THE EFFECTS OF MANAGEMENT OF ACCOUNT RECEIVABLES ON THE PERFORMANCE OF GOVERNMENT PARASTATALS

CHAPTER ONE

1.0  INTRODUCTION

1.1  BACKGROUND OF THE STUDY

According to Ajasa (2007), many business organizations in Nigeria have experienced liquidity problem largely because of the effects of the high inflationary rate.  This has been necessitated by the various economic measure introduced in the country ranging from auxsterity measure introduced in 1982 to the structural adjustment program and the deregulation of the economy. As a result of these, it then becomes more necessary than ever to get money promptly from trade debtors for the day-to-day operations, because of uncertainty in the fluctuations of prices.

He further suggests that if all trade transactions were to be made on cash basis the companies in Nigeria would hardly do well in terms of sales turnover. This results form the fact that at the time of consumption, the liquidity position of the consumers may be such as not to allow the availability of enough cash to make on- the – spot payments in cash for such goods and services to be consume now and to pay at a later date, resulting in accounts receivable.

According to Bass (2006) accounts receivables represent claims usually stated in terms of a fixed amount arising from the sale of goods, the performance of service, the lending of fund or some type of transactions which establish relationship whereby one party is indebted to another. These claims result from the sale of goods or services and are sometimes neither supported by a written note or secured by specific collaterals. In that case, creditors have no right to lay hands on specific assets.

1.2     STATEMENT OF THE PROBLEM

Despite the indispensability of water to mankind and the amount of investment by state governments, water in urban and some rural areas has been a very scarce commodity yet its consumption rate has not abated.

The issue of water has become a very strong slogan for politicians and they use same in building the political manifestoes.  The electorate on the other hand are always respectable to mere promises of better water facilities, there is still an unwillingness to pay bills. Water managers accuse both the consumers and government of deliberate refusal to co-operate in making their dream a reality. Government parastatals most of the time end up with a large amount of debts.

This research therefore looks into the perennial problem of water in Enugu State, with particular reference to Enugu Urban, to find out the effect of accounts receivables make on the performance of the Enugu State water corporation.

1.3     OBJECTIVE OF THE STUDY

This study seeks to achieve the following objectives:

·        To find out the cause of the irregularities and lack of payment of water bills.

·        To find out the reason for the huge amount of debts in the financial statements of the Enugu state water corporation.

·        To find out the effect of accounts receivables in the performance of government owned parastatals but with particular reference to the Enugu State water corporation.

·        To determine if the guidelines and practices of the Enugu state water corporation, with reference to the management of accounts receivables is in conformity with sound theoretical principles and policies as provided by theoretical framework.                  

·        To recommend workable solutions that might minimize the problems and thereby enhance the effective management of account receivables in most government owned parastatals.

·        To make any other suggestions that would lead to the solution of the perennial water scarcity in Enugu State Water Corporation.

1.4     HYPOTHESES

1Ho:       The level of accounts receivables does not affect the services and operating income of the Enugu state water corporation.

Hoi:The level of accounts receivables does affect the service and operating income of the Enugu State water corporation.

2Ho:       The delay or default in the payment of water bills by consumers is NOT connected with the efficiency of services rendered by the Enugu State water corporation.

Hi:   The delay or default in the payment of water bills by consumers is connected with the efficiency of services rendered by the Enugu State water corporation.

3Ho:       The level of services rendered by Enugu State Water Corporation is NOT a resultant effect of poor management of the accounts receivables.

Hi:   the level of services rendered by Enugu State Water Corporation is a resultant effect of poor management of the accounts receivables.

4Ho:       An improper working condition does NOT  influence the incidence of account receivables.

Hi:   An improper working condition does influence the incidence of accounts receivables.