The Effect Of Credit Management On Company Profitability Case Study: Selected Manufacturing Companies In Garowe Puntland Somalia.

ABSTRACT

The study investigated the relationship between the credit management and company

profitability in selected manufacturing companies in Garowe Puntland, Somalia with the

objectives of determining the level of credit management in selected manufacturing

companies in Garowe Puntland Somalia, to determine the level of profitability in

selected manufacturing companies in Garowe Puntland Somalia and to establish the a

relationship between the level credit management and level of profitability in selected

manufacturing companies in Garowe Puntland Somalia.

The study used a descriptive correlation quantitative design focused on two (2)

manufacturing companies in Garowe Puntland Somalia consisting of a total population

of 40 company staff consisting of finance managers and customers. A sample of 36

respondents was selected using simple random technique. The data collection method

used was questionnaire. Data analysis techniques of frequency, percentages, mean and

correlation analyses were used as found appropriate.

The study found that the companies controls credit management through proper

procedure by applying effective credit policies, credit terms, credit limits, credit

standards credit period, credit discounts, and collection procedure, The findings showed

that the most respondents agreed that credit management process plays great role the

collection of sales revenue and if this system is poor or weak, company will not be able

to collects its overdue accounts effectively and efficiently and the study found that there

is a significant relationship between credit management and profitability. The findings

indicated the relationship between credit management and profitability is weak positive

correlation which means there is a relationship between these two variables but it is not

strong. Therefore the Null hypothesis was rejected.

The study recommended that the finance manager should maintain that accounts credit

management model that the firm uses currently and also should improve the risk

management model which is currently weak, The finance manager should supervise

whether credit terms, credit limits, credit period are clear stated both informally and

formally. Because as Somalis, we are oral society, so, the finance manger should closely

consider that, The finance managers should come up with other strategies to satisfy

customers about model of managing accounts receivable because as table 4.5 reveals

that the customers are dissatisfied how they accounts receivable handled, offered. But

as accountants our concern is not that (customers satisfaction), our concern is level of

profit being generated by the firm and The finance manager should main and update as

environment changes the technique and tools of billing can collection procedure that the firm uses currently because they are strong as the respondents agreed.