1

Chapter 1
THE PROBLEM AND ITS BACKGROUND

Introduction

Many business organizations today are encountering problem of having

vast balances from accounts receivables which are sometimes become doubtful

and therefore affect the operation of the organization. Management of accounts

receivables is important for this problem, for without it, receivables will build up to

excess levels leading to declining cash flows. Caisip and Italia (2011) stated that

efficient credit policies and procedures may result to minimal write offs of

accounts receivables, increase cash flow, and improved the credit collection.

Trade credit is very important to a firm because it helps to protect its sales

from being eroded by competitors and also attract potential customers to buy at

favorable terms. As long as there is competition in an industry, selling, on credit

becomes inevitable. Kakuru J, (2011) stated that the business will lose its

customers to competitors if it does not allow credit to them. Thus investment in

receivables may not be a matter of choice but a matter of survival.

Background of the Study

Through the years, local businesses have succeeded because of

personal service to their customers. In the country, there are lots of businesses

that one can engage in. With the increase in population, the demand for living
 2

quarters also increases. The hardware store business is an ideal start-up

business because it is extremely profitable for this demand.

Hardware stores provide consumers with tools and construction materials

needed to build, maintain, and improve their homes and properties. Examples of

home improvement merchandise are automotive supplies, building materials,

electrical supplies, hand and power tools and accessories, hardware, home

decorating products, house wares, lawn and garden items, lumber, paint, paint

sundries, plumbing, heating, cooling products, sporting goods and more. Starting

hardware store requires capital investment, registration to government bureaus

and especially to register with the BIR to get a Tax Account Number for the

annual income tax return, location site selection, manpower, operational

guidelines and procedures.

Just like any other business, hardware stores offer credit to gain a

competitive advantage in their market. Michalowicz, (2004) advised that to offer

credit to customer, the company should be started with small amounts to build a

history and reward good behavior, but also enforce penalties on late payers. In

this simple usual part of business operation, the business is involved in collecting

its receivables.

The researcher’s curiosity in managing certain business and her

accounting skills were her main motive of choosing the study on accounts

receivable and its effect to the financial performance of the particular business.
 3

The knowledge earned from this study would be of great help to the manager or

owner of the hardware stores who engaged in the same kind of business.

Literature Review

Galas, G. D. (2014) on his study entitled Effects of Billing Schemes to the

Profitability of Different Cable Companies in District 4-B of Laguna revealed that

the cause of lower rate assets of companies studied was the non-collection from

some of their subscribers.

Valix, C.T. et al (2012) defined receivable as financial asset representing

a contractual right to receive cash or other financial asset from another entity.

There are two classifications of receivables; trade receivables and nontrade

receivable. Trade receivable refers to claim arising from sale of merchandise or

services in the ordinary course of business. Non trade receivables represent

claims arising from sources other than the sale of merchandise or services.

Donahey, A.A. (2012) conducted a study entitled Services for Small

Business using professional account receivable management service can also

help retain positive customer relationship. Flat fee services focus on earlier and

more diplomatic customer reminders than contingency-based collections. Agents

are well versed in the rules and regulations to legally collect and stay compliant

privacy laws.
 4

Thomas, A. P. et al (2012) stated that when goods are sold on credit, it

sometimes transpires that the customer is unwilling or unable to pay the amount

owed this is referred to as bad or irrevocable debt. The decision to treat a debt is

as bad as a matter of judgment. A debt may be regarded as irrevocable for a

number of reasons, like being unable to trace the credit customer, if not being

worth taking the credit customer to court, or the credit customer being bankrupt.

Imhoff, Jr. E. A. (2012) discussed allowance for bad debts account is a

contra asset account to the Accounts Receivable account representing an

estimate of uncollectible accounts receivable. The balance in this contra account

is subtracted from the balance in accounts receivable in the balance sheet to

arrive at the net receivable, which is the amount expected to be received from

credit customers, net of bad debts, for all outstanding receivables as of balance

sheet date.

Bwambale, J. (2011) stated that to ensure optimal investment in

receivables, a firm required an appropriate credit policy. Credit policy is

designed to minimize costs associated with credit while maximizing the benefits

from it. Credit policy is either lenient or stringent. A lenient credit policy tends to

give credit to customers on very liberal terms and standards such that credit is

granted for longer periods even to those whose credit worthiness is not fully

known. A stringent credit policy allows credit only to those whose credit

worthiness has been ascertained and is financially strong.

 5

Summers, et al (2010) noted in their study, if a small firm experiences

problems raising finance, selling accounts receivable can help in two ways: cash

associated with a sale is received earlier and finance can be raised if a firm has

insufficient or inappropriate fixed assets to pledge as collateral in a conventional

loan arrangement.

Ludovice, V. A. (2010) revealed on her study entitled Effects of Loan

Policies of Rural Bank of San Antonio, Incorporated to their Financial

Performance for the Fiscal Year 2007-2009, which focuses on loan receivables

management practices of the banks, the types and terms of loan, billing and

credit policies and financial performance, that the Rural Bank of San Antonio

Incorporated is performing well.

Mitschow, M. C. (2010) defined credit management as a process of

managing of credit from the process of credit appraisal, disbursal till the credit

outstanding is received. It is at the core of the collection process. It can restrict or

expand sales by rejecting credit or by loosening acceptance criteria respectively.

Credit management practice involves setting of credit policy, granting credit and

managing existing credit customers by including various fundamental financials.

Aduana, N. A. (2009) mentioned that the loans and receivables are those

non- derivative financial assets with fixed or determinable payments that are not

quoted in an active market and are shown as current assets if collectible within

one year or within the normal operating cycle of the business.

 6

Agamata, F.T. (2009) stated that the credit management strategically

defines the quality of accounts receivable collections. Credit and collection have

a direct relationship. If credit standards are high, the rate of collection is expected

to be high, and vice versa. Credit period refers to the entire credit days granted to

customers. A long credit period slows down collection while a short credit period

quickens the receipts of money from customers. Credit cap or credit limit refers to

the maximum, or ceiling, amount of credit line allowed to a given customer

depending on his capability to meet trade payments. The higher the credit risk of

a customer, the lower the credit cap is.

Danos, P.A. et al (2009) revealed that in minimizing bad debts,

companies begin by carefully checking the credit worthiness of potential credit

customers. Once credit is extended, a systematic approach should be taken to

follow up the late accounts. Appropriate collection procedures must be initiated

for delinquent payers if necessary.

Leobrera, E. S. (2008) found out on her study Account Receivables

Management Practices of Kapit-Bisig Ugnayan Multi-Purpose Cooperative and

Its Implementation on the Financial Performance for the Years 2004-2006 that by

implementing better collection policies the cooperative gain better financial

performance. They maintained that good relationship with borrowers and

cooperative members play significant role in the collection strategy.

Paul and Boden (2008), and Giannetti et al. (2008) examined the

relationship between the length of credit sales and the size of buying firms or
 7

customers. The studies explained that the length of the trade credit period

depends on the bargaining power and size of buying firms and customers. They

were of the view that due to the size of these larger firms and customers, they

may have bargaining power over their suppliers to influence the credit period.

Large firms have adequate financial resources; they can buy from other suppliers

if a supplier refuses to give them a longer trade credit period. If these customers

leave, the supplier’s sales may drop substantially. Consequently, the supplier

may be forced to offer a longer credit period in order to continue the business

relationship with these customers.

Llagas, B. M. (2008) as cited by Olidana, A. B. (2013) entitled

Management Practices of Accounts Receivable and Its Effect on the Financial

Performance of Diamzon Enterprise, the findings revealed that Diamzon

Enterprise receivable management practices start with keeping an accounts

receivable ledger for each customer. The mode of payment is 50% down

payment and 50% upon completion on the quotation letter send to the

prospective clients. The payment should be made within 30-60 days upon

completion.

Hutton, et al (2007) found that credit managers did not feel comfortable

using credit as a sales promotion device. They were either negative or

ambivalent towards the sales department and did not see credit as relevant to

sales promotion. The objective espoused by credit control managers was bad

debt minimization.
 8

Collier (2006) discussed how to measure the effective trade receivables.

It depends upon the days’ sale outstanding which is equal to the ration between

the trade receivables and average daily sales. The target number of days’ sales

will be a function of the industry, the credit terms offered by the firm and its

efficiency in both credit approval and collection activity. He disclosed that while it

is important to collect debts from customers. It is also essential to ensure that

suppliers are paid within their credit terms.

Villaruel, E. M. (2005) conducted a study entitled “Operation Management

of Emerald Feeds in Atimonan, Quezon, management techniques greatly affects

the growth and profitability of the business because it will help to increase the

income of the business. Most especially, these techniques greatly influence the

business in production, financial and marketing. Through proper management of

the business, the operation of the company will be effective and efficient while

striving for change, elasticity and integration with technology.

Philippine Financial Reporting Standard 9, paragraph 5.1.1, provides that

the financial asset shall be recognized initially at fair value plus transaction costs

that are directly attributable to the acquisition. The fair value of a financial asset

is usually the transaction price, meaning, the fair value of the consideration

given. For short-term receivables, the fair value is equal to the face value or

original invoice amount.

PAS 32 Financial Instrument: Disclosure and Presentation defines

financial asset as any asset like cash, equity instrument of another entity, a
 9

contractual right such as to receive cash or another financial asset from another

entity or to exchange financial assets or financial liabilities with another entity

under conditions that are potentially favorable to the entity, and a contract that

will or may be settled in the entity’s own equity instrument.

Envestor Limited Journal recommends that customers are more likely to

be impressed than irritated if they take a professional approach to credit control.

If they are annoyed or embarrassed it may be because they have something to

hide - all the more reason to stick to their professional approach.

Theoretical Framework

This study was anchored on the "Risk Theory of Profit" by F. B. Hawley.

According to Hawley, risk in business arose from product obsolescence, a

sudden fall in prices, superior substitutes, natural calamities or scarcity of certain

crucial materials. Risk taking was an inevitable component of dynamic production

and those who took risk in business had a right to a separate reward known as

"profit". In addition, profit is the price paid by society for assuming business risk.

A businessman would not take a risk without expecting compensation in excess

of actuarial. The reason that expected profit must be more than actuarial risk is

the assumption that risk gives rise to dis-utilities of various kinds. Therefore,

assuming risk gives the entrepreneur a claim to a reward in excess of the

actuarial value of the risk. Hawley's theory is also known as the "residual theory

of profit.”
 10

Conceptual Framework

The figure consists of two (2) boxes. The first box is the independent

variable which includes the profile of the respondents and receivable

management such as credit control policy, credit standards and collection policy.

The second box includes the financial performance of the business in terms of

profitability.
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Conceptual Paradigm

INDEPENDENT VARIABLE DEPENDENT VARIABLE

Demographic Profile of the Profitability

Respondents in terms of:

 Age
 Sex
 Civil Status
 Educational Attainment

Accounts Receivable
Management

 Credit Control Policy

 Credit Standards
 Collection policy

Figure 1. Showing the interplay of independent and dependent variables.

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Statement of the Problem

This study was conducted to determine the impact of the accounts

receivable management to the profitability of hardware stores in District 4 B of

Laguna.

Specifically, this study sought to answer the following questions:

1. What is the demographic profile of the respondents in terms of:

1.1 . age;

1.2 . sex;

1.3 . civil status;

1.4 . educational attainment?

2. What is the level of compliance in the accounts receivable management

by the hardware stores in terms of:

2.1. credit control policy;

2.2. credit standards; and

2.3. collection policy?

3. What is the status of financial performance of hardware stores in terms

of profitability?

4. Is there a significant relationship between the profile of the respondents

and the level of compliance in accounts receivable management?

5. Is there a significant effect between the level of compliance in accounts

receivable management by the hardware stores and the status of

financial performance in terms of profitability?

 13

Hypotheses

Ho1. There is no significant relationship between the profile of the

respondents and the level of compliance in accounts receivable

management?

Ho2. There is no significant effect between the level of compliance in

accounts receivable management by the hardware stores and the

status of financial performance in terms of profitability?

Significance of the Study

The findings of this study will be of great help to the following:

Future Researcher. The findings of the study will also serve as reference

in their own study.

Managers. The study will enable the managers to appreciate the

importance of decision making for the business to attain objectives.

Researcher. This shall be educational value for the researcher who will

be an employee of the same institution.

Student. This will be additional knowledge to the student especially those

who will be in business-related courses.

University. Relevant information gathered from this study may give the

university some ideas which can be used by the Business Affairs Office.
 14

Scope and Limitation

The researcher’s study focused on the Hardware Stores from eight towns

in District 4-B of Laguna namely Kalayaan, Paete, Pakil, Pangil, Siniloan, Famy,

Mabitac, and Sta. Maria. The respondents were limited to the managers/owners

of the business who are offering credit. It focused to accounts receivable

management and its impact to the performance of the business in terms of its

profitability.

Definition of Terms

The following terms were operationally defined to understand further the

study.

Accounts Receivable. Money owed by customers (individuals or

corporations) to another entity in exchange for goods or services that have

been delivered or used, but not yet paid for

Accounts Receivable Management. Includes establishing a credit and

collections policy for credit accounts

Credit Control Policy. A strategy use by company to promote good

credit among the faithful customers

Credit Standards. A personal background of the customers who are

applying for credit

 15

Collection Policy. A strategy use by company in collecting accounts

receivable

Financial Statement. A written report of the financial condition of a firm

Liquidity. The ability of current assets to meet current liabilities

Manager. A person responsible for controlling or administering all or part

of a company or similar organization

Profitability. The state or condition of yielding a financial profit or gain

 16

Chapter 2
RESEARCH METHODOLOGY

This chapter presents the research design, population and sampling

techniques, research procedure, research instrument, data gathering procedures

and statistical tools.

Research Design

The study utilized the descriptive method of research. Crisyl Sumadsad

(2013) stated that the descriptive method of research is a fact finding study with

the adequate and accurate interpretation of findings, describe and emphasize

what actually existed in current conditions during the conduct of the research. It

involves the collections of data in order to answer questions concerning the

status of the study.

Respondents of the Study

The primary source of information was gather through a personal interview

with the managers of Hardware Stores in District 4-B of Laguna who offered

trade credit to its customers/clients.

Population and Sampling Techniques

The researcher covered the entire population or total enumeration. District

4-B of Laguna has thirteen hardware stores offer credit to their customer.
 17

According to Bathla, total enumeration is preferred for certain types of data. It

has a high level of accuracy and provides a complete statistical coverage over

space and time.

Data Gathering Instruments

It composed of three parts; the first part was a set question for

demographic profile of the respondents and the second part was the accounts

receivable management. The third part was composed of sets of questionnaire

for financial performance of the business using the following 5 point-scale.

4.21 - 5.00 Always

3.41 - 4.20 Frequently

2.61 - 3.40 Sometimes

1.81 - 2.60 Seldom

1.00 - 1.80 Never

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Research Procedure

The first step was the construction of research instrument. In

administering of questionnaire, the content was validated by some reputable

experts in the field of study.

The researcher used the questionnaire as a tool for manager/owner

respondents. The questionnaire was distributed through hand carry and collected

after they finished answering. The respondents were given enough time to

answer to enable to think out carefully and make their decision properly for each

time. All the items in the questionnaire were fully accomplished by the

respondents.

GANTT Chart

The study was last for eight (8) months starting from conceptualizing and

formulating of research title, title defense, gathering of information, preparation

for chapters 1 and 2 until the final checking and validation of the questionnaire.

Colloquium was conducted followed by survey and data gathering, computation

and interpretation of data until preparation of chapters 4 and 5 and appendices.

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  Academic Year 2014-2015

  JUN JUL AUG SEPT OCT NOV DEC JAN FEB

1. Conceptualize and
formulate the research
title.                  

2. Title Defense.                    

3. Gathering of
Information                        

4. Preparation for
Chapters 1 and 2.                        

5. Final Checking.                    

6. Validation of
Questionnaire.                      

7.Colloquium                    

8. Survey and Data

Gathering                  

9. Computation and
Interpretation of Data
Gathered                  

10. Preparation of
Chapter 3 and 4                      

11. Final Oral Defense

12. Completion

Figure 2. The GANTT Chart of the Study

 20

Budgetary Requirements

In conducting a research, the budget required was four thousand two

hundred pesos (₱4200.00). The budget allotted for transportation expense was

Php1, 000.00, computer rents was Php700.00, printing and bookbinding was

Php1000.00, and other supplies cost Php1500.00.

Data Processing and Statistical Analysis

The following data gathered by the researcher was analyzed, summarized

and interpreted.

Analyses Statistical Tools

1. Profile of the respondents Percentage (f), Rank

2. Extent of Compliance in Accounts

Receivable Management Mean, Percentage (f), Rank

3. Financial Performance Status in

Mean, Percentage (f), Rank
terms of profitability

4. Relationship of profile of the

respondents to the level of

compliance in account receivable Chi-square/ Spearman Rho

management of Hardware stores.

5. Effect of Accounts Receivable

Management to the Financial Spearman Rho

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Performance of the Business in

terms of Profitability

Chapter 3
PRESENTATION, ANALYSIS, AND INTERPRETATION OF DATA

This chapter deals with the presentation, analysis and interpretation of

data gathered from the responses of the managers/owners of hardware stores

 22

regarding accounts receivable management which compiled and studied in order

to determine the overall outcome of the research conducted.

Profile of the Respondents

Table 1 shows the profile of the respondents in terms of age, gender, civil

status, civil status and educational attainment.

As indicated in the table, the respondents were almost from 28 years old

to 47 years old. Only few belong age group 50 years and above and 27 years

old below. Most of the respondents are female with 9 or 69.23 percent while male

with 4 or 30.77 percent. Respondents who are married are 10 or 76.92 percent

and single with 2 or 15.38 percent. The respondents had attended formal

schooling, majority had obtained tertiary education and the others were taken

vocational courses.

Table 1 Profile of the Respondents

Age Frequency Percentage Rank

18-27 years old 2 15.38 3.5
28-37 years old 4 30.77 1.5
38-47 years old 4 30.77 1.5
48-57 years old 1 7.69 5
58-67 years old 2 15.38 3.5
 23

Gender Frequency Percentage Rank

Male 4 30.77 2
Female 9 69.23 1

Civil Status Frequency Percentage Rank

Single 2 15.38 2
Married 10 76.92 1
Others 1 7.69 3

Educational
Attainment Frequency Percentage Rank
Vocational Attainment 2 15.38 2
College Graduate 10 76.92 1
Others (College
Undergrad) 1 7.69 3

Level of Compliance in the Accounts Receivable Management

Table 2 shows the level of compliance in the accounts receivable

management in terms of credit control policy. Sometimes, the business imposes

interest to overdue accounts based on the commercial bank interest rate policy

and imposes no delivery policy if the previous delivery was not yet fully paid by

the customer. Moreover, the business never requires collateral when the

customers apply for credit, they did not conduct credit investigation and no legal

counsel in case of non-payment. Data shows that when it comes to credit control,

the business has no strict policy.

Table 2 Compliance in Accounts Receivable Management in Terms of Credit

Control Policy
 24

Accounts Receivable Management Average Rank Verbal

Interpretation
Credit Control Policy
The customer must have collateral when 1 4 Never
applying for credit.
The business conducts credit investigation 1 4 Never
properly.
The business imposes interest to overdue 3 1.5 Sometimes
accounts based on the commercial bank
interest rate policy.
The business imposes no delivery policy if 3 1.5 Sometimes
the previous delivery was not yet fully paid
by the customer.
The business refers the customer the legal 1 4 Never
counsel in case of non-payment.

General Average 1 Never

Table 3 presents the level of compliance in the accounts receivable

management in terms of credit standards. It implied that the managers practice

strict policy regarding the credit standards. They always consider debtors’

personal background, good track record and must reside within the area of

jurisdiction. They allow the customers to apply for credit if they are regular

customers only.

Table 3 Compliance in Accounts Receivable Management in Terms of Credit

Standards

Accounts Receivable Average Rank Verbal

Management Interpretatio
 25

Credit Standards

1. The debtor must possess 5 3 Always

good character.

2. The debtor must have the 5 3 Always

capacity to pay the account
in a specified payment
period.

3. The debtor must reside 5 3 Always

within the area of jurisdiction
of the company.

4. The debtor must be a 5 3 Always

regular customer.

5. The debtor must have a 5 3 Always

good track record.

General Average 5 Always

Table 4 shows the level of compliance in the accounts receivable

management in terms of collection policy. The business always keeps updated

customers’ addresses or contact numbers for tracking purposes. They accept

cash and checks. Like any other business, collection is always supported by

official receipts to serve as one of the source documents. Sometimes, the

company sends demand letters together with return address to the delinquent
 26

customers. It implied that the company is complying with a proper management

of accounts receivable as to collection policy.

Table 4 Compliance in Accounts Receivable Management in Terms of Collection

Policy

Accounts Receivable Average Rank Verbal

Management Interpretatio
n

Collection Policy

1. The company sends demand 3 5 Sometimes

letters together with return
address to the delinquent
customers.

2. The company keeps updated 5 2.5 Always

customers’ addresses or
contact numbers.

3. The company accepts cash. 5 2.5 Always

4. The company accepts 5 2.5 Always

checks.

5. Collection is supported by 5 2.5 Always

official receipts.

General Average 5 Always

 27

Status of Financial Performance of Hardware Stores

Table 5 shows the status of financial performance of hardware stores in

terms of its profitability. All indicators are related to accounts receivable.

Frequently, business’ sales on account and bad debts increase every year, and

accounts receivables are sometimes collected on or before the due date. These

results affect the revenue of the business and its performance as a whole. The

reality that the businesses are seldom collect interest and penalty charges is the

reason of not collecting accounts receivable on specified period of time and

increasing its bad debts every year. Another possible reason for this undesirable

result is that the company did not obtain legal assistance to collect long

outstanding past due accounts.

Table 5 Profitability of the Business

Financial Performance Average Rank Verbal

Interpretation

1. Sales on account increase 4 1.5 Frequent

every year.

2. Bad debts increase every 4 1.5 Frequent

year or exceed the
tolerable limit.

3. Legal assistance is 2 4.5 Seldom

commissioned to collect
long outstanding past due
accounts.

4. Accounts receivables are 3 3 Sometimes

 28

collected on or before the

due date.

5. Collect interest and 2 4.5 Seldom

penalty charges on past
due accounts.

General Average 1 Sometimes

Relationship of the Profile of the Respondents to the Level of Compliance

in Accounts Receivable Management

Table 6 shows the relationship of the profile of the respondents to the level

of compliance in accounts receivable management. The profile of the

respondents as to civil status has p-value of 0.39 lower than the threshold value

of 0.05. It shows that there is a significant relationship between the civil status of

the respondents and the level of compliance in accounts receivable management

as to credit control policy and by this result, the decision is to reject the null

hypothesis. This finding is congruent to the study conducted by the International

Conference on Social Education and Management Engineering which states that

marital status is also a factor that affects business practices.

Table 6 Relationship of the Profile of the Respondents to the Level of Compliance in Accounts
Receivable Management

Profile Level of N Statistical p- decision Verbal

compliance tool value interpretation
 29

age CCP 13 Spearman 0.940 Accept no relationship

rho
CS correlation 0.698 Accept no relationship

CP 0.575 Accept no relationship

sex CCP 13 Chi- 0.413 Accept no relationship

square
CS 0.118 Accept no relationship

CP 0.488 Accept no relationship

civil status CCP 13 Chi- 0.039 Reject significant

square relationship

no relationship
CS 0.850 Accept
no relationship
CP 0.550 Accept

Educational CCP 13 Chi- 0.463 Accept no relationship

attainment square
CS 0.057 Accept no relationship

CP 0.850 Accept no relationship

Effect of Level of Compliance in Accounts Receivable Management to

Profitability

Table 7 shows the significant effect of level of compliance of accounts

receivable management to the profitability. It shows that credit control policy is

related to the profitability of the business which has a p-value of 0.50 which is a

threshold value therefore reject the null hypothesis. This result is supported by

the study conducted by M.S.K. Ifurueze 2013, The Impact of Effective

Management of Credit Sales on Profitability and Liquidity of Food and Beverage

Industries Effective. According to this study, management of credit sales has a

 30

positive relationship with the operating profit of the companies. It also revealed

that the objective of any firm's credit policy is to maximize profit of the firm and at

the same time minimize costs associated with credit sales.

Table 6 Effect of Level of Compliance in Accounts Receivable Management to Profitability

Test of relationship N Statistical p- value decision Verbal

tool interpretatio
n

Level of CCP 13 Spearman 0.050 Reject significant

compliance rho effect
vs status of correlation
financial no effect
performance CS 0.609 Accept
no effect
CP 0.609 Accept
 31

CHAPTER 4

SUMMARY, CONCLUSION AND RECOMMENDATIONS

This chapter presents the summary of finding, conclusions and

recommendations made by the researcher.

Summary of Findings

A total of 13 managers were included in the study. As to the age, the

respondents were almost from 28 years old to 47 years old. Most of them are

female and married. Majority had obtained tertiary education. It shows that the
 32

managers never require collateral when applying for credit, never conducts credit

investigation and no legal counsel in case of non-payment when it comes to

credit control policy. As to credit standard, the managers of hardware stores

consider the customers’ ability to pay and personal background. . It implied that

the company is complying with a proper management of accounts receivable as

to collection policy. Accounts receivable are sometimes collected on or before

the due date. They seldom collect interest and penalty charges on past due

accounts.

The profile of the respondents, specifically civil status is related to the

level of compliance in accounts receivable as to credit control policy. With

regards to the relationship between accounts receivable management and

profitability, accounts receivable management as to credit control policy has a

significant effect to the profitability of the business.

Conclusions

Based on the stated findings above, it is concluded that the accounts

receivables are not collected on specified period of time and bad debts expense

increase every year due to not collecting interest and penalty charges. In

addition, having a legal counsel on this kind of business is necessary to collect

long outstanding past due accounts. This result has a great impact on the

financial performance of the business. Moreover, the profile of the respondents’

in terms of civil status has a significant relationship with the level of compliance in

accounts receivable management specifically to credit control policy. Credit

 33

control policy has a significant effect to the profitability of the business. When the

credit control policy is stricter the financial performance in terms of profitability is

higher.

Recommendations

After verifying and analyzing all the findings and conclusions, the

researcher recommends to the managers of hardware stores to collect interest

and penalty charges and should obtain legal assistance to collect long

outstanding past due accounts. It recommends having collateral when customers

apply for credit especially when it is greater amount. They must continue to have

a good collection policy and credit standards.