Effect of Accounts Receivable Management on Financial Performance of Chartered Public Universities in Kenya
Abstract
Accounts receivable refer to the payments expected by an organization in the foreseeable future. Accounts receivable management plays an integral part in the financial performance of higher learning institutions. With several public universities experiencing no or delayed payments from the respective receivable accounts, such institutions have been characterized with financial constraints, struggling to meet their immediate obligations. From reduced government capitation, lack of the module two students (Self-Sponsored), and students' non-compliance on fee payment policy, public universities in Kenya continue to experience poor financial performance due to inefficiency of their accounts receivable management. This study sought to examine the effect of accounts receivable management on the financial performance of chartered public universities in Kenya. The general and specific objective was to determine the effect of accounts receivable management on the financial performance of chartered public universities in Kenya. The study used the Cash Conversion Cycle (CCC) theory. Descriptive and inferential research designs were applied to analyze data. The target population was all the 31 chartered public universities in Kenya, and as such, the census survey method was adopted to collect data. Secondary panel data was extracted from the respective institutions’ audited annual reports for 2017, 2018, and 2019. The SPSS Version 25 was applied to analyze descriptive and inferential statistics. The study found that accounts receivable management had an indirect and significant effect on the financial performance of chartered public universities in Kenya (p= 0.000, β= -0.875). The study concluded that accounts receivable management has a substantial effect on the financial performance of chartered public universities in Kenya. The study recommended that in line with the IFRS 5 and IAS 1, respective university managements should develop optimal debts management frameworks to guide their financial management operations to realize sustainable financial performance both in the short and long runs.
References
Africa Edition, U. (2021). Government cuts universities budget by 26%. Retrieved 26 January 2021, from https://www.universityworldnews.com/post.php?story=20200610144752328
Bairagi, V., &Munot, M. V. (Eds.).Research methodology: A practical and scientific approach. (2019). CRC Press.
Bulle, H. I. (2017). Financial Management and Financial Performance of Firms Listed under Manufacturing and Allied Sector at the Nairobi Securities Exchange, Kenya (Doctoral dissertation, Kenyatta University).
Chang, C. C. (2018). Cash conversion cycle and corporate performance: Global evidence. International Review of Economics & Finance, 56, 568-581.
Gartenberg, C., Prat, A., &Serafeim, G. (2019).Corporate purpose and financial performance.Organization Science, 30(1), 1-18.
Geiger, R. (2010). Impact of the financial crisis on higher education in the United States. International Higher Education, (59).
Hernandez, H. (2021). Testing for Normality: What is the Best Method.ForsChem Research Reports, 6, 2021-05.
Kalnins, A. (2018). Multicollinearity: How common factors cause Type 1 errors in multivariate regression. Strategic Management Journal, 39(8), 2362-2385.
Mbula, K. J., Memba, S. F., &Njeru, A. (2016).Effect of accounts receivable on the financial performance of firms funded by Government Venture Capital in Kenya. IOSR Journal of Economics and Finance, 7(1), 62-69.
Munene, F., &Tibbs, C. Y. (2018). Accounts receivable management and financial performance of Embu Water and Sanitation Company Limited, Embu County, Kenya (Doctoral dissertation, Kenyatta University).
Munene, I. (2019). Kenyan universities: On the brink of financial insolvency. International Higher Education, (97), 25-27.
Othman, N., Singh, H. K. T., Tin, P. B., &Sulaiman, N. (2012).Globalization and the trend in demand for higher education in Malaysia. International Journal of Education and Information Technologies, 6(1), 131-140.
Otieno, I. A. (2018). Kenyan Public Universities in the Age of Internationalization: Challenges and Prospects. Lexington Books.
Pakdel, M., &Ashrafi, M. (2019).Relationship between Working Capital Management and the Performance of Firm in Different Business Cycles. Dutch Journal of Finance and Management, 3(1), em0057.
Qazi, H. A., Shah, S. M. A., Abbas, Z., &Nadeem, T. (2011).Impact of working capital on firm's profitability. African Journal of Business Management, 5(27), 11005-11010.
Raza, M. Y., Bashir, M., Latif, K., & Shah, T. S. (2015). Impact of working capital management practices on profitability: Evidence from Pakistan oil sector. International Journal of Accounting and Financial Reporting, 5(1), 286-299.
Trincu-Drăguşin, C. P., Mihai, M., & Blanco-Pascual, L. (2016). Indicators Of The Economic And Financial Performance For The Public Universities In Romania. Annals of the University of Craiova, Economic Sciences Series, 1(44).
Wachira, C. (2018). Effect of Government Funding on Operational Efficiency of Public Universities in Kenya (Doctoral dissertation, University of Nairobi).
Yator, P. K. (2018). The Working Capital Management Practices and Financial Performance of Middle-Level Colleges in Eldoret Town, Kenya.
Zeleza, P. T. (2019, February). Money Matters: The Financial Crises Facing Universities from the USA to Kenya. Regional Knowledge Forum.
