Credit Management Practices in the Service Industry: the Case Study of Telkom Kenya Limited

Abstract

The aim of this research was to find out the reasons which have led to the large outstanding debt and also establish the relationship between the debtors' problem and the credit policies of Telkom Kenya Limited hereinafter referred to as "TELKOM", by reviewing its credit management practices and bench marking these against the ideal or best practices. The study focused on the population involving the heads of Credit Units III the seventeen (17) Credit Units regions of TELKOM spread across the country. A qualitative and quantitative research method was complementarily used in order to have a more objective interpretation of data. Data was collected by use of the questionnaire method. Questionnaires were administered personally at the head office or sent through the Regional Accountants to the various Credit regions of TELKOM as the circumstances dictated. Secondary data like the financial statements were also used to understand the financial performance of the company in detail. The data analysis technique has been aligned to meet the three objective of study, namely: to identify and evaluate the credit management practices (debt collection and follow up) within the different regions of TELKOM and draw a comparison with the corporate credit policy and. best practices in credit management; to evaluate the level of bad debts within the different regions of TELKOM; and to establish the relationship between credit management practices and level of bad debts in TELKOM, regionally. All the seventeen regions responded and the findings on the three set objectives indicates the inability to effectively practice credit management policies , lack of proper vetting procedures and Government's slow pace in meeting its obligations as some of the factors which have led to the debt growth at TELKOM. In order to manage credit sales effectively therefore, TELKOM must re-assess its sales contracts with the Government and Personal accounts holders. These are the worst