Effect of Accounts Receivable Management on Financial Performance of Chartered Public Universities in Kenya

Abstract

Accounts receivable refer to the payments expected by an organization in the foreseeable future. Accounts receivable management plays an integral part in the financial performance of higher learning institutions. With several public universities experiencing no or delayed payments from the respective receivable accounts, such institutions have been characterized with financial constraints, struggling to meet their immediate obligations. From reduced government capitation, lack of the module two students (Self-Sponsored), and students' non-compliance on fee payment policy, public universities in Kenya continue to experience poor financial performance due to inefficiency of their accounts receivable management. This study sought to examine the effect of accounts receivable management on the financial performance of chartered public universities in Kenya. The general and specific objective was to determine the effect of accounts receivable management on the financial performance of chartered public universities in Kenya. The study used the Cash Conversion Cycle (CCC) theory. Descriptive and inferential research designs were applied to analyze data. The target population was all the 31 chartered public universities in Kenya, and as such, the census survey method was adopted to collect data. Secondary panel data was extracted from the respective institutions’ audited annual reports for 2017, 2018, and 2019. The SPSS Version 25 was applied to analyze descriptive and inferential statistics. The study found that accounts receivable management had an indirect and significant effect on the financial performance of chartered public universities in Kenya (p= 0.000, β= -0.875). The study concluded that accounts receivable management has a substantial effect on the financial performance of chartered public universities in Kenya. The study recommended that in line with the IFRS 5 and IAS 1, respective university managements should develop optimal debts management frameworks to guide their financial management operations to realize sustainable financial performance both in the short and long runs.