Credit management and financial performance of solar energy companies in south-western Uganda

Abstract

Credit management is one of the most important activities in any company and cannot be overlooked by any economic enterprise engaged in credit irrespective of its business nature. Sound credit management is a prerequisite for a financial institution's stability and continuing profitability, while deteriorating credit quality is the most frequent cause of poor financial performance and condition. As with any financial institution, the biggest risk in bank is extending credit and clients fail to pay back. The study sought to examine the influence of credit management on the financial performance of solar companies in South Western Uganda. The study adopted a cross-sectional survey research design. The target population of study consisted of 56 respondents who have been administering credit sales and management staff. Entire population was used as the sample giving a sample size of size of 56 employees. Random sampling technique was used in sampling where the entire population was included in the study. Primary data was collected using questionnaires which were administered to the respondents by the researcher. The Statistical Package for Social Scientists (SPSS) was used for analysis of data in this study which was the SPSS version 20.0. In attempting to analyze the data the researcher used both descriptive statistics. Qualitative data was prepared by use of code sheets which capture relative data on the study variables. The study found that client appraisal, credit risk control and credit policy had impact on financial performance of solar company. · The study established that there was strong relationship between financial performance of solar companies and client appraisal, credit risk control and credit policy. The study established that client appraisal, credit risk control and credit policy significantly influence financial performance of solar companies. Credit policy was found to have a higher effect on financial performance and that a stringent policy is more effective in debt recovery than a lenient policy. The study recommends that solar companies should enhance their credit policy by adapting a more stringent policy to a lenient policy for effective credit management.