a reality. Government parastatals most of the
time end up with a large amount of debts.
This research therefore looks into the
perennial problem of water in Enugu State, with particular reference to Enugu
Urban, to find out the effect of accounts receivables make on the performance
of the Enugu State water corporation.
1.3
OBJECTIVE OF THE STUDY
This study seeks to achieve the following
objectives:
·
To find out the cause of the irregularities and lack of payment of water
bills.
·
To find out the reason for the huge amount of debts in the financial
statements of the Enugu state water corporation.
·
To find out the effect of accounts receivables in the performance of
government owned parastatals but with particular reference to the Enugu State
water corporation.
·
To determine if the guidelines and practices of the Enugu state water
corporation, with reference to the management of accounts receivables is in
conformity with sound theoretical principles and policies as provided by
theoretical framework.
·
To recommend workable solutions that might minimize the problems and
thereby enhance the effective management of account receivables in most
government owned parastatals.
·
To make any other suggestions that would lead to the solution of the
perennial water scarcity in Enugu State Water Corporation.
1.4
HYPOTHESES
1Ho:
The level of accounts receivables does not affect the services and
operating income of the Enugu state water corporation.
Hoi:The level of accounts receivables does
affect the service and operating income of the Enugu State water corporation.
2Ho:
The delay or default in the payment of water bills by consumers is NOT
connected with the efficiency of services rendered by the Enugu State water
corporation.
Hi:
The delay or default in the payment of water bills by consumers is
connected with the efficiency of services rendered by the Enugu State water
corporation.
3Ho:
The level of services rendered by Enugu State Water Corporation is NOT a
resultant effect of poor management of the accounts receivables.
Hi:
the level of services rendered by Enugu State Water Corporation is a
resultant effect of poor management of the accounts receivables.
4Ho:
An improper working condition does NOT
influence the incidence of account receivables.
Hi:
An improper working condition does influence the incidence of accounts
receivables.
1.5
RESEARCH QUESTIONS
For this research work to be effective, it
pleases the researcher to ask the following questions:
1.
Do you think that the level of accounts receivable affects the services
and operating income of Enugu State Water Corporation?
2.
Is the delay or default in the payment of water bills by consumers
connected with the efficiency of services rendered by Enugu State water
co-operation.
3. Is the level of service rendered by
Enugu State water co-operation affected as a result of poor management of
account receivables?
4.
Does improper working condition influenced the incidence by account
receivables?
1.6
SIGNIFICANCE OF THE STUDY
The incidence of bad debts in government
owned companies is quite enormous and it is on the increase. As a result. It
becomes really necessary to look into the matter.
As a matter of fact, this debt problem is
coming in all fields of commercial endeavours. This suggests that this
consequently enhance gross domestic product of the nation.
This work is intended to show the importance
of effective and efficient accounts receivables management in the performance
of business organizations to all those in charge of credit management incomes.
It will signify dangerous effects of improper management of accounts
receivables. In addition, the important of consumer awareness interest and
perception of debt management will be highlighted. The awareness of the
obligation that consumers own to the survival of government owned companies
will be created, thus fixing consumers relationship which is ideal for growth
and more efficient operations.
In this era of privatization and
commercialization of public enterprises, this study will serve as a useful
guide to investigations to the extent that it exposes the viability of
government owned companies.
The management owned companies will also find
this work useful. This is due to the fact that they should also be interested
in finding solutions to reduce and eliminate the huge book debt owned through
consumers credits. This research work will expose them to ways of achieving the
organizational goals.
Finally, apart form the fact that this
research will provide a concise inventory or reference materials that will aid
the financial manager in credit management, it will also provide a valuable
sources of information and serve as a basis for future research study in the
libraries of both the department accountancy and that of the institute of
management and technology, Enugu.
1.7
SCOPE OF THE STUDY
This research work covers the credit
management policies and practices of the Enugu State Water Corporation with
particular reference to the Enugu urban districts. It does not cover the total
accounts receivables as prepaid expenses, loans and advances to staff, but is
restricted to the consumer accounts receivables usually found in the
corporation records as commercial debtors.
This research looks into the activities of
the Accounts and Commercial Departments of the Enugu State Water Corporation as
regards credit and management practice and policies in ensuring that
receivables are kept to a minimum. It also examines the contributions of the
customers to the incidence of accounts receivables.
1.8
LIMITATIONS OF THE STUDY
The limitations of this study are that time
and money constraints restricted it to only Enugu Urban Districts. Also,
Current Annual performance reports of the Enugu State Water Corporation were
not available. Only the audited published accounts for 1992 and 1993 were
available and scanty records of 1994/95 which are still unedited.
Finally, because of the limited amount of
literature on this topic, only a few authors were taken into consideration in
the literature review.
1.9 DEFINITION OF TERM
BAD DEBT: This is defined as money owed to
you that you can’t collect
DEBT RECOVERY: This is also called a debt
settlement, usually takes place, when a debtor is unable to pay the debt and
the attempts of the creditors to take back his money have failed.
DEBT CEILING: this is the maximum amount of
monies the united state can borrow. The debt ceiling was created under the
second liberty bond act of 1917. It is also known as the “Debt Limit” or
“Statutory debt limit”
ACCOUNT RECEIVABLES: This is defined as
claims, usually stated in terms of a fixed amount of money arising from the
sale of goods rendering of services
ACCOUNT RECEIVABLE MANAGEMENT: This is an
account which its decision of firm is regarding its overall credit and
collection policy, and the evaluation of the individual credit applicants.