The management of trade credit in small and medium-sized enterprises
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Date
2014
Authors
Otto, Werner Henk
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Journal ISSN
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Publisher
University of the Free State
Abstract
Afrikaans: Ongeveer 24.5% van die ekonomies aktiewe bevolking in Suid-Afrika is werkloos (Statistiek Suid-Afrika 2009). Suid-Afrika ondervind geweldige inkomste-ongelykhede en hoë vlakke van armoede. Klein-en medium grootte ondernemings (KMOs) is veronderstel om ’n belangrike hulpmiddel te wees om die uitdagings van werkverskaffing en volhoubare ekonomiese groei aan te spreek. Volgens Von Broembsen, Wood en Herrington (2005) se opname is die kanse vir KMOs om te oorleef skraler in Suid-Afrika as in enige ander GEM land. Die wanbestuur van handelskrediet kan ’n moontlike oorsaak vir die KMOs se mislukkings in Suid-Afrika wees.
Die hoofdoel van hierdie studie is om die bestuur van handelskredietpraktyke van KMOs vas te stel en sodoende te bepaal of handelskrediet deur KMOs in Suid-Afrika wanbestuur word. Om hierdie doel te bereik, was dit nodig om die (huidige) bestuur van handelskredietpraktyke te bepaal en te illustreer om sodoende vas te stel of KMOs dit moeilik vind om handelskrediet doeltreffend te bestuur en onsuksesvol is om handelskrediet effektief as ’n bron van finansiering aan te wend.
Om te verduidelik hoekom KMOs as gevolg van wanbestuur van handelskrediet in hulle eie praktyke misluk, is dit belangrik om die moontlike redes vir die onsuksesvolle bestuur van handelskrediet te verstaan en te verduidelik. Ten einde hierdie doel te bereik, het hierdie studie van ’n e-pos opname gebruik gemaak en is ’n aanlynvraelys as die primêre data-insamelingsinstrument ontwerp.
Hierdie aanlyn-vraelys is aan 352 KMO respondente gegee en is ontwerp deur ’n deeglike oorsig van literatuur oor die debiet- en kredietbeleid vir KMOs saam met die besigheidsomgewing en KMOs te volg. Empiriese navorsing is uitgevoer om die bestuur van handelskredietpraktyke van KMOs in Suid-Afrika te bepaal. Die statistiese analises sluit statistiese tegnieke soos beskrywende statistiek, frekwensies, kruistabulering en gemiddeldes in. Daarmee saam is die ooreenstemmende t-toets en die McNemar-toets gebruik om vergelykings tussen die twee verskillende klassifikasiewaardes, naamlik debiteure en krediteure, te tref. Aanbevelings is gemaak om die bestuur van handelskrediet onder KMOs te verbeter. Die bevindinge stel voor dat KMOs van ’n beproefde en gestruktureerde kredietbeleid gebruik maak alvorens handelskrediet aan ’n kliënt toegestaan word, sodat die bestuur van handelskrediet onder KMOs versterk en verbeter word. Verder moet kredietbeleid gestruktureer en opgeskerp word om die doeltreffendheid van KMOs se kredietbeleid te verhoog, veral deur op die relevante kredietkomponente, soos in die kredietbeleid van die KMO uiteengesit word, te fokus. Dit word ook aanbeveel dat KMOs, sover moontlik, moet probeer om nie die betalings uit te stel wat aan ander KMOs of kliënte gemaak moet word nie. Opleiding en kommunikasie kan ook KMO-eienaars help om die konsepte van doeltreffende bestuur van handelskrediet te verstaan. KMO-eienaars kan ook by netwerke inskakel deur seminare by te woon.
English: Of the economically active population in South Africa, approximately 24.5% are unemployed (Statistics South Africa, 2009). South Africa experiences severe income inequality and high levels of poverty. SMEs are expected to be an important vehicle to address the challenges of job creation and sustainable economic growth. The chance of survival for SMEs is less likely in South Africa than in any other GEM country sampled in 2005, according to Von Broembsen, Wood and Herrington (2005). The mismanagement of trade credit could be a cause of failure for SMEs in South Africa. The primary objective of this study was to determine the trade credit-management practices of SMEs in order to establish whether trade credit is being mismanaged by SMEs in South Africa. To achieve this objective, it was necessary to determine and illustrate the trade credit-management practices of SMEs in order to establish whether SMEs find it difficult to manage trade credit successfully and fail to use trade credit effectively as a source of funding. Understanding and explaining possible reasons why SMEs find it difficult to manage trade credit successfully is important in explaining if SMEs’ fail due to the mismanagement of trade credit within their own practices. For this purpose, this study made use of an e-mail survey and developed an online questionnaire as the primary data-collection instrument. This online questionnaire, administered to 352 SME respondents, was developed following a thorough review of the literature on debtors and credit policy for SMEs along with the business environment and SMEs. Empirical research was conducted to determine the trade credit-management practices of SMEs in South Africa and, in doing so, establish the reasons why SMEs find it difficult to manage trade credit successfully and fail to use trade credit effectively as a source of funding. The statistical analyses included statistical techniques such as descriptive statistics, frequencies, cross-tabulations and mean scores. In addition, the matched samples t-test and the McNemar test were used in conducting comparison testing between two different classification values, namely debtors and creditors. Recommendations were made to improve the management of trade credit among SMEs. The findings suggested that SMEs should make use of a sound and structured credit policy before granting trade credit to a customer, in order to strengthen and improve the management of trade credit among SMEs. Furthermore, credit policies must be structured and tightened up in order to increase the effectiveness of SMEs’ credit policies, especially focusing on the relevant credit components as set out in the credit policy of the SME. The recommendations also included that SMEs should, as far as possible, try not to prolong the payment owed to other SMEs and/or clients. Training and communication can also help SME owners understand the concepts of effectively managing trade credit. In addition, owners of SMEs should network by attending seminars.
English: Of the economically active population in South Africa, approximately 24.5% are unemployed (Statistics South Africa, 2009). South Africa experiences severe income inequality and high levels of poverty. SMEs are expected to be an important vehicle to address the challenges of job creation and sustainable economic growth. The chance of survival for SMEs is less likely in South Africa than in any other GEM country sampled in 2005, according to Von Broembsen, Wood and Herrington (2005). The mismanagement of trade credit could be a cause of failure for SMEs in South Africa. The primary objective of this study was to determine the trade credit-management practices of SMEs in order to establish whether trade credit is being mismanaged by SMEs in South Africa. To achieve this objective, it was necessary to determine and illustrate the trade credit-management practices of SMEs in order to establish whether SMEs find it difficult to manage trade credit successfully and fail to use trade credit effectively as a source of funding. Understanding and explaining possible reasons why SMEs find it difficult to manage trade credit successfully is important in explaining if SMEs’ fail due to the mismanagement of trade credit within their own practices. For this purpose, this study made use of an e-mail survey and developed an online questionnaire as the primary data-collection instrument. This online questionnaire, administered to 352 SME respondents, was developed following a thorough review of the literature on debtors and credit policy for SMEs along with the business environment and SMEs. Empirical research was conducted to determine the trade credit-management practices of SMEs in South Africa and, in doing so, establish the reasons why SMEs find it difficult to manage trade credit successfully and fail to use trade credit effectively as a source of funding. The statistical analyses included statistical techniques such as descriptive statistics, frequencies, cross-tabulations and mean scores. In addition, the matched samples t-test and the McNemar test were used in conducting comparison testing between two different classification values, namely debtors and creditors. Recommendations were made to improve the management of trade credit among SMEs. The findings suggested that SMEs should make use of a sound and structured credit policy before granting trade credit to a customer, in order to strengthen and improve the management of trade credit among SMEs. Furthermore, credit policies must be structured and tightened up in order to increase the effectiveness of SMEs’ credit policies, especially focusing on the relevant credit components as set out in the credit policy of the SME. The recommendations also included that SMEs should, as far as possible, try not to prolong the payment owed to other SMEs and/or clients. Training and communication can also help SME owners understand the concepts of effectively managing trade credit. In addition, owners of SMEs should network by attending seminars.
Description
Dissertation (M.Com.(Business Mangaement))--University of the Free State, 2014
Keywords
Small business -- Management, New business enterprises -- Management, Economic development, Credit -- Management