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Trade Credit Terms and Credit Practices of Selected Firms in Accra-Tema Metropolis
Abstract
Management of trade credit has been observed to be problematic for Finance Managers because the credit offered affects sales, profits, and cash flow position of a firm. The study was conducted to analyse the trade credit terms and credit collection practices of 96 firms in the Accra-Tema Metropolis. Questionnaires were administered to collect the data and
descriptive statistics used for the data analysis. The results indicate that the firms surveyed maintained proper procedures in granting of credits and collections. About 52 % of sampled firms had over 40 % of the turnover as credit sales. The absence of credit rating agencies was identified as a major obstacle in firms validating the credit worthiness of prospective clients, as well as established customers. Collection or repayment was more difficult to
manage than granting credit, and the difficulties were attributable to human factors of retaining co-operation and goodwill of customers in relation to the competitive state of the industry.
descriptive statistics used for the data analysis. The results indicate that the firms surveyed maintained proper procedures in granting of credits and collections. About 52 % of sampled firms had over 40 % of the turnover as credit sales. The absence of credit rating agencies was identified as a major obstacle in firms validating the credit worthiness of prospective clients, as well as established customers. Collection or repayment was more difficult to
manage than granting credit, and the difficulties were attributable to human factors of retaining co-operation and goodwill of customers in relation to the competitive state of the industry.
