The impact of credit management on the profitability of a manufacturing firm (a case study of unilever plc aba, nigeria).

Thesis Overview

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