Analysis of Credit Management Techniques on the Financial Performance of Logistics Firms in Mombasa County Kenya

Abstract

Financial performance depicts survival rate of any business enterprise. This rate for most firms internationally have been at a declining rate of 70% and 80% mostly in the sub- Saharan Africa. The Logistic firms in Kenya Mombasa County have been striving to survive reasons among other factors the deteriorating credit management techniques. The adverse performance is evidenced by the collapse and the closure of a number of logistics firms. The purpose of this research was to analyze the various credit management techniques and their influence on financial performance of logistics companies in Mombasa County. The specific objectives of the study were to analyze effect of appraisal process, credit risk control, collection policy and terms of credit on financial performance. The study was based on the following theories Agency Theory, Credit Risk Theory, Tax Theory of Credit, Portfolio Theory and Asymmetric information Theory to ascertain if their presumptions explains best the relationship between credit management techniques on financial performance of logistic firms. The study applied a descriptive research design and will target a population of 248 employees of logistics firms in Mombasa County registered under KIFWA and the sample size of 160 obtained through stratified sampling. The collection of data was done through primary data collection methods. Primary data was amassed through the administration of questionnaires to senior managers and officers in the finance department. Analysis of data was done through Statistical Packages for Social science (SPSS) representing descriptive statistics such as percentages, measures of central tendencies, variation measures and frequencies distribution. The interpretation was based on descriptive statistics and the measures of dispersion as well as inferential statistics were used Pilot test was carried out to ensure the accuracy and validity of the research tools Multi linear regression model was used to analyze effect of credit management techniques on financial performance. The research sought to analyze whether client appraisal process credit risk control collection policy and terms of credit has significant effects on financial performance of logistics firms in Mombasa County. The study further sought recommendation on how a robust credit control mechanism sound credit policies acceptable terms of credit and proper client appraisal process can be applied in credit management to enhance financial performance of logistics firms in Mombasa County. The beneficiaries of the study were the Logistics firms’ managers, Policy makers financial managers scholars and academicians.