DEBTOR MANAGEMENT AND ORGANIZATIONAL PERFORMANCE ON COMPANIES by HC12110619537

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									               MAKERERE UNIVERSITY


DEBTOR MANAGEMENT AND ORGANIZATIONAL PERFORMANCE
     ON COMPANIES ENGAGED IN POULTRY PROJECTS.
           CASE STUDY; EDEN POULTRY LTD.




               BY NAMATOVU MASTULA
                  O7/ U/ 12730/ EXT
                    SUPERVISOR
                MR. NZIBONERA ERIC




A RESEARCH REPORT SUBMITTED TO MAKERERE UNIVERSITY
DEPARTMENT OF OPEN AND DISTANCE LEARNING IN PARTIAL
FULFILLMENT OF THE REQUIREMENTS FOR THE AWARD OF A
         DEGREE OF BACHELOR OF COMMERCE.




                     JUNE, 2011




                          i
                                       DECLARATION

I, Namatovu Mastula, declare that this research report is my own original work and has not been
submitted for the award of any other degree or diploma in any other University or institution.




Signed                                                 Date




…………………………………..                                             ………………………………………
NAMATOVU MASTULA
(07/U/12730/EXT)




                                                ii
                                  APPROVAL


I certify that Namatovu Mastula carried out this research on debtor management and
organizational performance on companies engaged in Poultry taking Eden poultry ltd as
a case study.


Signed                                             Date
….…………………………………                                 ……………………………..
MR. NZIBONERA ERIC
SUPERVISOR




                                       iii
                                       DEDICATION
I dedicate this special project to my Mum Mrs. Namutebi Hawa and My Dad Hajji Rashid
Mwase for their confidence in me; and their financial assistance, they have rendered to me the
whole of my academic career.




                                              iv
                                   ACKNOWLEDGEMENT
First, I wish to thank Allah who has made me who I am and also enabled me go through the
hardships plus whatever I have achieved throughout my life.
I also wish to acknowledge the following persons who tirelessly gave me a hand of help
during the course of carrying out this research.
My dear supervisor Mr. Nzibonera Eric who has always been available for me for the guidance
and advice and also committed his precious time over and again to read through my research.
This research would not have been to perfection without his professional encouragement and
advice.
Special thanks to all my family members especially my brothers especially Mr. Mustafa and my
sister for support given to me up to this level. I thank all my friends especially my former course
mates in the struggle. In this regard special thanks go to Mwangi Gad, David Kawooya, Davy,
Okware Robert, Nabakooza Florence, Nalubwama Rebecca, Rhona, Antoy, and Mawejje Phillip
with whom I have shared bitter times during my studies.
My respondents in Eden Poultry who were hospitable to me during collection. Their willingness
to provide the required data by sacrificing their time and energy made this research possible.
I thank Jim and Miss Nice Kateeba for their guidance while compiling and editing my work.




                                                v
                                      TABLE OF CONTENTS
DECLARATION ............................................................................................................. ii
DEDICATION ................................................................................................................ iv
ACKNOWLEDGEMENT ............................................................................................... v
TABLE OF CONTENTS ................................................................................................ vi
LIST OF TABLES .......................................................................................................... ix
ABSTRACT..................................................................................................................... x
CHAPTER ONE .............................................................................................................. 1
1.0 Introduction ................................................................................................................ 1
1.2 Background to the study ............................................................................................ 1
1.3     Statement of the problem ........................................................................................ 2
1.4 Purpose of study......................................................................................................... 2
1.5 objectives of the study were;...................................................................................... 2
1.6 Research Questions were; ........................................................................................ 2
1.7      Scope of the Study ................................................................................................. 3
1.7.1 Geographical scope ................................................................................................. 3
1.7.2 Content scope .......................................................................................................... 3
1.8 Significance of the Study ........................................................................................... 3
CHAPTER TWO ............................................................................................................. 4
RELATED LITERATURE .............................................................................................. 4
2.0 Introduction ................................................................................................................ 4
2.1 Methods of debtor management................................................................................. 4
2.1.1 Rationale of credit ................................................................................................... 4
2.1.2 Type of credit policy ............................................................................................... 5
2.1.3 Costs associated with extending credit ................................................................... 5
2.1.4 Nature of Credit Management Policies ................................................................... 6
2.1.5 Designing credit policy ........................................................................................... 8
2.2 Definition of business performance ........................................................................... 9
2.3 Measures of Performance. ....................................................................................... 10
2.4 Other factors affecting business performance.......................................................... 11


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2.5 Relationship between debtor management and organizational performance .......... 13
2.6 Conclusion ............................................................................................................... 14
CHAPTER THREE: ...................................................................................................... 15
METHODOLOGY ........................................................................................................ 15
3.1 Introduction .............................................................................................................. 15
3.2 Research Design....................................................................................................... 15
3.3 Study population ...................................................................................................... 15
3.4 Sample size and sample selection ............................................................................ 15
3.5 Sampling procedure ................................................................................................. 16
3.6 Data sources ............................................................................................................. 16
3.6.1 Primary data .......................................................................................................... 16
3.6.2 Secondary data ...................................................................................................... 16
3.8 Data analysis and processing ................................................................................... 16
CHAPTER FOUR .......................................................................................................... 17
PRESENTATION, INTERPRETATION AND DISCUSSION OF FINDINGS .......... 17
4.0 Introduction .............................................................................................................. 17
4.1 Demographic Characteristics of respondents........................................................... 17
4.1.1 Findings on Gender Representation ...................................................................... 17
4.2.2 Findings on the Academic Background/Qualifications ........................................ 17
4.2.3 Findings on Marital Status of respondents ........................................................... 18
4.1 Findings on objective one which was to evaluate methods of debtor management
employed by poultry farms in Uganda.......................................................................... 20
4.2 Findings on objective two which was to find out factors affecting business
performance of poultry industry in Uganda .................................................................. 23
4.3 Findings on objective three which was to find the relationship between debtor
management and organizational performance. ............................................................. 25
CHAPTER FIVE ........................................................................................................... 29
SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATIONS .......... 29
5.1 Summary of findings................................................................................................ 29
5.1.1 Findings on methods of debtor management employed by poultry farms in
Uganda .......................................................................................................................... 29

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5.1.2 Findings on factors affecting organizational performance of poultry firms ......... 29
5.2 Conclusion ............................................................................................................... 30
5.3 Recommendations .................................................................................................... 30
5.4 Areas for further research ........................................................................................ 30
REFERENCES .............................................................................................................. 31
QUESTIONNAIRE ....................................................................................................... 32




                                                       viii
                                             LIST OF TABLES
Table 1 : Showing gender response ............................................................................... 17
Table 2 showing the highest academic qualification ...................................................... 18
Table 3 showing the marital status................................................................................. 18
Table 4: Showing Age range of respondents ................................................................. 19
Table 5: showing experience of respondents ................................................................. 19
Table 6: showing whether there’s debtor management policy in place ......................... 20
Table 7: Showing whether debtors are always reminded of debts................................. 21
Table 9: Showing whether capacity of debtor is always evaluated before extending
 credit ............................................................................................................................. 22
Table 10: Showing whether credit terms are evaluated before extending credit ......... 22
Table 11: Showing whether there are credit limits that are considered before extending
 credit ............................................................................................................................. 23
Table 12:         Showing respondent response towards factors that affect business
 performance .................................................................................................................. 23
Table 13; showing whether organizational performance will be improved if all credit
 terms are evaluated ....................................................................................................... 25
Table 14: Showing whether there is relationship between debtor management and
 organizational performance .......................................................................................... 25
Table 15: Showing whether effective management improves organizational
 performance .................................................................................................................. 26
Table 16: Showing whether evaluation of credit Limits leads to better organizational
 performance .................................................................................................................. 26
Table 17: Showing whether evaluation of debtor capacity leads to better organizational
 performance .................................................................................................................. 27
Table 18: Showing Relationship between Debtor management and organizational
 performance in poultry firms ........................................................................................ 27




                                                           ix
                                           ABSTRACT
The purpose of the study was to find the relationship between debtor management and
organizational performance of companies engaged in poultry taking Eden poultry ltd as a case
study. Objectives of the study were;
To evaluate methods of debtor management employed by poultry farms in Uganda, to assess the
business performance of poultry industry in Uganda and to establish the relationship between
debtor management and performance of poultry industry in Uganda performance



The study established that most respondents have no defined debtor management policy in place,
at times respondents are not reminded of debts, character of debtors is rarely evaluated before
extending credit, most respondents don’t evaluate capacity of debtor before extending credit, and
credit terms are at times not evaluated before extending credit.

Lack of capital is another impediment to businesses in their early stages. Results of the study
indicated a significant proportion of the respondents, this as a major problem. Poor record
keeping as also a cause for startup business failure. In most cases, this is not only due to the low
priority attached by new and fresh entrepreneurs, but also a lack of the basic business
management and skills. Most business people, therefore, end up losing track of their daily
transactions and cannot account for their expenses and their profits at the end of the month.

It was concluded that there is a weak positive relationship of (r=.035) between debtor
management and organizational performance which implies that the more effective debtor
management, the better organizational performance.

It is recommended that Poultry firms should ensure that there is effective management in
coordination of its activities, owners of poultry firms should access loans to resolve lack of
capital problem which is another impediment to businesses in their early stages, there should be
poor record keeping as also a cause for startup business failure, owners of poultry firms should
have a control system or process for managing debtors, owners of poultry firms should have
budgets for profit and loss analysis to really know what you spend (or intend to spend) in each
area of your business over 12 months.


                                                 x
                                     CHAPTER ONE

1.0 Introduction
This chapter covers the background of the study, statement of the problem, purpose of the
study, objectives of the study, research questions, and scope of the study and significance
of the study.

1.2 Background to the study


Debtors occupy an important position in the structure of current assets of a firm. They are
the outcome of rapid growth of trade credit granted by the firms to their customers. Trade
credit is the most prominent force of modern business. Stoner (1997) describes
organisational performance as the ability to operate efficiently, profitably, survives, grow
and lead to opportunities and threats. Stoner (1997) singled out the production process
efficiently as the key factor governing business performance. There is also emphasis
upon innovation for profitability, assets management and overall entrepreneurship for
achieving lasting performance.


Performance of business refers to the ability to meet required standards, increase market
share, improve on facilities, ensuring returns on profitability and total waste reduction,
cost reduction thus once this is achieved a business is believed to be performing
effectively (Balunywa ,1998).


Despite of this, majority of these firms collapse in the first five years of operation and the
smaller the size and age of the business, the more it is likely to collapse ( Obonyo,
2000).According to Survey carried by         Enterprise Uganda(2007) one of         the most
prevalent challenges identified during business health checks is that Scale business
enterprises are associated with poor credit management and financial records which
makes entrepreneurs unable to make business decisions on the sound financial records..
Also these businesses cannot access loans because they don’t have effective credit



                                              1
management systems and end up accumulating alot of debts which are eventually written
off.


In Eden poultry ltd profitability is not readily predictable due to a lot of debts. The
researcher in this particular study wishes only to evaluate the relationship between debtor
management visa vis organizational performance.

1.3     Statement of the problem
Poultry farming in Uganda seen to be experiencing challenges; for instance poultry farms
ltd is experiencing challenges which include; having a lot of bad debts all the time ,
difficulties in recovering debts, incurring a lot of costs in recovering debts which are
ultimately written off. Its management has tried to resolve these fore mentioned
challenges but they are still persistent (According to internal monthly report, 2009)
.Unless these fore mentioned debt related challenges are fully resolved; they may cause a
threat to its organizational performance.

1.4 Purpose of study
       The purpose of the study was to establish the relationship between debtor
       management and organizational performance of companies engaged in poultry taking
       Eden poultry ltd as a case study.



1.5 objectives of the study were;
   i.     To evaluate     methods of debtor management employed by poultry farms in
          Uganda
 ii.      To assess the business performance of poultry industry in Uganda
 iii.     To establish the relationship between debtor management and performance of
          poultry industry in Uganda performance.

1.6 Research Questions were;
            i.   What methods of debtor management are employed by poultry industry in
                 Uganda?


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          ii.   To assess the business performance of poultry industry in Uganda
         iii.   To establish the relationship between debtor management and performance
                of poultry industry in Uganda performance.




1.7     Scope of the Study

1.7.1 Geographical scope
The study was carried out at Eden poultry ltd in container village in Kampala District.

1.7.2 Content scope
The study focused on Debtor management and organizational performance



1.8 Significance of the Study
   i.    The study will provide information that will be used by policy makers in
         formation of proper debtor management policies
 ii.     It will also help businesses in identifying critical factors influencing business
         performance in competitive climate.
 iii.    Research will also add to already existing scholarly knowledge regarding Debtor
         management and organizational performance.




                                               3
                                     CHAPTER TWO

                                RELATED LITERATURE

2.0 Introduction
This chapter provides related literature on debtor management and business performance
of an organization .It covered what scholars have written about them from selected
published journals, on internet and text books.

2.1 Methods of debtor management
Debtors occupy an important position in the structure of current assets of a firm. They are
the outcome of rapid growth of trade credit granted by the firms to their customers. Trade
credit is the most prominent force of modern business. It is considered as a Marketing
tool acting as a bridge for the movement of goods through production and distribution
stages to customers.
It is generally believed that credit policy stimulates sales as it helps in retaining existing
customers and winning clients from rivals. Trade debtors represent amounts owed to the
firm as a result of credit sale of goods or services in the ordinary course of business. The
key function of credit management is to optimize the sales at the minimum possible cost
of credit.

2.1.1 Rationale of credit
According to Kakuru Julius (2001), firms use credit as a marketing weapon for expanding
business in a declining industry. In a growing competitive market, credit is used to
increase a firms markets share of minimize erosion of the firm’s market share by
maintaining the firms share and maintaining the firm market share. Further more, it
helps to retain old customers and create new ones by wining them away from
competitors. To him, credit extension is a desirable option on which companies can do
business in a better way hence gaining competitive advantage.
Kakuru Julius goes further to define credit policy as a set of polices of action designed to
manage costs associated with credit, while maximizing the benefits from it. A firm may
follow a limited or a stringent credit policy.

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2.1.2 Type of credit policy
Kakuru Julius (2001), identifies 2 types of credit policies; Lenient and Stringent Credit
Policies. To him, a lenient credit policy tends to give credit to customer on very liberal
terms and standards. He further notes that a stringent credit policy is highly selective and
gives credit to only those customers whose credit worthiness has been ascertained and
who are financially strong.

2.1.3 Costs associated with extending credit
Boggess W.P (1967), noted that carrying costs are those costs of capital measured as the
company’s internal required rate of return on funds committed in receivables where as
normal credit costs are those costs for supporting the credit function, for example legal
collections.


Rosse and Wasterfield (1988), distinguished two costs; the carrying costs and opportunity
costs.
To them, carrying costs are those associated with credit extension and investment in
receivables. They include the required rate of return from bad debts and the costs
associated with credit analysis, monitoring and collection efforts. They further argued
that opportunity costs are costs related to loss of sales and as a result of refusing to grant
credit.


According to Van Horne (1989), a firm should evaluate its credit policy in terms of
returns and costs. The costs involved include; the selling costs, administration costs,
collection costs and bad debt losses. Van Horn however identifies these costs as
involving in the implementation of credit sales. He further emphasizes that a firm can
realize sales because of credit sales, which leads to larger profits.


Kakuru Julius (2001) noted that though extending credit is beneficial, it involves costs
which are inevitable in some cases, and these costs include; collection costs, bad debt
losses, administrative costs and opportunity costs. To him, collection costs are incurred at



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the time of collection of receivables. These could be in form of sending reminding letters,
meeting telephone charges and making reminders through the press in some cases.



2.1.4 Nature of Credit Management Policies
Credit management policies are comprehensive set procedures and guidelines that must
be followed by banks in lending practices to achieve their goals (Agu, 1998).
The term credit policy is used to refer to the combination of three decision variables i.e.
credit standards, credit terms and collection efforts on which the financial manager has
influence. Credit standards are criteria to decide the types of customers to whom goods
could be sold on credit. If a firm has more slow- paying customers, its investment in
accounts receivable will increase. The firm will also be exposed to higher risk of default.


According to Pandey (2001), in order to analyze customers and set standards, two aspects
are considered; the average collection paid and the default rate. To him, average
collection paid refers to the period in which debts remain outstanding, and default rate is
the ratio of uncollected receivables to the total receivables.


Pandey (2001) identifies 5C’s of credit as a measurement in setting standards. The 5 C’s
include; character, capacity, condition, capital, and collateral.


Character
According to Pandey (1995) the credit manager attempts to ascertain the applicant’s
willingness to pay and settle his or her obligation. Much consideration is accorded to the
moral factor. As much as possible, the financial manger should ascertain whether the
customer will make honest efforts to meet the credit obligations of the firm. In making
analyses about the customer’s character, the firm should consider some of the aspect from
the clients. These aspects include; bank references, marital status, attachment to
government agencies, level of education contact operational stability and historical
background.




                                              6
According to Pandey (2001), Capacity is the ability of a customer to pay credit advanced
to him or her.
In analysis his or her capacity, the manager should look at financial statements, previous
experience with the firm, bank and trade references, amount and purpose of credit.


Kakuru, (2001) also considers that factors like profit margin, cash flows, acid taste
ratio of business, and the duration one has been in the business should be looked
while analyzing capacity.


Condition
According to Kakuru (2001), this includes the assessment of prevailing economic and
other factors like social – political which   may affect the customer’s ability to pay. In
addition, where customers incur substantially larger transport costs, one could be
disruptive in extending credit to such. This is because this high cost reduces their profits
which may affect their payments. All these views are shared by Pandy (2001).


According to Pandey (1995), one should evaluate the customer’s financial position by
analyzing ratios and trends in cash and working capital positions. The attributes to
consider are how much the owner of the business has put in the business as this
determines the stake of the person in the business. Pandey (2001) contends that, in some
situations, the applicant may be required to offer securities before credit is advanced. The
security should be safe and easily marketable.
Credit terms
According to Pandey (1995), credit terms are stipulations under which a firm grants
credit to its customers. To him, immediately after the credit manager has verified the
credit applicant using set credit standards, decisions to extend credit is made . The
firm should try as much as possible to make terms more attractive to act as an
incentive to clients without incurring unnecessary high levels of bad debts. Therefore,
the terms used should conform to the average industrial terms and they include credit
period and cash discount.



                                              7
Collection procedures
Balstansky (1993) noted that collection procedures are efforts applied in order to
accelerate collections from slow paying customers and to reduce bad debt losses.
Collection procedures could be defined for each credit customer. This should be done in
an organized manner that will accelerate cash receipts without endangering the
relationship with the debtor.
Kakuru (2001), gives a step by step procedure that is essential in collecting dues from
slow paying customers and these include; reminders, final write-off, insuring debtors, and
factoring of debtors.

2.1.5 Designing credit policy
Kakuru Julius (2001), contends that, the only a way a firm can control its sales is through
altering its credit policy. He says that credit policy is based on three controllable
variables which are credit standards credit terms, and collection procedure.
Credit Investigations and Analysis
Van Horne (1989), emphasizes that, credit analysis considers the character of the
company, its management and the financial strength of the firm in order to avoid
imbalances. To him, credit analysis can be done by using techniques like credit scoring
where characteristic of an applicant are quantitatively rated and credit decisions made on
the basis of the total score. Characteristics like the marital status, level of education
occupational stability can be rated.
Credit Limit
According to Kakuru Julius (2001), credit limit is the maximum of credit the firm can
extend to customers at any point of time. He suggests that the analyst should carefully
sensitize the amount of contemplated sales and the customer’s financial strength and that
if a problem arises, it may make it inevitable to review the credit limit.
Credit standards setting in practice
According to Kakuru Julius (2001), in order to analyze customers and set standards, two
aspects are considered; the average collection paid and the default rate. To him, average
collection paid refers to the period in which debts remain outstanding, and default rate is
the ratio of uncollected receivables to the total receivables.


                                              8
Credit terms
According to Pandy (1995) credit terms are stipulations under which a firm grants credit
to its customers. To him, immediately      after the credit manager has verified the credit
applicant using set credit standards, decisions to extend credit is made. The firm should
try as much as possible to make terms more attractive to act as an incentive to clients
without incurring unnecessary high levels of bad debts. Therefore, the terms used should
conform to the average industrial terms and the include credit period and cash discount.
Collection procedures
Balstansky (1993) noted that collection procedures are efforts applied in order to
accelerate collections from slow paying customers and to reduce bad debt losses.
Collection procedures could be defined for each credit customer. This should be done in
an organized manner that will accelerate cash receipts without endangering the
relationship with the debtor.
Kakuru, (2001), gives a step by step procedure that is essential in collecting dues from
slow paying customers and these include; reminders, final write-off, insuring debtors, and
factoring of debtors.



2.2 Definition of business performance
Stoner (1997) describes business performance as the ability to operate efficiently,
profitably, survives, grow and lead to opportunities and threats.


Stoner (1997) singled out the production process efficiently as the key factor governing
business performance. There is also emphasis upon innovation for profitability, assets
management and overall entrepreneurship for achieving lasting performance.
Considering the definitions therefore, business performance can be defined as in terms of
profitability, liquidity, and growth and expansion prospects for the business.

According to Dean, (1994), Organizations; the term ‘organizational performance’ is used
comfortably in three time- senses - the past, present, and the future. In other words,
performance can refer to something completed, or something happening now, or
activities that prepares for new needs.

                                             9
Profitability, for example, is often regarded as the ultimate performance indicator, but it
is not the actual performance. The actual performance occurred some time back - first
with decisions and then the actions that followed the decisions. Profit is therefore an
indicator of previous performance. In this sense, performance is the outcome or ‘end’.

If you are also interested in current behaviors that are associated with good or high
performance, then you must identify and assess them as they occur. These behaviors start
with the strategic planning process and continue into implementation, monitoring, and
assessment. In this sense, performance is the ‘activity’ or ‘means’. are also interested in
predictors of performance - conditions and behaviors that have been shown over time to
lead to better performance. In this sense, performance is a package of behaviors around
strategic planning and programming.

According to Ghobadian, (1994), There are numerous, major methods and movements to
regularly increase the performance of organizations. Each includes regular recurring
activities to establish organizational goals, monitor progress toward the goals, and make
adjustments to achieve those goals more effectively and efficiently. Typically, these
become integrated into the overall recurring management systems in the organization (as
opposed to being used primarily in one-time projects for change.

2.3 Measures of Performance.
When determining performance of a business, the following have to be considered
according to (Balunywa, 1998)
Increased market share.
This is where the company expands on its activities by occupying a large position of the
existing markets. This can be in terms of sales and the range of products in the market
hence a sign of good performance.
Return on gross investment.
This is in terms of profits obtained from investment you made. Therefore, high rates of
profitability show a sign of good performance
Total waste reduction.



                                            10
When a company performs well, waste reduction is minimized because every activity is
done in the right time and right place thus not wasting firm’s resources (Bakunda, 2001).
“For world class companies, the ultimate goal is zero costs. All costs are unnecessary
unless proven otherwise.”
Meeting standards.
Usually when a company meets standards set in a particular field, it will indicate a good
performance level. Others include cost reduction, improved facilities, and good
reputation.
Despite important advances made in determining what qualifies to be a good indicator of
business performance, much more needs to be done to develop a satisfactory
understanding of the subject because no measure works in isolation of the other, all
factors must be combined and exploited efficiently to achieve performance targets.

2.4 Other factors affecting business performance
Competition
Competition comes in existence from situations where two or more business
organizations produce identical products, share the same market. Many Economists
believe that competition is a fact, which must be considered if the business is to prosper
(Porter, 1992).
In order to match increasing competition, most companies will produce products that can
be bought at relatively low prices. However, this may compromise quality in that
customers may purchase infrequently hence affecting performance (Drucker, 1989).


Customers influence
David and Houston (2000) argues that the most important factor that impact on any
organizations operations function is to manage value adding activities inside the business
in such away that customer requirements are meet in full. For each element of product or
service that is of concern to the customer, organizations will have an internal response
that facilitates the satisfaction of the customer preferences thus, performance. The most
successful businesses are those that can most effectively configure their operations to
meet customer requirements.


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Planning
Dune (1995) stresses the importance of financial planning in the business to prosper
effectively. A retailer or any business owner invests money in merchandise for profitable
resale to others but this will be impossible of the choice of merchandise if made without
effective planning, and the result is always low profits or loss.
Marketing function
Kotler, (1995) cited marketing function as one of the major weapons to be used for the
better results of business operations. All business organizations have to continuously
encourage through potential customers to buy their products and they must achieve this
as efficiently as possible through implanting marketing function.


Adock (1995) advises business organizations with no formal marketing function, in order
to succeed to use specialists or managers who initially understand market requirements.


Biimble (1990) advises business operators or owners to acknowledge that, a business,
which carries out advertising as part of marketing function, increases its market share,
which indicates good performance.
Economic changes
In situations where high currency is charged, business is forced to increase prices for
sustainability of business hence affecting their performance. This can be because of
importation in periods for example, when the currency rate is very high. Other economic
changes as inflation also causes prices to increase eventually cost of production increases
as a result demand reduces hence affecting performance Brown, (1990).

Generally, it can be seen that the theoretical models have only served as a rough guides
and have not specifically analyzed the imposition of a tax on business performance. Even
Brown (1990) who tried to analyze economic changes never pointed out how taxation
affects business performance that the present study wants to investigate

According to Mbaguta, (2002) lack of capital is another impediment to businesses in their
early stages. Results of the study indicated a significant proportion of the respondents,
64(48%) raised this as a major problem. First, these businesses were started with limited

                                             12
capital. Secondly, micro businesses lack collaterals such as cars or land titles that can be
deposited to get loans from the traditional commercial banks. On the other hand, the
loans provided by microfinance institutions are small, with a short repayment period and
high interest rates.

Snyder (2000) points poor record keeping as also a cause for startup business failure. In
most cases, this is not only due to the low priority attached by new and fresh
entrepreneurs, but also a lack of the basic business management and skills. Most business
people, therefore, end up losing track of their daily transactions and cannot account for
their expenses and their profits at the end of the month.

High rental charges have impeded the success of many businesses as some charges are
pegged to the United States dollar, which in most cases appreciates against the Uganda
shilling Bagazonzya (2003). One businessperson mentioned that their rent is US$200 for
a space of 12 feet by 10 feet. Expansion of towns has led to increased demand for
business premises, which means that some small businesses have been pushed away from
the busy areas of the town to the periphery. This has increased costs and resulted in poor
sales and negative cash flow, thus minimizing the chances for most businesses to
succeed.

Arden, (2003) points’ lack of effective management during their early stages is also a
major cause of business failure for small businesses. Owners tend to manage these
businesses themselves as a measure of reducing operational costs. This study uncovered
the example of businessperson who locks the shop for a full day whenever he goes
shopping in Kampala. He does this once every week, a total of four days a month. One
result of this is loss of customer loyalty.

2.5 Relationship between debtor management and organizational performance

For businesses to succeed it is essential to have a good debtor management In addition,
businesses should aim at fixing prices that will enable them to earn sufficient profits for
survival and growth. Further, every businessperson needs effective and efficient



                                              13
management skills to go into business and new, effective, and efficient management
skills to stay there.

Namajja (2003) recommends debtor management systems. She asserts that small to
medium sized businesses should have system or process for managing debtors. It is even
more important during uncertain financial times that you manage your debtors
effectively, and there are several different methods for doing this.


According to Balunywa (1996); medium sized businesses should have budget profit and
loss analysis to really know what you spend (or intend to spend) in each area of your
business over 12 months?

2.6 Conclusion
In orgarnisations,although there are other ways of driving the business to success like
competitive aggressiveness, visionary, leadership, trained staff and costumer focus,
debtor management provides a reflector of past and a drive to achieve better performance
for effective measurement.




                                             14
                                   CHAPTER THREE:

                                   METHODOLOGY

3.1 Introduction
This chapter presents the methodology that was used to collect data in this study. It
describes the research design, area where the study was carried out, population, subject
sample, instruments and procedure for data collection, sampling procedure, and methods
of data processing and analysis.

3.2 Research Design
Both the research design was cross-sectional qualitative and quantitive were used. This
design was appropriate in investigating the empirical relationship analysis between the
variables.

3.3 Study population
Data was collected from different groups of respondents that is proprietors, employees,
creditors and customers.

3.4 Sample size and sample selection

 Category of Population        Sample            Selection
                                                 Method

 Proprietors of businesses            10         Purposive
 Employees of businesses              20         Purposive
 Creditors                            10         Random
 Customers                            20         Random
 Total                                60
Source; Primary data




                                           15
3.5 Sampling procedure

Purposive sampling was used to select proprietors and employees. Random sampling was
used to select creditors and customers.

3.6 Data sources

The study based on both primary and secondary sources, with much emphasis on primary
data.

3.6.1 Primary data
This was obtained through use of questionnaires and discussions with relevant
stakeholders to the study.

3.6.2 Secondary data

Data was obtained from records of Town council, journals, textbooks as well as internet.

3.8 Data analysis and processing
After data was collected it was edited and coded and there after simple descriptive
statistics frequencies and percentages were computed to help in the discussion of
findings. Data was analyzed using frequency tables and graphs




                                           16
                                    CHAPTER FOUR

   PRESENTATION, INTERPRETATION AND DISCUSSION OF FINDINGS

4.0 Introduction


This chapter basically concerns the presentation, interpretation and discussion of findings
of the research on the research objectives which were to; evaluate methods of debtor
management employed by poultry industry in Uganda, to find out factors affecting
business performance of poultry industry in Uganda and to establish the relationship
between debtor management and organizational performance.

4.1 Demographic Characteristics of respondents

4.1.1 Findings on Gender Representation


In order to establish the most dominant sex group, respondents were asked to state their
gender.

Table 1: Showing gender response

 Gender                        Responses                     Percentage
 Male                          35                            70
 Female                        15                            30
 Total                         50                            100
Source; Primary data
From the above table; 70% shows male, 30% shows female. This implies that both male
and female participated. However, male respondents were more than female respondents
as shown in the table above.



4.2.2 Findings on the Academic Background/Qualifications
In order to determine the highest frequency, respondents were asked to tick the options of
the academic background where they belong.

                                            17
Table 2 showing the highest academic qualification


 Gender                       Responses                     Percentage
 University degree            12                            24
 Certificate                  22                            44
 O level                      10                            20
 Never gone to school         6                             12
 Total                        50                            100
Source; Primary data
From the above table; 24% of respondents were University degree, 44% were certificates,
20% were O level and 12% never gone to school. This implies that most of the
respondents were well educated and there fore findings can be relied on.

4.2.3 Findings on Marital Status of respondents
The investigations on marital status of respondents were carried out to identify the most
dominant group. The results were obtained and presented in table as shown below;



Table 3 showing the marital status

 Marital status               Frequently         percentage
 Married                      32                64
 Single                       10                20
 Widowed                      8                 16
 Total                        50                100
Source; Primary data
From the above table; 64% were married, 20% were single, and 16% were widowed.
There fore, this shows that the majority of the participants were married as shown from
the table which indicates that most respondents were mature.




                                           18
Table 4: Showing Age range of respondents

         Age range                    Frequency                    Percentage


        20-30 years                                                     26
                                          13
        30-40 years                       17                            34


        40-50 years                       10                            20


         50+ years                        10                            20


           Total                          20                           100


Source; Primary data


Findings in table 4: 26% of respondents were in age bracket of 20-30, 34% were in range
of 30-40, 20% were in age bracket of 40-50,and also 20% were 50 years and above. This
indicates that most respondents were between 30 -40 age bracket which indicates that
most respondents mature.

Table 5: showing experience of respondents

    Working experience                Frequency                    Percentage


      Less than a year                     10                           20
          1-2 years                       15                            30
                                          18                            36
          3-4 years
                                           7                            14
         3-10 years
           Total                          50                           100
Source; Primary data

                                          19
As indicated in table 5 above, respondents who had worked for less than a year were
20%, 30% had worked for 1-2 years, those who have worked for 3-4years\were 36% and
14% have worked for over 3-10years.This indicates that most respondents have adequate
business experience.

4.1 Findings on objective one which was to evaluate methods of debtor management
employed by poultry farms in Uganda

Table 6: showing whether there’s debtor management policy in place

 Categories                     Frequency           Percentage
 Strongly disagree                12                24
 Agree                            10                20
 Not sure                         5                 10
 Disagree                         15                30
 Strongly agree                   8                 16
 Total                           50                  100
Source: primary data.



From above table; 24% strongly agreed, 20% agreed, 10% not sure, 30 % disagreed, 15%
strongly disagreed. This implies that most respondents have no defined debtor
management policy in place. This is in disagreement with (Agu, 1998) who asserts that
credit management policies are comprehensive set procedures and guidelines that must be
followed in lending practices to achieve organizational goals.




                                            20
Table 7: Showing whether debtors are always reminded of debts

 Categories                    Frequency                      Percentage
 Strongly agree                18                             36
 Agree                         12                             24
 Not sure                      9                              18
 Disagree                      7                              14
 Strongly disagree             5                              10
 Total                           50                            100%
Source: primary data.



From above table; 36% strongly agreed,24% agreed, 18% not sure,14 % disagreed,10%
strongly disagreed. This implies that most respondents are reminded of debts.

Table 8: Showing whether character of debtor is always evaluated before extending
credit

 Categories                    Frequency                      Percentage
 Strongly agree                    12                         24
 Agree                             14                         28
 Not sure                          8                          16
 Disagree                          5                          10
 Strongly disagree               11                           22
 Total                           20                           100
Source: primary data.

From above table; 24% strongly agreed, 28% agreed, 16% not sure, 10 % disagreed, 22%
strongly disagreed. This implies that character of debtors is always evaluated before
extending credit.




                                            21
Table 9: Showing whether capacity of debtor is always evaluated before extending
credit

 Categories                    Frequency                     Percentage
 Strongly agree                7                             14
 Agree                         10                            20
 Not sure                      13                            26
 Disagree                      11                            22
 Strongly disagree             9                             18
 Total                         50                            100
Source: primary data.
From above table; 14% strongly agreed, 20% agreed, 26% not sure, 22 % disagreed, 18%
strongly disagreed. This implies that most respondents don’t evaluate capacity of debtor
before extending credit

Table 10: Showing whether credit terms are evaluated before extending credit

 Categories                    Frequency                     Percentage
 Strongly agree                9                             18
 Agree                         12                            24
 Not sure                      11                            22
 Disagree                      8                             16
 Strongly disagree             10                            20
 Total                         50                            100
Source: primary data.


From above table; 18% strongly agreed, 24% agreed, 22% were not sure, 16 % disagreed
and 20% strongly disagreed. This implies that credit terms are at times not evaluated
before extending credit.




                                           22
Table 11: Showing whether there are credit limits that are considered before
extending credit

 Categories                 Frequency                   Percentage
 Strongly agree             21                          42
 Agree                      8                           16
 Not sure                   4                           8
 Disagree                   11                          22
 Strongly disagree          6                           12
 Total                      50                          100
Source: primary data.


From above table; 42% strongly agreed,16% agreed, 8% were not sure,22%
disagreed,12% strongly disagreed. This implies that credit limits are at times not
considered before extending credit



4.2 Findings on objective two which was to find out factors affecting business
performance of poultry industry in Uganda

Table 12: Showing respondent response towards factors that affect business
performance

              Lack of      Poor         managemen            High rental   Planning    High costs
 Factors      capital      records      t                    charges
 Strongly     23     46    14     28    8         16         16    32      5     10    19   36
 agree
 Agree        21     42    12     24    15        30         28    54      10    20    24   48
 Not sure      -           9      18    17        34                       14    28    4    8
 Disagree      4     8     7      14    6         12         4     8       8     16    2    4
 Strongly      2     4     8      16    4         8          2     4       13    26    1    2
 disagree
 Total        50     100   50     100   50        100        50    100     50    100   50   100


                                             23
Source: primary data.
From table 11 shown above; 46% of the respondents strongly agreed that lack adequate
of capital affect their businesses, 42% agreed, 8% disagreed and 4% disagreed. This
shows that lack of adequate capital affects the company’s performance substantially.


As indicated in table 12 shown above; it can be observed that 28% of the respondents
strongly agreed that poor records affects the company’s performance, 24% agreed, 18%
not sure , 14% disagreed and 16%Strongly disagreed This implies that poor records
affects the company’s performance.


From table 12 shown above; 16% of the respondents strongly agreed that management
affect their businesses, 30% agreed, 34% not sure, 12% disagreed and 8% Strongly
disagreed. This implies that management affects their businesses.


As indicated in table 12 shown above; it can be observed that 32% of respondents
indicated that high rental charges affect their businesses, 54% agreed, 8% disagreed and
4% strongly disagreed. This implies that high rental charges affect their businesses.


From table 12 shown above; 10% of the respondents strongly agreed that lack of
planning affect their businesses, 20% agreed, 28% were not sure,16% disagreed and 16%
strongly agreed . This shows that lack of effective planning affects the business
performance substantially.


As indicated in table 12 shown above; it can be observed that 36% of respondents
indicated that high costs affect their businesses, 48% agreed, 8% were not sure, 4%
disagreed and 2% strongly disagreed. This implies that high costs affect their businesses.




                                            24
4.3 Findings on objective three which was to find the relationship between debtor
management and organizational performance.

Table 13; showing whether organizational performance will be improved if all
credit terms are evaluated

 Categories                    Frequency            Percentage
 Strongly disagree                  20              40
 Agree                              11              22
 Not sure                           8               16
 Disagree                           7               14
 Strongly agree                     4               8
 Total                             50                100
Source: primary data.



From above table; 40% strongly agreed, 22% agreed, 16% not sure, 14 % disagreed,8%
strongly disagreed. This implies that organizational performance will be improved if all
credit terms are evaluated

Table 14: Showing whether there is relationship between debtor management and
organizational performance

 Categories                    Frequency                      Percentage
 Strongly agree                32                             64
 Agree                         10                             20
 Not sure                      4                              8
 Disagree                      3                              6
 Strongly disagree             1                              2
 Total                          50                             100
Source: primary data.




                                           25
From above table; 64% strongly agreed, 20% agreed, 8% not sure, 6% disagreed, and 2%
strongly disagreed. This implies that there is relationship between debtor management
and organizational performance

Table 15: Showing whether effective management improves organizational
performance

 Categories                    Frequency                   Percentage
 Strongly agree                      12                    24
 Agree                             14                      28
 Not sure                          8                       16
 Disagree                          5                       10
 Strongly disagree               11                        22
 Total                           50                        100
Source: primary data.

From above table; 24% strongly agreed, 28% agreed, 16% not sure, 10 % disagreed, and
22% strongly disagreed. This implies that effective management improves organizational
performance

Table 16: Showing whether evaluation of credit Limits leads to better organizational
performance

 Categories                    Frequency                   Percentage
 Strongly agree                5                           10
 Agree                         12                          24
 Not sure                      13                          26
 Disagree                      11                          22
 Strongly disagree             9                           18
 Total                         50                          100
Source: primary data.
From above table; 10% strongly agreed, 24% agreed, 26% were not sure, 22 % disagreed,
and 18% strongly disagreed. This implies that most respondents don’t evaluate Capacity
of debtor before extending credit.

                                           26
Table 17: Showing whether evaluation of debtor capacity leads to better
organizational performance

 Categories                      Frequency                         Percentage
 Strongly agree                  9                                 18
 Agree                           19                                36
 Not sure                        11                                22
 Disagree                        6                                 12
 Strongly disagree               5                                 10
 Total                           50                                100
Source: primary data.
From above table; 18% strongly agreed, 36% agreed, 22% were not sure, 12 % disagreed
and 10% strongly disagreed. This implies that evaluation of debtor capacity leads to
better organizational performance



Table 18: Showing Relationship between Debtor management and organizational
performance in poultry firms

                                         Debtor
                                                           Organizational Performance
                                         management

                       Pearson
                                         1.000             0.035
                       Correlation
  Debtor
  management           Sig. (2-tailed)   .                 0.000

                       N                 50                50

                       Pearson
                                         0.035             1.000
                       Correlation
  Organizational
  Performance          Sig. (2-tailed)   0.000             .

                       N                 50                50

  * Correlation is significant at the 0.05 level (2-tailed).


                                              27
From the table above, there is an indication of a weak positive relationship of (r=0.035)
between debtor management and organizational performance which implies that the more
effective debtor management, the better organizational performance.




                                           28
                                     CHAPTER FIVE

    SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATIONS


This chapter presents the summary of the study findings and the conclusion. It presents
the recommendations arising from the study and issues that are required further
investigation.

 5.1 Summary of findings

5.1.1 Findings on methods of debtor management employed by poultry farms in
Uganda

      Most respondents have no defined debtor management policy in place
      At times respondents are not reminded of debts

      Character of debtors is rarely evaluated before extending credit.
      Most respondents don’t evaluate Capacity of debtor before extending credit
      Credit terms are at times not evaluated before extending credit.

5.1.2 Findings on factors affecting organizational performance of poultry firms

Lack of capital is another impediment to businesses in their early stages. Results of the
study indicated a significant proportion of the respondents, this as a major problem. First,
these businesses were started with limited capital. Secondly, micro businesses lack
collaterals such as cars or land titles that can be deposited to get loans from the traditional
commercial banks. On the other hand, the loans provided by microfinance institutions are
small, with a short repayment period and high interest rates.

Poor record keeping as also a cause for startup business failure. In most cases, this is not
only due to the low priority attached by new and fresh entrepreneurs, but also a lack of
the basic business management and skills. Most business people, therefore, end up losing
track of their daily transactions and cannot account for their expenses and their profits at
the end of the month.

                                              29
High rental charges have impeded the success of many businesses which means that
some small businesses have been pushed away from the busy areas of the town to the
periphery. This has increased costs and resulted in poor sales and negative cash flow, thus
minimizing the chances for most businesses to succeed.

Lack of effective management during their early stages is also a major cause of business
failure for small businesses. Owners tend to manage these businesses themselves as a
measure of reducing operational costs.

5.2 Conclusion
There is an indication of a positive relationship of (r=.035)        between debtor and
organizational performance in poultry which implies that the more effective debtor
management, the better organizational performance

5.3 Recommendations

      Poultry firms should ensure that there is effective management in coordination of
       its activities
      Owners of poultry firms should access loans to resolve lack of capital problem
       which is another impediment to businesses in their early stages
      There should be poor record keeping as also a cause for startup business failure
      Owners of poultry firms should have a control system or process for managing
       debtors.
      Owners of poultry firms should have budgets for profit and loss analysis to really
       know what you spend (or intend to spend) in each area of your business over 12
       months

5.4 Areas for further research

       There fore further research could be done on;
         i.   The impact of effective management on organizational performance
        ii.   The effect of production costs on organizational performance.
       iii.   The impact of empowerment on organizational performance

                                            30
                                 REFERENCES


   Boudreau (1991), , De Human resource management – 17th Edition.
   Brown,J (1993) Business management Today 5th Edition, Pretince Hall.
   Carter G(2007), Auditing Principles and Procedures 5th Edition.
   David and Houston (2000) contemporary auditing 3rd Edition, New Delhi, and
    McGraw Hill.
   Huselid,k. (1995). Financial Management (Higher Awards) 1st publication.
   Jain D.P. [1993] Auditing 1st Edition.
   John Crowhurst, A guide to principles and practice.
   Journals text books.
   Julius K. [1998] Basic Financial Management 1st Edition.
   Meigs and Meighs, [1988] Principles of Auditing – Revised 8th Edition.
   Meigs, Walter B. [1987] Accounting 7th Edition.
   N.L. Hingorani and O.P. Chwala, [1984]: Management Accounting.
   Ramas Wamy [1994] Auditing 4th Edition.
   Report of Education policy Review Commission [1989] Uganda 10.7.1.
   Robert W. Johnson [1965] Financial Management 2nd Edition.
   Waswa Balunywa (1998) Business Management 1st edition Makerere University
    Printing Press.




                                        31
                                  QUESTIONNAIRE
Dear Respondent,
I am carrying out a research study about Debtor management and organizational
performance of companies engaged in poultry industry. Please spare some few
minutes of your precious time by ticking or filling in the boxes to make the study
successful.
This research is purely academic and your response will be treated with utmost
confidentiality.


SECTION A: BACKGROUND INFORMATION
1. Gender:
          Male                                        Female
2. What is your highest academic qualification
          University Degree.                      Certificate.


          O level                                 A level
          Never gone to school


3. Marital status.

        Married                        Single                    Widowed
5. Age bracket


20-30                          30-40


40-50                          50- Above

6.How long have you been in this business
        Less than a year                        3-4 Years


        1-2 Years                               3-10 Years


                                            32
In the following sections B,C&D respond to the 5 items by ticking the alternative
you agree with, using the table below.


 Strongly           Disagree(D)     Not sure(N)      Agree(A)       Strongly
 disagree(SD)                                                       agree(SA)
 1                  2               3                4              5




SECTION B; Methods of debtor management employed by poultry farms in
Uganda
 Statement                                      SD       D      N       A      SA
 1) There’s debtor management policy in
 place
 2) Debtors are always reminded of debts
 3) Character of debtor is always evaluated
 before extending credit
 4) Capacity of debtor is always evaluated
 before extending credit
 5)   All credit terms are evaluated before
 extending credit
 6) There are credit Limits that considered
 before extending credit




                                           33
SECTION C; Factors affecting business performance of poultry industry in Uganda
 Statement                                         SD    D        N        A       SA
 7). Lack of capital affect your businesses
 8) Poor record has an         affect on your
 business
 9)    Effective     management   attribute   to
 business failure
 10) High rental charges have impeded
 success of your businesses
 11) Planning has effect on businesses
 12 High costs have become one of the
 problems faced by your businesses.


SECTION D; Relationship between debtor management and organizational
performance
 Statement                                         SD    D        N        A       SA
 13) Organizational performance will be
 improved if all credit terms are evaluated
 14)There is relationship between debtor
 management and organizational performance
 15)     Effective     management     improves
 organizational performance
 16)Evaluation of credit Limits leads to better
 organizational performance
 17) Evaluation of debtor capacity leads to
 better organizational performance


18) List other ways in debtor management that affect organizational performance.
   …………………………………………………………………………………………
………………………………………………………………………………………………
                            Thank you for your participation

                                              34

								
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