GREAT LAND COLLEGE
COLLEGE OF BUSINESS AND ECONOMICS
DEPARMENT OF ACCOUNTING AND FINANCE
ASSESSMENT OF RECEIVABLE MANAGEMENT PERFORMANCE IN CASE OF
AWASH BANK NEKEMTE BRANCH
A RESEACH SUBMITTED TO GREAT LAND COLLEGE, COLLEGE OF BUSINESS
AND ECONOMICS, DEPARTMENT OF ACCOUNTING AND FINANCE AS PARTIAL
FULFILMENT FOR THE REQUIREMENTS OF BACHLER OF ARTS DEGREE IN
ACCOUNTING & FINANCE
BY
ID No
1. Narobika Feyisa
0408/12
2. Ayantu Hailu
0221/12
3. Elsabet Yosef
0223/12
4. Ayantu Niftalem 0190/12
5. Almaz Etefa
0217/12
Advisor: Ifa Akuma (MSc)
JUNE 2023
NEKEMTE, ETHIOPIA
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Acknowledgements
We would like to express our heartfelt appreciation and respect to our advisor, Ifa Akuma
(MSc.) for his constructive guidance, follow up, support, inspiration, and patience, invaluable
advice and kindness while we’re preparing this proposal work. Working with him has been a
treasured experience for us. It has been a pleasure and we feel much more confident in our
abilities with the encouragement and support he given to us.
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Table of Contents
Acknowledgements ................................................................................................................... i
Table of Contents .......................................................................................................................ii
List of Tables ............................................................................................................................ iv
Acronym .................................................................................................................................... v
CHAPTER ONE ........................................................................................................................ 1
INTRODUCTION ..................................................................................................................... 1
1.1 Background of the Study .................................................................................................. 1
1.2 Statement of the problem ................................................................................................. 3
1.3 Research Questions .......................................................................................................... 4
1.4 Objectives of the study ..................................................................................................... 4
1.3.1 General objective ....................................................................................................... 5
1.4.2 Specific objectives ..................................................................................................... 5
1.5 Significance of the study .................................................................................................. 5
1.6 Scope of the Study............................................................................................................ 5
1.9 Organization of the Study ................................................................................................ 5
CHAPTER TWO ....................................................................................................................... 6
REVIEW OF RELATED LITERATURE ................................................................................. 6
2.1 Theoretical literature ........................................................................................................ 6
2.1.1 Sources and Nature of Account Receivable........................................................... 6
2.1.2 Categorization of Receivables ................................................................................... 6
2.1.3 Management of Account Receivable ......................................................................... 6
2.1.4 Objectives of Accounts Receivables Management ................................................... 7
2.1.5 Benefits of reducing accounts receivable .................................................................. 7
2.1.6 Cost of holding accounts receivable .......................................................................... 8
2.1.6.1 Time Cost ............................................................................................................ 8
2.1.6.3 Legal consideration ............................................................................................. 8
2.1.6.4 Finance charge .................................................................................................... 9
2.1.7 Credit Collection Techniques ................................................................................ 9
2.1.8 Credit Policy ............................................................................................................ 10
2.1.8.1 Elements of An effective Credit Management Policy ...................................... 10
2.1.8.2 The Importance of a Written Credit and Collection Policy and Procedure
Manual .......................................................................................................................... 10
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2.1.8.3 Choosing the Right Type of Credit Policy ........................................................ 11
2.1.8.3.1 Strict Analysis of Risk and Strict Collections ............................................... 11
2.1.8.3.2 Strict Analysis of Risk with Liberal Collections ........................................... 11
2.1.8.3.3 Liberal Analysis of Risk and Vigorous Collection Effort ............................. 11
2.1.8.3.4 Liberal Analysis of Risk and Liberal Collections .......................................... 12
2.1.9 Managing Risks ....................................................................................................... 12
2.1.9.1 Credit Risk Categories .......................................................................................... 12
2.1.9.2 Customer Risk Assessment .................................................................................. 13
2.1.9.3 Controlling Risk in Accounts Receivable Management ....................................... 13
2.1.13 Accounts receivable management performance ratios .......................................... 14
2.1.14 Measuring of bad debts.......................................................................................... 14
2.3 Empirical Studies ........................................................................................................... 15
CHAPTER THREE ................................................................................................................. 17
3. RESEARCH METHODOLOGY......................................................................................... 17
3.1 Research Design ............................................................................................................. 17
3.2 Population and Sampling Techniques ............................................................................ 17
3.3 Types of Data to be collected ......................................................................................... 17
3.4 Methods of Data to be collected ..................................................................................... 17
3.5 Methods of Data Analysis .............................................................................................. 18
CHAPTER FOUR .................................................................................................................... 19
4. DATA ANALYSIS AND INTERPRETATION ................................................................. 19
4.1. General Characteristics of respondents ......................................................................... 19
4.2. Factors in facilitating the receivable management activities ........................................ 21
4.3. Loan Requirement ........................................................................................................ 22
4.4. Receivable management of the institution .................................................................... 22
4.5 Major Customers ............................................................................................................ 24
4.6. Follow up for receivable collection .............................................................................. 26
CHAPTER FIVE ..................................................................................................................... 28
5. CONCLUSION AND RECOMMENDATION ................................................................... 28
5.1 Conclusions .................................................................................................................... 28
5.2 Recommendation ............................................................................................................ 29
Reference ................................................................................................................................. 30
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List of Tables
Table. 1 Sex ............................................................................................................................. 19
Table.2 age ............................................................................................................................... 19
Table 3 Educational background ............................................................................................ 20
Table 4 Experience ................................................................................................................. 20
Table 5. Values attached by respondents to the significance of the following factors in
facilitating the receivable management activities. ................................................................... 21
Table 6. Requirement of Oromia credit and saving institution Nekemte Town Nekemte
branch before granting loan ..................................................................................................... 22
Table 7 Receivable management of the institution .................................................................. 22
Table 8. Who are the major customers of the institution? ...................................................... 24
Table 9. Long outstanding loan Receivable ............................................................................ 25
Table 10. Initiation Mechanisms for Receivable Settlement .................................................. 25
Table 11. Reward for customer ............................................................................................... 26
Table 12. Follow up for receivable collection ........................................................................ 26
Table 13. Evaluation Methods ................................................................................................ 27
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Acronym
AIB................................ Awash International Bank
FASB..............................Financial Accounting Standard Board
GAAP..............................General Accepted Accounting principles
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Abstract
The purpose of this study was to assess a receivable management performance in the AIB,
Nekemte branch in achieving its targets so as to suggest the possible solutions to prove
uninterrupted activities. So as to met the stated objectives the researchers took all 20
employees AIB, Nekemte branch. To answer these points’ data was collected through
questionnaires. As sample of the questionnaire dispatched, 18(90%) were returned. The
study found out that the institution has got both strong and weak side. The strong side of the
institution is that it has credit policies and work flow procedures through which it can
carries its activities very smoothly, conduct follow up and take defaulters to legal case.
Though the institution is strong , in the other side it has weakness in that it lucks loan
recovery & rehabilitation unit that facilitate rehabilitation and recovery of sick loans, the
absence of this which resulted in long outstanding loan in its account. In addition to that the
method the institution is using in recognizing uncollectable is direct write of method. This
method as it is well known is not recommended unless and other wise there are exceptional
cases. On the other hand GAAP accept the application of the method in the assumption of
materiality concept. The Method also violate revenue matching principle as it recognizes
expense when clients are judged to be defaulters contrary to allowance method which
record provision in each accounting period & adjusts on year end. The researcher would
like to give recommendations on AIB, Nekemte branch, should inform and negotiate with
customers to pay the debt amount on time. The institution must provide better reward to those
customers who settled on due date. The institution should not tolerate long outstanding debts
by major customers, since it cause more bad debt expense. .
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CHAPTER ONE
INTRODUCTION
1.1 Background of the Study
The real significance of the receivable management including loan management comes to be
appreciated to a great extent. In today’s world the receivable management is critical factor to
success or failure of any micro financing institutions(Brigham & Houston, 2012)
Problems related to collection of account receivable are noticeable in credit and saving share
companies. This issue has been great concern for many organizations. According to proper
receivable management system needs to provide loans; at the right time, the right amount and the
right customer such problems needs a solutions. So as the researchers aimed the study on noncollectability of account receivable in Awash Bank (Brigham & Houston, 2012).
Private banking service are established as autonomous body for providing service. The banking
give these services on credit. Receivable management has received a great deal of attention in
recent times, especially in private banking service. This is partly because the Banking services
are perceived to be inefficient in the provision of their services, and one major cause is
ineffective management of their accounts receivable Ernest et al (2022). Ineffective management
of accounts receivable prevents the banks from having the essential working capital needed for
their routine operations and also to ensure maximization of needed profits. On the other hand
efficient receivable management, with its crucial impact on cash flow, can make the difference
between survival and insolvency in the private sector, or between cost effective and wasteful
administration in the private sector. Effective management of accounts receivable therefore
presents important opportunities for financial institutions to achieve strategic advantage through
improvements in customer service, cash management and reductions in costs (Vikiru k, 2008).
According to Robert (2011), accounts receivables are amounts owed to the business enterprise,
usually by its customers. Managing accounts receivables involves five steps: determining to
whom to extend credit, establishing a payment period, monitoring collections, evaluating the
liquidity of receivables accelerating, and eventually cash receipts from accounts receivables
holders. A critical part of managing accounts receivables is determining to whom credit should
be extended and to whom it should not. Many banking increase sales by being generous with
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their credit policy, but they may end up extending credit to risky customers who do not pay. If
the credit policy is too tight, sales lost.
All firms by their very nature are involved in selling either goods or services. Although some of
these sales for cash, a large portion will involve credit. Whenever a sales is made on credit, it
increase the firm’s account receivable. Thus, the importance of how a firm manages its accounts
receivable depends on the degree to which the firm sells on credit (Murthy, 2012).
Effective receivable and collection systems in banking are a critical component for ensuring the
viability of a service provider. Improving receivable and collection activities has an immediate
impact on the revenue streams of a service provider that can, in turn, help the service provider in
improving services. However, while effective receivable and collection practices depend on
many internal factors (including customer databases, the extent of credit provision, tariff and
receivable structures, delivery of receivable, and facilities for customer payments) the
institutional arrangements under which service providers operate and provide services determine
whether such practices will remain sustainable in the long term. Efficient receivable and
collection practices can set incentives for the provider to effectively charge and collect
receivable while also fulfilling a commercial orientation to services (Sansom, Kevin, Richard
and Franceys, 2021).
Most financial institutions have not sought to test whether the credit and collection activities in
which they engage are effective. As a result, many credit and collection activities are either
unnecessary or unproductive in accomplishing their purposes. Many more activities do not
contribute to the overall least-cost provision of credit service. A major reason for these failures is
the reliance upon supposition and "conventional wisdom" that is not grounded in an empirical
reality (Roger, 2014).
Banking service
are unable to collect outstanding receivable in a timely manner due to
inefficiencies in the credit operations and collection system, or political interference prevent the
receivable from forcing its customers, particularly government or government owned entities to
pay their receivable (Ernest et al., 2022). Banking service in developing countries are often
capital constrained, and hence, their service provisions as well as required investment in
infrastructure largely depend on customers‟ patronization as reflected in their timely payment of
receivable. If customers default on their payments and/or are unable to pay their receivable in a
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timely manner, the credit operations are more likely to face serious cash flow problems in
maintaining sustainable services (Mohammed and Zakiya, 2017)
Awash International bank of Nekemte branch is one of the banking service established for
providing credit, done in every month but the preparation as well as collection of receivable is
done every two months. Hence, the purpose of this study is to assess the receivable management
performance of Awash International Bank of Nekemte branch from different perspectives in light
of the practices of modern receivable management in private banking service.
1.2 Statement of the problem
When financial institutions sell goods or render service, it may receive cash immediately or sells
on credit, which is to be collected in cash later. The purpose of selling on credit is to increase
sales and therefore the earning of the firm. As Rober Cole (2018) noted one of the most
important reasons for high failure rate of business is the inability to implement good credit
collection policy. If the organization needs to bring positive cash flows from credit operations, it
must be organized effective collection department.
Oswald D(2020) says there are two major problems areas are created from selling on credit. First
selling on credit involves making decisions concerning the credit classes of customers to whom
credit will extend and the terms to be offered. Second major problem area is derived from the
necessity administering customer accounts and making collection.
Financial institutions are expected to be available, accessible and sustainable but require high
capital expenditure. In developing countries private funding is the common source of finance for
establishing and even operating financial institutions such as banking (Ernest et al., 2016).
Managers of private banking service in Africa have difficulties in efficiently collecting
receivable from their customers (Chitonge, 2013). Receivable and revenue collection are the two
factors that drive cash flows of banking service because receivable and revenue collection
involve collection costs, receivable costs, and bad debts. He also stated that managers of banking
service could experience negative effects on financial viability when there is under-performance
in revenue collection.
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According to Ernest (2016) most private banking service have not sought to test whether the
credit and collection activities they pursue are effective. Also, most studies have concentrated on
the management of working capital as a whole and always focused on a manufacturing.
Researchers have focused on the assessment of receivable management performances of
receivable in different African countries other than Ethiopia (Ernest, 2016, Kofi mintah, 2015,
Nicholas, 2017, Onono, 2006, Vikiru K, 2008 and Francis Munene, 2018). In this changing and
competitive environment, knowledge of receivable management must be taken into account
because receivables are the most important components of the economy. As the researchers
observed the un-collectability of receivable in Nekemte branch of Awash Bank , it came across
many problems related to un-collectability. This resulted in interruption in the provision of loan
and which in turn has an effect on the smooth operation of the institution.
According to Birhanu (2018), in East Wollega zone, most of private banks are faced with weak
management structures, processes and systems and poor systems of revenue collection due to
political instability. Like other branch private banks Awash International Bank of Nekemte
branch is one of the entities, which carried out its activity on credit. Hence credit sales effective
if it is systematic well planned and properly managed. Therefore, this paper focuses on to assess
of receivable management performance in Awash International Bank of Nekemte branch
1.3 Research Questions
The study conducted to identify answer for the following questions
1. What is the cause of uncollectable account receivable?
2. How could un-collectability of account receivable be solved?
3. What type of appropriate receivable evaluation method implemented in the organization?
4. How the institution strictly implement following policies and procedures of receivable
management?
1.4 Objectives of the study
This study will attempt to investigate the following general objective and specific objective.
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1.3.1 General objective
It gave some basic opportunity to assesses receivable management performance in case of
Awash Bank Nekemte Branch
1.4.2 Specific objectives
The specific objectives of this study
1. To investigated the cause of receivable un-collectability’s.
2. To investigated ways to solve receivable un-collectability
3. To assessed whether procedures of receivable management are strictly implement or not
4. To analyzed the accounting treatment over receivable of the institution.
1.5 Significance of the study
This research significant in that, it try to show some un-collectability problem in AIB Nekemte
branch. The findings of this study help the management of the organization to observe many uncollectability problems. In addition, it would provide financial and accounting principle to solve
the identified problem, As to the knowledge of the researcher, this study could possibly serve as
a stepping-stone for further researcher and plays significant role for the improvement of the
micro financing institution overall performance.
1.6 Scope of the Study
Even though receivable management is interesting and wide ranging for detail study, the research
confined only to Awash Bank Nekemte branch loans receivable. It excludes other receivables.
1.9 Organization of the Study
The paper organized into five chapters. chapter One deals with introduction, Background of the
organization, statement of the problem, objective of the study, significance of the study, Scope of
the study, limitation of the study and organization of the study. Chapter two deals with literature
review. Chapter three deals with methodology of the study, data presentation analysis and
interpretation. Chapter four deals with data presentation analysis and interpretation; Chapter five
deals with summary, conclusion and recommendations.
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CHAPTER TWO
REVIEW OF RELATED LITERATURE
2.1 Theoretical literature
2.1.1 Sources and Nature of Account Receivable
Firms are often sold products and services to customers in return for promises to pay in the
future. These transactions are called credit sales or sales on account. The promises from buyers
are called account receivable to sellers. Accounts receivable is an interim debt arising through
credit sales and recorded as accounts receivable by the seller and accounts payable by the buyer
(Omondi, 2014). Account receivables usually are relatively large in amount and should appear as
separate item in the current assets section of the balance sheet at their net realizable value.
Receivable are increased by new credit sales and are decreased by customer payment.
2.1.2 Categorization of Receivables
Trade receivables are from normal trading and are classified as notes receivable and accounts
receivable. Accounts receivable and notes receivable are the two most common receivables.
Notes receivable are claims for which formal instruments of credit are issued as proof of the
debt. A note receivable normally extends for periods of 60–90 days or longer and requires the
debtor to pay interest. Accounts receivable is amounts owed by customers on account. They
result from the sale of goods and services. Banking generally expect to collect these receivables
within 30 to 60 days. Accounts receivable are the most significant type of claim held by a banks.
The banks’ making the sale does not receive any written orders or promises to pay from the
purchaser. The creditor merely enters the amount due in its books. Accounts receivable
constitute a major portion of the assets of Banking service and tend to vary directly with sales
(Colton ,2015) accounts receivable may be sold to finance banking or pledged as collateral to
obtain loans from commercial banks or finance banking.
2.1.3 Management of Account Receivable
A finance manager has to match the increased revenue with additional costs. The credit should
be liberalized only to the level where incremental revenue matches the additional costs. The
quality of trade accounts should be decided so that credit facilities are extended only up to that
level. The optimum level of investment in receivables should be where there is a tradeoff
6
between the costs and profitability. On the other hand, a tight credit policy increases the
liquidity. Receivables management begins with the firm‟s credit policy, but a monitoring system
is also important to keep tabs on whether the terms of credit are being observed.
2.1.4 Objectives of Accounts Receivables Management
The primary objective of accounts receivable management is to maximize the value of the
enterprise by striking a balance between liquidity, risk and profitability. A significant part of
accounts receivables management involves the proper selection of customers, because every
credit sale involves the risk of delayed payment or non-payment of the value involved
(Hrishikes, 2007).
The main purpose of maintaining receivables is not, sales maximization nor is it for
minimization of risks involved by way of bad debts. Had the main objective been growth of
sales, the concern would have opened credit sales to all sorts of customers. Contrary to this, if the
aim had been minimization of risk of bad debts, the firm would not have made any credit sale at
all. That means a firm should indulge in sales expansion by way of receivables only until the
extent to which the risk remain within an acceptably manageable limit. The basic target of
management of receivables is to enhance the overall return on the optimum level of investment
made by the firm in accounts receivables. This optimum investment is determined by comparing
the benefits to be derived from a particular level of investment with the cost of maintaining that
level (Periasamy, 2019). Thus the objectives of management of accounts receivable may be
viewed as to; attain not maximum but optimum volume of sales, exercise control over the cost of
credit and maintain it on a minimum possible level and to keep investment at an optimum level
in the form of accounts receivables.
2.1.5 Benefits of reducing accounts receivable
The benefits of effectively managing the account receivable asset according to Ernest et
al.,(2016) include increased cash flow, higher credit sales and margins, reduced bad debt loss,
lower administrative cost in the entire revenue cycle, decreased deductions and concessions
losses, and enhanced customer service, improved staff morale. An organization that is able to
achieve excellence accounts receivable management will certainly have enough working capital,
is credit worthy, be more profitable, have better motivated staff and will enjoy the benefit of low
staff turnover.
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2.1.6 Cost of holding accounts receivable
Accounts receivable add cost to a banks's operation if they remain unpaid. The true value of
accounts receivable is therefore necessary for efficient management and ability to reduce this
cost is not only critical for liquidity but a challenge to the banks. McCormick(2002) has a study
of the carrying costs of accounts receivable and what follows is taken of his work. He identified
five carrying costs as time, administrative; financing, bad debt and morale costs.
2.1.6.1 Time Cost
In a credit transaction, the seller will have to wait to receive payment. If the seller had received
cash immediately, the cash could have been invested elsewhere by the seller for profit; the seller
will lose investment earnings, and may be required to borrow funds to pay its own receivable.
Time cost is the present value of money to be paid at a specified point in the future i.e. how
much money would have to be invested today, at a given interest rate, to generate a principalplus- interest amount equal to what paid or collected in the future (Ernest et al.,2016). As the
receivable ages beyond the normal cycle, the collection process becomes more cost intensive.
2.1.6.2 Administrative costs
The seller will incur additional administrative costs after accepting the debtors promise to pay.
Administrative cost which includes follow-up letters, telephone calls, transport expenses,
additional staff expenses and additional record keeping are costs directly related to the age of
receivable beyond the normal collection cycle cost (Mccrea 2004).
2.1.6.3 Legal consideration
The credit transaction is affected by laws that have been passed by state and federal legislatures
to protect both the debtors and creditors. These laws must be understood to avoid the penalties
and extra costs that are involved in litigation. Training is required to ensure that workers will
conduct credit transactions properly. As these laws continue to change, someone must accept the
responsibility to monitor these changes in order to adjust the credit policies and procedures as
needed (Daniel, 2020).
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2.1.6.4 Finance charge
The creditor may or may not require a finance charge as part of the credit transaction a finance
charge is additional amount that must be paid over and above the value received by the debtor or
borrower. The finance charge will help cover the costs mentioned above: losses due to nonpayment, operation expenses, lost investment earnings, inflation, and legal expenses, if finances
charges are not specifically identified, they must nevertheless be incorporated in prices of a firms
goods and services, (Daniel, 2020).
2.1.7 Credit Collection Techniques
Effective credit collection techniques are one of the necessities for Receivable Banks. Knowing
how to encourage customers to pay their outstanding bill on time can increase the cash flow of
the banks. According to DanielG (2020) there is a numbers of collection techniques are
employed. Under normal circumstances customers are expected to pay in cash as per the
agreement made. The basic techniques are:
Telephone Calls: If the customer passes the due date, a telephone call may be made to the
customer to request immediate payment of debt. Personal visits: If the telephone call made is not
resulted positive response vesting his business and discussing the issue with the customer can be
a very effective collection procedure.
Letters: If the efforts made so far is unsuccessful and not resulted positive response a polite letter
is to be served reminding the customer of its obligation followed by warning letters for the action
to be taken in future and its consequence.
Using Collection Agencies: Firms can turn uncollectible accounts over to a collection agency or
an attorney for collection. The fees for this service are typically quite high;the firm may receive
less than fifty percent on accounts collected in this way.
Legal Action: legal action is the most stringent step in the collection process. It is analternative
to the use of a collection agency not only is direct legal action expensive,butis may force the
debtor in to bankruptcy, thereby reducing the possibility of future business without guarantying
the ultimate receipt of overdue amount.
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2.1.8 Credit Policy
The term credit policy is used to include all the banks‟s systems and include credit selection,
credit standards, credit terms and collection policy. According to Brown (2013), the first step for
any banks is to define its credit policy. This must include customer acceptance criteria, credit
vetting, credit limits and payment terms.
The board must define the balance for the business between the potential profitability of the
customer, the desire to retain the customer whilst maximizing their use of products and services
and the exposure to potential bad debt. From this stems the customer acceptance policy with the
boundaries of what the banks does, and does not want to do business. The balance between the
need for market share and growth on the one hand, and profitability on the other, will determine
the appropriate element of risk in taking on new customers. Once this has been established, the
customer acceptance policy needs to be updated as circumstances change (Wallis, 2002).
2.1.8.1 Elements of An effective Credit Management Policy
According to Rowe (2004) some of the key elements of an effective credit management policy
are Check a new customer’s creditworthiness before drawing up a contract; set strict limits and
stick to them; prepare unambiguous written contracts and/or terms and conditions of trading;
involve the sales force in negotiating the payment terms and ensuring that these are understood
and agreed at the start; make sure that you know and comply with the procedures used by your
customers‟ buying and accounts department; initiate and maintain close contact with your
customers, particularly with the person responsible for paying your account try to create a
rapport so that you are on top of the list to be paid even when money is tight; make regular credit
checks on customers; ensure that all dispatch notes and invoices are accurate and delivered to the
right person at the right time; put a stop on supplies to customers who are not paying.
2.1.8.2 The Importance of a Written Credit and Collection Policy and Procedure Manual
The main role of credit policy is to provide a framework for consistent credit decision
compatible with the goals of the credit function. The credit policy requires regular review and
clear documentation. According to Pike and Cheng (2011) a survey conducted, to establish the
causes of late payments in the U.K., found that virtually all (94%) firms have a credit policy
manual, although only 54% regard it as „fully documented‟. As might be expected, this is
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considerably higher than the 35% of small/medium-sized firms with a written credit policy found
by Wilson (2015) survey.
Among the benefits of a written policy are that the policy will reduce bias and subjectivity in
credit decisions being made, the process becomes more predictable (something sales and senior
management will appreciate); and since everyone understands the ground rules, exceptions
made based on business considerations (Dennis, 2004).
2.1.8.3 Choosing the Right Type of Credit Policy
Among the alternative types of credit policy that a firm can choose from are strict analysis of risk
and strict collections, strict analysis of risk with liberal collections, liberal analysis of risk and
vigorous collection effort, or liberal analysis of risk and liberal collections states (Wallis, 2002) .
2.1.8.3.1 Strict Analysis of Risk and Strict Collections
Under this policy, only high-credit rated accounts are accepted, and very little variation from
terms is allowed. The analysis of risk is thorough; collection efforts require a greater effort, and
selling may be restricted. But the increased effort may pay sizeable dividends in the form of
improved accounts receivable turnover and minimal bad-debt losses, leading to increased cashflow and profitability.
2.1.8.3.2 Strict Analysis of Risk with Liberal Collections
This policy is somewhat more liberal in its collection procedures. It concentrates on the selection
of good credit risks but does not aggressively press payment. The assumption is that the good
risks will, on average, pay their receivable within terms; any additional time is less expensive to
carry than the cost of following up accounts that are only a few days past due. If your cost of
capital is high, this type of policy may not be wise, especially when customer orders involve
sizeable amounts. A more prudent course would be to follow collections closely.
2.1.8.3.3 Liberal Analysis of Risk and Vigorous Collection Effort
The credit analysis is liberal, so nearly all customers that apply accepted. But once the sale is
made, close control is kept over collections. This type of policy would normally be followed in
financial institutions selling high mark-up, low unit-price goods or services. The cost of credit
analysis is relatively low in this type of credit policy, but collection costs are usually quite high.
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2.1.8.3.4 Liberal Analysis of Risk and Liberal Collections
Very few lines of business would find this policy profitable to operate. One advantage might be
that it tends to lower credit costs. Yet the costs related to carrying receivables for long periods
coupled with a resulting increase in bad-debt expense more than offsets the savings.
The principal motivation for a banks adopting this policy is to obtain maximum sales volume.
For this policy to be effective, profit margins must be set high enough to counter the slow turn in
receivables resulting bad-debt losses.
2.1.9 Managing Risks
According to Greengard (2013) for most banking, winning the battle for market share and new
customers is essential to success. Advertising and marketing executives conjure up elaborate
campaigns to entice corporate decision makers to part with their cash. Sales people mine, leads
and court potential buyers with relentless zeal. Yet many of these efforts ignore a basic business
truth: Not all customers are created equal.
Managing credit risks remains an essential and challenging corporate function. Unfortunately,
it’s one that is often no more than an afterthought. Many financial institutions give a great deal
more attention to retaining customers and snaring new accounts than they do tracking who is
paying, who is lagging behind and who might default. But, as the current economic malaise
drags on and bankruptcy rates climb, effective credit management becomes an increasingly
critical factor in achieving success.
2.1.9.1 Credit Risk Categories
According to Pickford (2011) Credit risk is the potential for financial loss resulting from the
failure of a borrower or counter party to honor its financial or contractual obligation. Credit risk
may be classified as firm specific credit risk (the risk of default of the borrowing firm associated
with the specific types of projected risk taken by that firm) or systematic credit risk (the risk of
default associated with general economy wide or macro-economic conditions affecting all
borrowers). An overall credit management review will therefore include an evaluation of the
credit risk management policies and practices of a banks.
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2.1.9.2 Customer Risk Assessment
Credit risk management policies, to limit or reduce credit risk and asset classification. A banks‟s
lending function should ensure that credit is extended on a sound and collectible basis and funds
are invested profitably for the benefits of shareholders and protection of the depositors. To
mitigate these exposures, financial institutions are expected to have clearly defined policies of
the institutions credit risk philosophy and parameters within which credit risk is to be controlled.
However, effective customer risk assessment may be hampered by information asymmetry;
borrowers may not provide all the pertinent information about their financial abilities and history
(Ross, 2002).
For most firms with credit policies, cash deposits to safeguard against non-payment and making
prepayments are some of the common measures adopted to minimize default. Besides analysing
the customers past payment history to know whether he is likely to pay, lenders can also get
assistance from credit rating agencies. Such agencies report the experience that other firms have
had with your customer (Brealey and Myers, 1988).
2.1.9.3 Controlling Risk in Accounts Receivable Management
One of the best ways to avoid long accounts receivable time-lines is by doing due diligence on
your customers up front. By combining early due diligence with close attention to aging
receivables and using strategies like keeping backup like credit card numbers on file ,smallbusiness owners can get a handle on their account receivables and keep their bottom lines
healthy, even when customers are dealing with their own economic challenges (McCrea, 2004).
A critical aspect in the granting of trade credit is the control of risk of bad debt losses. Financial
writers have generally measured this risk by the expected value of the probability distribution of
these losses. Dun and Bradstreet Inc. suggest that a firm should make a credit sale to a customer
only if the operating profit on sales exceeds the expected bad debt losses. According to this study
carried out by Onono (2006) the results indicate that the prediction of bad debts is best if a firm’s
customers are small and there is a wide distribution of sales among them. The prediction will
however not be accurate if the default risks are closely correlated, for example, when sales are
concentrated in a few large customers.
13
2.1.13 Accounts receivable management performance ratios
Ratio analysis involves measuring the proportional relationship between two or more financial
statements items. Performance ratios sometimes called activity or efficiency ratios measure how
effectively a banks uses its assets in daily operations. Larson (2019) out that performance ratio is
a measure usually of how much revenue is or a certain level of assets. Observed that since
accounts receivable analysis encompasses many factors, which sometimes appear to conflict with
each other the performance obtained using only one ratio may be deceptive.
Massey(2013) supported a pre-defined formula and weighting system involving three major
accounts receivable performance indicator namely Days Sales Outstanding, Percentage of
Accounts Receivable greater than 90 days, and percentage of charges written off as bad debt.
The following discussions confined to the five major accounts receivable indicators mentioned
by various writers including (Larson, 2019) and (Libby, 2002). The five major account
receivable key performance indicators are: the accounts receivable to total revenue ratio,
accounts receivable turnover ratio, days' sales outstanding percentage of accounts receivable
greater than 90 days and percentage of sales written off as bad debt. These measures are
evaluated by comparing them against those of other banking, industry averages or prior
performance of the banks.
2.1.14 Measuring of bad debts
Despite careful credit investigations, a few credit customers will not pay their receivable. If an
account receivable is uncollectible, the business has incurred a bad debt expense. Firms that
extend credit know that there a certain amount of bad debt losses on credit sales. In fact, an
extremely low rate of bad losses is probably not good because it may indicate too tight a credit
policy. To measure bad debt expense, the bad debt allowance method is used. The allowance
method recognizes that bad debt expenses must be recorded in the year in which the sales that
cause those losses were made rather than in the year that customer is unable to pay. Therefore,
the allowance method is based on estimates of the probable amount of bad debt losses from
uncollectible accounts. The objective in the estimation of doubtful accounts expense is to prevent
an over statement of assets and revenue in the accounting period in which sales are made. In the
ledger, the estimate of doubtful accounts is carried as a credit balance in valuation account titled
Allowance for doubtful accounts or allowance for uncollectible accounts to measure their net
14
realizable value the allowance account is deducted from account receivable in the balance sheet.
The doubtful accounts expense may be classified several ways in the income statement.
Logically, doubtful accounts expense should be classified as an offset against gross sales,
because it represents revenue that will not be collected. In practiced, doubtful accounts expense
usually appears among of operating expenses. Under the assumption that credit losses are a
normal expense of operations. The estimate is made in each accounting period based on either
the total sales for the period or an aging of account receivable( Daniel, 2020).
2.3 Empirical Studies
Kofi Mintah, (2015) have tried to analyse risk and challenge of debt management practice in
Ghana banks. The study used both primary data and secondary data were used. Ratio analysis
was main data analytical procedure. The study carried out by comparing the trend analysis of
account receivable the past four years. The information indicated that the percentage of account
receivable reduced in 2011 from 2010 and to increases 2013 and reduced 2014. The study
analyses account receivables to be fluctuating in the study period and the account receivable to
current asset ratio indicated the existence of poor management of account receivables. The study
conclude that The weakness of the law, ineffective and inefficient management of accounts
receivables and poor investment in the collection of account receivable were some of the factors
identified as the causes of poor account receivables.
Ernest et al., (2016) tried to analyse the receivable management of Electric Banks of Ghana and
to provide some comments to improve their services. The study area was Ashanti West region
that has eight districts. The study covered the past five year the banks Account receivable
management information. The information indicates that the percentage accounts receivable to
sale has not been decreasing; an average days' sales outstanding was 158 days over the study
period and unrealistic provision for bad debt of about 5%.The study's conclude that the banks is
not very effective in its accounts receivable management .
Vikiru, (2008) studied credit management practices in Kenya power and lighting banks. The
study set out to address the application of the credit management procedures in KPLC by
reviewing various variables such as the existing credit standards, credit terms and collection
policy and assess their adequacy and effectiveness in militating against growth in account
15
receivables. The study found that the variables are positively correlated with the level of
receivables.
Nicholas, (2017) studied strategies for Maximizing Revenue Collection in Private Banking
service banks located in Malawi, the study, explored credible business strategies that senior
managers of the private
Banking service
use to address inefficiencies in collecting
fee
revenues. Innovative strategies, customer relations management, disconnection of supply from
customers with overdue receivable, and effective metering and receivable were the four themes
that morphed from the study. The study found that those teams could affect the efficiencies of
collecting fee revenues.
Onono, (2006) studied credit management practices of Kenya Telecom. The study take place on
the population involving the heads of credit units in the seventeen credit units regions of telecom
spread across the country. The study to draw a comparison with the corporate credit policy and
best practices in credit management; to evaluate the level of bad debts within the different
regions; and to establish the relationship between credit management practices and level of bad
debts .The researcher found that the inability to effectively practice credit management policies,
lack of proper vetting procedures and Governments slow pace in meeting its obligations as some
of the factors which have led to the debt.
A study conducted by Getu Negusie, (2017), to assess the receivable management practice in
shipping and logistics service enterprise in Ethiopia. The result of this study evidences that
Ethiopian Shipping & Logistics Service Enterprise has no means to secure the collection of its
credit services. There is a gap between the significant value of the credit services &receivable
management practices.
Kimani, (2013), the study aimed at investigating the principles and practices adopted by
manufacturing firms in Kenya for effective management of accounts receivables. The results
from the study revealed several factors that affected the management of accounts receivable such
as lack of a formal credit policy, delayed or non-review of the credit policy manual,
inconsistency on credit risk analysis procedures and haphazard variation of credit terms.
16
CHAPTER THREE
3. RESEARCH METHODOLOGY
3.1 Research Design
The study used descriptive research design. According to Kothari (2004), descriptive study
design used to assess and analyzed the performance of account receivable collection of the
Awash Bank.
In order to conduct this study quantitative research approaches used. According to Creswell
(2005), quantitative research is a type of research in which the researcher decides what to study,
asks specific narrow questions, collects numeric (numbered) data from participants and analyzes
these numbers using statistics, and conducts the inquiry in an unbiased objective manner. To
achieve the aforementioned objectives, the study adopted a quantitative research approach as the
methodology to provide a quantifiable statistical analysis of the responses to the study.
3.2 Population and Sampling Techniques
So as to met the stated objectives the researchers took 20 employees. The total population 30 of
them selected. In this study convenient sampling (taking all population) employed. Taking all
population in conducting study expected to yield highest accuracy of finding. The researchers
consciously select all individuals who has knowledge, capacity and willingness to participate in
the research.
3.3 Types of Data to be collected
The data’s collected from primary and secondary sources data. For it is a first-hand information
the researchers relay on primary data and conducted on quantitative type of data. Secondary data
sources collected from account receivable balance in all categories of customers at the end of the
year and revenues figures obtained from the AIB nekemte branch receivable information system
from 2018-2022.
3.4 Methods of Data to be collected
The data quantitative type collected from primary source. The quantitative data
through questionnaires especially close ended and open ended question.
17
collected
3.5 Methods of Data Analysis
Relevant statistical methods used to analyses the collected data through tabulation and simple
percentage. So as it was expect factor research, the researchers use descriptive research to
describe the necessary data by simple method.
18
CHAPTER FOUR
4. DATA ANALYSIS AND INTERPRETATION
In this section attempts have been made to assess the receivable management activities by using
the primary data collected from questionnaires. Twenty questionnaires are distributed to
employees working in AIB, Nekemte branch which is found in Nekemte Town, out of 20
questionnaire distributed 18(90%) of them were returned and 2(10%) were not returned.
Accordingly, the analysis and findings of this paper are based on the number of respondents of
the questionnaires distributed to managers, staff workers and employees.
4.1. General Characteristics of respondents
Table. 1 Sex
Number
Percentage
• Male
10
55.5%
• Female
8
44.5%
Total
18
100%
Sources: Questionnaires
As shown in table 1, 10(55.5%) are male respondents and 8(44.5%) are female respondents. The
above data indicate there is little variation between male and female respondents. It today’s’
Ethiopian condition the participation of Women in every respect is increasing. This shows that
the current transformation and development program is highly motivated.
Table.2 age
Number
Percentage
• Below 25 years
0
0%
• 25-30 years
13
72.2%
• 31 - 40 years
3
16.7%
• Above 40 years
2
11.1%
Total
18
100%
Sources: Questionnaires
19
Regarding age the majority of the respondents 13(72.2%) range between 25-30 years, were
indicate that they take responsibility in responding to the questionnaire. The respondent ages
between 31-40 years were 3(16.7%). This show that they are able to analyze the questionnaire
well and the remaining 2(11.1%) have a wide view on the questionnaire.
Table 3 Educational background
Number
Percentage
• Diploma
8
44.4%
• Degree
4
22.2%
• 2nd degree & above
6
33.3%
Total
18
100%
Sources: Questionnaires
Concerning
the educational background of respondents the largest group who (responded)
8(44.4%) are diploma holders. The second largest group (33.3%) are certificate and below and
4(22.2%) are degree holders. There is no second degree and above holder. This data shows that
the majority of the employees are diploma holders. This implies that the employees are in a
position to understand and respond to the questionnaire items.
Table 4 Experience
Number
Percentage
• Less than 5 years
4
22.2%
• 5-10 years
12
66.7%
• Above 10 year
2
11.1%
Total
18
100%
Source: Questionnaires
Regarding work experience the majority of respondents served 5-10 years 12(66.6%) shown in
table 4, the next largest group is employees who served 5 years or less 4(22.2%) the remaining
groups said they worked above ten years. This indicates that a good number of
employees have served the institution for considerable years that they are more familiar
with the objectives and importance of receivable management activities.
20
4.2. Factors in facilitating the receivable management activities
Table 5. Values attached by respondents to the significance of the following factors in
facilitating the receivable management activities.
Factor
Very good Good
Providing employees required professional training 10
Assigning the right worker to the right work.
Good interdepartmental relationship
Good relation with customers
6
Poor
Total
2
18
55.5%
33.3% 11.1% 100%
7
6
38.8%
33.3% 27.7% 100%
11
4
61.1%
22.2% 16.7% 100%
12
4
2
66.7%
22.2
11.1% 100%
5
3
18
18
18
Source: Questionnaires
As indicated in the table 5, out of 18 respondents the majority 10(55.5%) said the practice of
employee training is very good and 33.3% good. This has high contribution in facilitating the
receivable management activities. The above table also shows that 13(72.1%) of the respondents
said that the right worker is assigned to the right work. This facilitates the receivable activities.
The employees were also asked to rate the value of the interdepartmental relationship and
facilitating receivable management activities. The majority of the respondent 11(61.1%) said
the interdepartmental relationship is very good. This facilitates the receivable management
activities and 3(16.7%) rated as poor, the remaining 4(22.2%) rated as good in facilitating
receivable management activities. With regard to good relationship with customers the majority
of respondents 12(66.6%) rated it as very good. From this we can infer that Awash Bank
institution, has good opportunity of sharing information and assisting customers to facilitate
effective payment and achieving their target.
21
4.3. Loan Requirement
Table 6. Requirement of Oromia credit and saving institution Nekemte Town Nekemte
branch before granting loan
Is there any requirement before granting the loan?
Response
Number
percent
Yes
18
100%
No
Nil
0%
Source: Questionnaire
According to table 6 requirements of AIB, Nekemte branch before granting loan all said (100%)
AIB has requirement before granting loan. This show all customers must fulfill the granting
requirement.
The respondents also describe requirements as: He/she must be industrious citizen with
minimum income which is less than to over expenditure for subsistence’s that is in rural people
who possess oxen or less and in sum urban and urban localities with monthly income of less than
birr 1000/month. He/she is with age of 18-60 years. He/she would be free from debts for many
other institutions. He/she must be free from addictions and other miss behaviour. He/she must
be free from disabling disease mainly from mental illness
4.4. Receivable management of the institution
Table 7 Receivable management of the institution
Yes
No
Total
Did the office give any training about the loan utilization for credit 18
Nil
18
beneficiaries either before or after taking the loan?
100%
-
100%
Was the loan collected according to repayment schedule?
5
13
18
27.7% 72.3% 100%
Does the office follow up and supervise the clients about the usage of 11
loan for the specified purpose?
7
18
61.1% 38.9% 100%
Did your institution have any coordination with woreda & kebele 18
22
Nil
18
administration?
100%
-
100%
Does the institute have credit and collection policy manuals?
18
Nil
18
100%
-
100%
Source: Questionnaire
From the table 7 we can see that regarding training about the loan utilization for credit
beneficiaries either before or after taking the loan, all the respondent 18 ( 100%) said yes there is
training. This contributes to the effectiveness of receivable management. Concerning the loan
collection according to re-payment schedule the majority of respondent 13(72.3) said that the
collection is not made according to schedule and the reaming 5(27.7%) said yes. From this we
can see that the loan is not collected according to repayment schedule and this leads to long
outstanding loan which may not be collected.
Regarding follow up and supervising the clients about the usage of loan for the specific purpose,
the majority of respondent 11(61.1%said yes there is follow up and supervision while the
remaining 7(38.9%) said no. From this we can say that the institution is effective in
following and supervising clients usage of loan whether they use the loan for it specific purpose
or for other purpose.
Concerning coordination of the institution with woreda and kebele administration all of the
respondent 18(100%) said yes there is coordination. This shows that the institution can
perform its activity effectively since it can select the appropriate clients.
From the above table we can also see that all of the respondents 18%(100%) said yes there
is credit and collection policy manuals. And from this we can understand that the institution has
credit and collection policy manuals which contribute to the effective receivable management.
23
4.5 Major Customers
Table 8. Who are the major customers of the institution?
Who are the major customers of the
institution
Number percentage
Farmers
18
100%
Hotel business owners
18
100%
Small scale business
18
100%
Domestic traders
18
100%
Government workers
18
100%
18
18
100%
100%
Small scale business
18
100%
Domestic traders
18
100%
Government Workers
18
100%
What is the consequential measure
Discussion with customers
14
77.7%
taken by the institution for
Accuse customers legally
16
88%
Transferring collateral to the
18
100%
Which
customers
have
outstanding debt?
receivables that are outstanding
above their due date?
long Farmers
Hotel business owners
institution
Source: Questionnaires
From the table 8 we can see that regarding the major customers of the institution 18(100%) said
that the major customers of the institutions are farmers, hotel business owners, small scale
business, domestic traders and government workers. From this the AIB comprise of all the social
groups. Concerning customers who have long outstanding debt 18(100%) said that farmers,
government workers, hotel business owners, domestic traders and small scale business have long
outstanding debt. From this we say that the receivable management of the institution is
ineffective because it has long outstanding debt for major customers which may intern lead to
receivable uncollectibility.
24
Regarding the consequential measures taken by the institution for receivables that are
outstanding above their due 14 (77.7%) said that the institution uses discussion with customers,
16(100%) said that the institution uses accusing of customers legally and 18(100%) said
that the institution uses a mechanism of transferring collateral to the measures.
Table 9. Long outstanding loan Receivable
Is there any long outstanding loan receivable? Yes
10
No
Total
8
18
(55.6%) (44.4%) (100%)
From the table 9 we can see that the majority of the respondent 10(55.6%) said that yes
regarding long outstanding loan receivable, while the remaining 8(44.4%) said no. from this we
can understanding that the institution is vulnerable to receivable un collectability since the longer
of the receivable the lesser the collectability.
Table 10. Initiation Mechanisms for Receivable Settlement
Frequency Percent
What are the mechanisms that the Group lending system
18
100%
institution uses to initiate its customers Punishment on delinquent
to settle receivable on time?
clients
18
100%
What types of incentive are given to Work closer customer
18
100%
customers?
Financial incentive
18
100%
Are given the amount of credit
18
100%
they need immediately
From table 10 we can see that regarding the mechanisms that the institution uses to initiates
customers to settle receivable on time, 18(100%) said that the mechanisms that the institution
uses to initiate its customers to settle receivable on time are punishment on delinquent clients,
group lending system, and work closer to the customers. From this we can say that institution
uses good mechanisms to settle receivable on time.
25
Concerning the types of incentive given to customers the respondent 18(100%) described, the
financial incentive and giving the amount of credit they need immediately are the institution
incentives to the customers.
Table 11. Reward for customer
Is there any reward for customer who effect payment on time?
Yes
No
Total
12
6
18
66.7%
33.3%
100%
Source. Questionnaires
From table 11 we can see a reward for customers who effect payment on time, the majority of
the respondent 12(66.7%) said yes there is a reward. This shows the institution is motivating
customers for their payment on time.
4.6. Follow up for receivable collection
Table 12. Follow up for receivable collection
Response
Very good
Good
Poor
Total
How is the follow up of collection Frequency
8
7
3
18
effectiveness on account receivable of Percent
44.4%
33.3%
16.6%
100%
the organization?
How
do you range the over-all Frequency
10
6
2
18
collection receivable management of Percent
55.5%
33.3%
11.1%
100%
the
organization?
Source:
Questionnaire
The respondents were also asked to rate the effectiveness of the organization’s collection follow
up, the majority of the respondents 8(44%) rated very good and 7(33.3%) rated as good, the
remaining 3(16.6%) rated poor. From this the organization is effective in its collection follow up.
Regarding the overall receivable management of the institution the majority of the respondent
10(55.5%) rated very good and 6 (33.3%) rated as good the
26
Table 13. Evaluation Methods
Type
Number Percent
What type of methods used to evaluate for receivable in Direct write off
13
72.2%
the branch?
Allowance
3
16.7%
Both
2
11.1%
Total
18
100%
Source. Questionnaires
The above table 13 also shows that concerning valuations of receivable as the majority of
respondents 13(72.2%) replied the institution uses direct write off method of valuation of
receivables, 3(16.7%) replied as the institution uses allowance method and the remaining
2(11.1%) replied both method. As we understand from the above table the institution most
of the time uses direct write off method. As the researcher observed from the above table AIB,
Nekemte branch used direct write off method. But this does not agree with generally
accepted Accounting principles, especially with the matching principle,
27
CHAPTER FIVE
5. CONCLUSION AND RECOMMENDATION
5.1 Conclusions
The purpose of this study was to assess receivable management performance in the AIB,
Nekemte branch in achieving its targets so as to suggest the possible solutions to prove
uninterrupted activities. To answer these points’ data was collected through questionnaires. The
questionnaire was dispatched to twenty selected workers of the institution. As sample of the
questionnaire dispatched, 18(90%) were returned. The analysis was based on questionnaire from
the sample respondent. The question is similar to all workers and the response were analyzed
and expressed in terms of percentage and qualitative descriptions. And finally, through analysis
the following conclusions are drawn.
Based on the analysis of data gathered through questionnaires we found out that the institution
has got both strong and weak side. The strong side of the institution is that it has credit policies
and work flow procedures through which it can carries its activities very smoothly, conduct
follow up and take defaulters to legal case. Though the institution is strong , in the other side it
has weakness in that it lucks loan recovery & rehabilitation unit that facilitate rehabilitation and
recovery of sick loans, the absence of this which resulted in long outstanding loan in its account.
In addition to that the method the institution is using in recognizing uncollectable is direct write
of method. This method as it is well known is not recommended unless and other wise there are
exceptional cases. Cases such as institutions in infancy period were historical background to
estimate their allowance for doubtful expense is unavailable. On the other hand GAAP accept
the application of the method in the assumption of materiality concept. The Method also violate
revenue matching principle as it recognizes expense when clients are judged to be defaulters
contrary to allowance method which record provision in each accounting period & adjusts
on year end.
28
5.2 Recommendation
The study focused on assessing the receivable management performance in the AIB, Nekemte
branch. The researcher would like to give recommendations on certain aspects of the receivable
management.
The researchers try to suggest solutions for the problems that are observed when conduct data
analysis and interpretation on receivable management. Based on the analysis of data the
researchers proposed the following recommendations as a promote measure. These
recommendations are:AIB, Nekemte branch, should inform and negotiate with customers to pay the debt amount on
time.
The institution must provide better reward to those customers who settled on due date
The institution has to use allowance method of accounting system.
The institution should not tolerate long outstanding debts by major customers, since it cause
more bad debt expense. So it has to take measures.
The institution should minimize long outstanding loans receivable by creating awareness of cash
management skills to customers.
29
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32
GREAT LAND COLLEGE
COLLEGE OF BUSINESS AND ECONOMICS
DEPARMENT OF ACCOUNTING AND FINANCE
Questionnaire
The aim of this questionnaire is to gather data and information for research work on assessment
of receivable management performance in case of Awash Bank Nekemte Branch. The supply of
your grant and honest answer will greatly contribute to the success of the research. We extend
our deepest thanks for your kind cooperation. We assure you that the
information provided used strictly for academic purpose and confidential.
N.B
1. No need of writing your name
2. Unless required to give brief written answer, you are kindly requested to tick on the box.
I. Personal Information
1. Sex Male [ ) Female [)
2. Age
Less than 20 years [ ]
20-30 years [ ]
3. Educational back ground
a) Certificate or below [ ] Degree [ ]
c) above 40 years [ ]
b) 30-40 years [ ]
d) Diploma [ ] MA/MSC or above [_]
4. Years of Service
Below 5 years [_] 5-10 years [ 1 above 10 years [_ ]
II. How do you rate the following?
1. Providing employees with professional training? Very good [ ) Good 1_]
2. Assigning the worker to the right work Very good [ ) Good [ ]
3. Good interdepartmental relationship Very good [ ) Good [ ]
4. Good relation with customers Very good [ ] Good [ [
5. Is there any requirement before granting the loan? Yes
Poor1_J
Poor[_]
No J ]
6. If your answer for Q 5 is yes, what are the types of requirement?
33
Poor1_J
Poor[_)
7. Did the office give any training about the loan utilization for credit beneficiaries either before
or after taking the loan? Yes Q
No { }
8. Was the loan collected according to repayment schedule? Yes Q
No { }
9. Does the office follow up and supervise the clients about the usage of loan for the specified
purpose? Yes { }
No | 1
10. Did your institution have any coordination with worda and kebele administration?
Yes { }
No | 1
11. Does the institution have credit and collection policy manual? Yes { }
No | 1
12. Who are the major customers of the institution?
13. Which customers have long outstanding debt?
14. What are the consequential measures taken by the institution for receivables that are
outstanding above their due date?
15. Is there any long outstanding loan receivable? Yes { }
No | 1
16. What are the mechanisms that the institution uses to initiate its customers to settle receivable
on time?
17.Is there any reward for customers who effect payment on time? Yes { }
18. If yes, what types of incentives are given to customers?
19. The effectiveness of the organizations collection follow up is
Very good [_) Good 1 ] Poor 1 1
20. How do you feel about overall receivable management of the institution?
Very good [_] Good [ ] Poor [ 1
21. What method of evaluation of receivable does the branch use?
Direct write off [ ] Allowance [ 1Both [
34
No | 1