Accounts Receivable Management And Financial Performance Of Kericho Water And Sanitation Company Limited, Kericho, Kenya

ABSTRACT

Account receivables have been a major problem for most utility service providers especially those still dealing with the post payment method where services are rendered before payment is made. This study sought to find out if financial performance of Kericho Water & Sanitation Company (KEWASCO) was attributed to management of accounts receivable. The study collected secondary data spanning from 2010 to 2014 from Kenya national audit office and KEWASCO published financial statements to find out average collection period and accounts receivable turnover. The target population included employees of KEWASCO in two regions, Kericho and Bureti working in finance. Data was collected using questionnaires where a census was employed and data analyzed using regression and correlation analysis to find if there is any relationship between financial performance and accounts receivable at 5% significance level. From the findings inventory turnover period and average payment period is averagely 30.14 days and 105.45 days respectively, accounts receivable turnover had a mean of 24.54, average collection period (29.8) size of the region (1.547). The results showed that KEWASCO, financial performance variable Return on Equity (ROE) was significantly affected on Size of the region with positive correlation of 0.688 and Inventory Turnover with negative correlation of 0.245. According to the regression equation established, taking all factors into account; size of the region, Average Payment Period (in Days), Accounts receivable turnover, and Average collection period) financial performance of KEWASCO, measured by ROE was 0.752 (75.2%).This study recommended that the organization should increase average collection period, inventory period, accounts receivable turnover and debt levels in order to improve their financial performance.