The Effectiveness of Credit Control Management on the Liquidity Position of Land and Property Developers: A Case Of Stoneclare Construction Pvt Ltd.

Abstract

The purpose of the study was to determine the effectiveness of credit control management on the liquidity position of land and property developers using Stoneclare Construction Pvt Ltd as a case study. Stoneclare Construction experienced liquidity problems since 2016 as a result of an ineffective credit control management system that has led to the company failing to recover the amounts owed by the clients. This was because of four major problems which includes charging low deposits and longer payment period, high servicing and maintenance cost, poor credit control management system and the company’s policy which allowed clients to building at 25 percent total cost contributions. Accounts receivable figures continued to increase overtime and there was no guarantee of payments due to mismanagement of debts hence led to the company failing to pay its own debts due to insufficient funds. Therefore this motivated the researcher to carry out this study. The researcher used a mixed approach on a target population of 20 members from the finance, accounts and sales department that had unlimited access to most of the information. Carrying out this study. The researcher used the Stata 13 Statistical software package. The relationship between liquidity position and credit control components was established using multivariate regression analysis to arrive at conclusion on Stoneclare Construction problems. The major finding of the study was that debt settlement and payment plan are ineffective as a credit control tool as clients failed to honour their promises and no payment is guaranteed at Stoneclare Construction. The researcher also found out that the best practices of credit control management includes debt centralization, debt segmentation, debt factoring and credit rating and if these strategies are successfully applied, credit control management can be handled efficiently and liquidity can be increased. The company should engage in debt factoring scheme and employee training schemes so as to improve liquidity as recommended by the researcher.