The aim of this research work is to appraise “The impact of credit management on the profitability of a manufacturing firm focused on Unilever Nigeria Plc Aba”. This is because; trade credit is a short term source of finance and sometimes take the form of bills payable. The statement problem of this research banks about the poor level of credit management and also the problems which the firms encounter as a result of high-rate of bad debts. The objective of this research study is to highlight the effects of the credit management on the profitability of the company as well as to highlight the advantages of effective and efficient management of trade credit amongst others. Furthermore, this research work will be of immense significance to the staff of Unilever Nig. Plc Aba as well as the students and the researcher since it aims at providing effective means of reducing default in collection of accounts. Also, research questions like; could a company’s liquidity problem be attributed to bad debt? On the average, how long do you allow credit to customers? Etc. research instrument used were questionnaires for the purpose of obtaining the desired result. In treating and analyzing the data collected, an extensive use of tabular information and percentages were of great importance. In the light of the findings and conclusions of this work, the following recommendations are put up: that then should be a regular review of credit policies to suit the changes in the business environment and that an enquiry unit should be established to take responsibility for prospective credit’s assessments amongst others. 



1.0      Introduction

1.1        Background of the Study

1.2      Statement of the Problem

1.3      Objective of the Study

1.4      Formulation of Research Hypotheses

1.5      Research Questions

1.6        Significance of the Study

1.7        Scope of the Study

1.8       Limitations of the Study

1.9      Definition of Terms


2.0      Literature Review

2.1      Reasons for granting credit

2.2        Setting credit policy and Regulation

2.2.1 Credit Standards

2.2.2 Credit Terms

2.2.3 Collection Efforts

2.3      Credit Policy Goals

2.3.1 Optimal Credit Policy

2.4      Credit Policy Variable Analysis

2.4.1 Credit Analysis

2.4.2 Credit Scoring

2.4.3 Collection Policy and Procedures

2.4.4 Establishing Internal Collection Procedure

2.4.5 Other Collection Procedures

2.4.6 Monitoring Receivables



3.0        Research Methodology

3.1         Research Design

3.2      Area of Study

3.3      Sources of Data

3.4        Population of the Study

3.5        Instrument of Data Collection

3.6         Validation of the Instrument

3.7         Reliability of the Instrument

3.8         Method of Data Analysis 

3.9        Sample Design and Determination of Sample Size


4.0        Presentation, Analysis and Interpretation of Data 

4.1        Analysis and Interpretation of Data

4.2      Test of Hypotheses

4.3      Test of Hypothesis 1


5.0      Summary of Findings, Conclusion and Recommendations

5.1      Summary of Findings

5.2        Conclusion

5.3      Recommendations


              Appendix 1

               Appendix II  




 Credit management is a term used to identify accounting functions usually conducted under the umbrella of accounts receivables. Essentially, this collection of processes involves qualifying the extension of credit to a customer, monitors the reception and logging of payments on outstanding invoices, the initiation of collection procedures, and the resolution of disputes or queries regarding charges on a customer invoice. When functioning efficiently, credit management serves as an excellent way for business to remain financially stable. 

 Competent credit management seeks to not only protect the vendor from possible losses, but also protect the customer from creating more debt obligations that cannot be settled in a timely manner. 

 Several factors are used as part of the credit management process to evaluate and qualify a customer for the receipt of some form of commercial credit. This may include; gathering data on the potential customer’s, current financial condition including the current credit score.  


 Unilever Nigeria Plc is a public liability company quoted on the Nigerian stock exchange since 1973 with Nigerian’s currently having 49 percent of equity holidays established in Nigeria. Unilever Nigeria Plc started as a soap manufacturing company and is today’s one of the eldest surviving manufacturing organization in Nigeria. The company changed its name to “Unilever Nigeria Plc” in 2001.

 The company is into the manufacture and marketing of household toiletries and favorites which are manufactured in their various factory locations in Nigeria. This is because they are so deeply committed to meet the everyday needs of people everywhere in Nigeria. Such factors are located at Lagos, Agbara, Oregun and Aba. Its staff strength is about one thousand eight hundred (1,800) employers. They also have indirect employees like contract staff and others who range from our forty thousand employees throughout the country. 

 The company has also made provision for assistance in fields of health, education, children welfare and potable water hygiene as part of its social responsibility programme in the Nigerian communities. 

Conclusively, Unilever Nigeria Plc from research has been found to be involved in both credit and cash transactions with its customers. 


 There are many problems companies encounter as a result of poor credit management. Thus, the problems inherent in this research study as investigated are as follows:

(1)            There is a high rate of bad debts because some corporations take advantage of the credit that is extended to them and find themselves not able to pay debt later. 

(2)            The poor level of trade credit management is reflected in the

liquidity and profitability position of the firm. 

(3)            The inability of business policy makers to certainly say how effectively, credit management other makes or mars the performance of the business in terms of profitability.  

(4)            Furthermore, lack of experienced staff or officers to tackle onerous and vital duties of managing debts appropriately. 

(5)            Also, limitation and inadequate training opportunities for key treasury or supporting staff. 

(6)            Finally, failure to comply with the agreed terms of agreement with the company upon when paying the debt. 


 The main objective of this study is to appraise the impact of credit management on the profitability of manufacturing firms and also providing effective means of reducing default in collection of accounts. 

Other objectives include the following:

(1)            To appraise the effects of the credit management on the profitability of the company. 

(2)            Identifying the problems associated with credit management in manufacturing firms. 

(3)            To investigate the advantages of effective and efficient management of trade credit. 

(4)            To also show how to reduce losses caused by bad debt through the use of effective and sound collection policy and procedures. 

(5)            It is also very necessary for a firm to critically evaluate the individual account of the customers to enable it obtain the necessary credit information about them and to devise appropriate collection

procedures for effective collection of account. 

(6)            To examine whether the credit management principles applied by the firm is appropriate and effective. 

(7)            To encourage staff to always be at an alert in respect of knowing who their debtors are. 


 The following hypotheses are formulated for the purpose of this research work. 


Firm’s do not make some profits when trade credit questions


Firm’s do make some profit when they extend credit to customers. 


Its credit information about customers does not help in reducing bad debt losses. 


Its credit information about customers help in reducing bad debt losses.


Firms that sale on credit to their customers do not make more sales than those who sale in cash.


Firm’s that sale on credit to their customers do make more sales than

those who save in cash. 


Base on the problems which this research work is aimed at finding solutions to, the following questions are put forward in finding solutions to the problems.

Does credit management have any effect on the profitability of a company?  Can trade credit be phased out completely from a company’s business dealing?  How can a firm enforce collection of it’s over due debts?  Has any company through the aid of trade credit facility achieved high profit index? Can the liquidity and profitability objectives of the company be achieved through the use of credit facilities?


This research work will be of great significance to the staff of Unilever Nigeria Plc. It will go a long way in enlightening them on the concept of credit management accounting as well as the best strategies to be adopted to monitor debts. This research work will as well be of benefit to students and researchers because it would widen their scope from the information contained in this research work and lastly, it will also be of help to the entire nation by also enlightening them on the importance of managing debt and finding the best possible measures in settling debts as at when due. 


This research work on the impact of credit management on the profitability of a manufacturing firm is focused on Unilever Nigeria Plc. 


    In the course of this research work, the researcher encountered some bureaucratic problems which are very peculiar to Nigeria firms. These factors are as follows: project topics   final year project topics and research materials 

Time: The time specified for submission for this research work was obviously too short and as such, was unable to go about Unilever Nigeria Plc thoroughly in carrying out this research.  Lack of knowledgeable and sincere personnels: Some of the officials employed in most manufacturing firms including that of Unilever Nigeria Plc has no knowledge on the ways of ensuring that credit management works effectively and they are also not approachable because they place themselves on a very high esteem and even when I was opportune to interview them, there were lots of shortcomings from the basis such as deliberate distortion of facts and amongst others.   Lack of Facilities: Research facilities such as transportation make research easy and interesting. But it is often noted that Nigeria has a poor transportation system which greatly affected me in conducting this research. 


 For easy comprehension of this research work, the writer intends to define the following terms: 

Accounts Receivable:

 This is the total sum which is being owed to Unilever Nig Plc by its customers at any particular accounting period. 

Bad debts:

      They are losses which are incurred by Unilever Nig Plc when some of its customers fail to pay part or all the money being owed to the firm.

Trade credit:

Is any amount for goods and or resources which remain unpaid at the time of purchase of such goods or services but which is deferred for future use.


    This is used to describe the assets of firms which are easily convertible to cash.


     We use this term to express a firm’s liabilities or obligations as they fall due or simply put a state of being able to pay debts as they fall due.




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