ACCOUNTS RECEIVABLE MANAGEMENT AND THE FINANCIAL PERFORMANCE OF NZOIA WATER SERVICE COMPANY LIMITED, KENYA

Abstract

Management of account receivables is a significant problem for most utility service providers, particularly those still dealing with the post-payment system when services are delivered prior to payment. This study was aimed at determining the impact of the accounts receivable on Nzoia Water Services Company's financial performance. The average collections on financial performance, accounts receivable turnover and the moderating effect on accountability and financial performance by region. They would analyze the average collection period. The study obtained secondary data dating from 2012 to 2016 from Kenya national audit office and Nzoia Water Services Company published financial statements to find out effect of average collection period and accounts receivable turnover on financial performance. The study employed explanatory research design and data was collected from secondary data and analyzed using regression and correlation analysis and found the relationship between financial performance and accounts receivable, 95% confidence interval was tested using tstudent test. From the findings the mean average collection period was 309.90 days, accounts receivable turnover had a mean of 1.1980, size of the region (7.5870). The results showed that NZOWASCO, financial performance variable Return on Equity (ROE) was significantly affected with average collection period with negative correlation-0.232 and positive correlation on accounts receivable turnover ratio of 0.401 and Size of the region with positive correlation of 0.911. According to the regression equation established, taking all factors into account; Average collection period, Accounts receivable turnover and size of the region on financial performance of NZOWASCO measured by ROE was -0.505.The study recommended that the organization reduce average collection period, accounts receivable turnover in order to improve their financial performance.