THE RELATIONSHIP BETWEEN INTERNAL CONTROLS AND DEBTORS MANAGEMENT: A CASE STUDY OF STAR FM, GARISSA-NORTH EASTERN PROVINCE, KENYA

Abstract

The research study was undertaken on the relationship between internal control and

debtors' management.

The main objective of the study was: to ascertain the internal control on debtors, to

determine the credit collection by Star Fm and examine the relationship of internal

control and debtors' management.

The techniques used in the collection were questionnaire and interviews. The data

collected was coded, edited and tabulated with the help of tables and percentages that

were essential techniques in presenting and analyzing data.

The study revealed that internal controls on debtors existed but were full ofloopholes that

made it possible for poor credit collection performance.

The study also revealed that the credit policy variables of credit terms, credit standards

and credit collection effort did exist but on close analysis it was found out that Star Fm

staffs hardly considers them before any credit extension is made to credit applicants.

These have affected the credit collection effort leading to high level of accumulating

debtors year after year.

To improve on credit terms and credit standards; the 5 C's of capital, capacity, collateral,

character, and condition of every credit applicant should be asce1iained as suggested by

Pandey.

On credit collection the company should use the remainder letters and if possible

personal visits, so as to encourage the customers to pay their over due account and if

possible use the credit collection agency.

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