An Investigation on the Impact of Accounts Receivables Management on Financial Performance: A Case of Zimbabwe Electricity Transmission and Distribution Company

Abstract

The study targets to investigate the impact of accounts receivables management on the financial performance of an entity, with the selection of ZETDC as the case study. The objectives of the study were to determine the effect of Average Receivables Collection period on the profitability of ZETDC, to assess the effect of cash conversion cycle on the liquidity position of ZETDC, to examine the impact of accounts receivables management on sales revenue generation within the organisation and to determine the relationship between accounts receivables management and financial performance indicators of ZETDC. A positivistic philosophy was utilised to guide the research; as well the utilisation of a mixed approach. Judgmental sampling was utilised on a size population of 50 ZETDC staff, resulting in a sample size of 21 staff comprising employees and managers. Descriptive and correlational analysis were utilised for data analysis and interpretation. The financial records utilised were annual audited financial statements from the periods from 2014-2016. The findings of the study indicated that the overall account receivables management has a significant and positive impact on financial performance, mostly in regards with profitability. It also deduced a positive relationship and correlation between return on total assets and average receivables collection period as well as net profit and average receivables collection period. Also, there was no significant relationship established between receivables turnover ratio and receivables to sales ratio, as well as between cash conversion cycle and current ratio. The study concluded therefore that accounts receivables management had a significant and vital impact on financial performance in relation to the indicator of profitability, but was not as significant on impact with regards to liquidity.