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ANALYSIS OF THE CREDIT MANAGEMENT IN KABUL SERENA HOTEL

Submitted By
Khatira Noori

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KARDAN UNIVERSITY KABUL

MAR, 2 0 1 7
ANALYSIS OF CREDIT MANAGEMENT IN KABUL SERENA HOTEL

Submitted by
Khatira Noori
Reg ; 302 – 1204001

Supervised by
Usman Ali
Chairman Research Committee Kardan University

SUBMITTED IN THE PARTIAL FULFILLMENT FOR THE
AWARD OF DEGREE OF BUSINESS ADMINISTRATION

TO

KARDAN UNIVERSITY KABUL

MAR, 2017

PROJECT APPROVAL FORM

The undersigned certify that they have read the following project report and are satisfied with the overall performance and recommend the report to the Faculty of business Administration for acceptance.
Project Report Title: Analysis of Credit Management in Kabul Serena Hotel

Submitted By: Abdul Khatira Noori Registration #: 302-1204001 Bachelor of Business Administration Specialization in Finance

Mr. Usman Ali

Mr. Qais Mohammadi

Mr. Usman Ali

DECLARATION FORM

I Khatira Noori daughter of Baz Ali Registration# 302-1204001 Student of Bachelor of Business Administration at the Kardan University Kabul, Afghanistan do hereby declare that the Project Report titled as
ANALYSIS OF CREDIT MANAGEMENT IN KABUL SERENA HOTEL

Submitted by me in partial fulfilment of BBA (Hons.) degree, is my own work, and has not been submitted or published earlier. I also solemnly declare that it shall not, in future, be submitted by me for obtaining any other degree from this or any other university or institution.

Signature: ________________________
Name: Khatira Noori

Dedication
I dedicate this humble effort to the Holy Prophet Muhammad (PBUH) and obviously to my Father Mother

A C K N O W L E D G E M E N T

All praises to ALLAH almighty who has blessed me with knowledge to accomplish the task of completing this thesis. This report is part of the coursework as student of BBA at the Kardan University without going in unnecessary detail. Finally this project has enhanced by the report has been prepared based on my findings while I was researching. Yet it was difficult to cover every aspect in full details without being judgmental. In the short span of 3months, I tried my best to do this research. I have also tried to include the wider scope of my study by shedding light on overall environment analyzing power and sense of observation.
I am very thankful to my respected supervisor Mr. Usman Ali. It is my worthy instructor’s kindness that I am at this level of knowledge.
Finally, thanks to my family especially my father and my mother. They always supported and encouraged me from the start of my studies from school up to now and friends for all the support and understanding during these three months writing my bachelor thesis.

Khatira Noori
TABLE OF CONTENT

Titles Page
Project Approval Form i
Declaration Form ii
Dedication iii
Acknowledgement iv

Table of content
Chapter – 1 Introduction
1.1 Background of the study 10-11
1.2 Objective of the study 12
1.3 Significance of the study 13
1.4 Scheem of the study 14-15

Chapter – 2 Literature Review
History of Credit Management analysis in Kabul Serena Hotel

2.1 Kabul Serena Hotel:
2.1.1 Features and Facilities 16
2.1.2 Guest Room Information 17-18
2.1.3 Recreational facilities 18
2.1.4 Food ; Beverage Facilities
2.1.5 Other Facilities 19
2.2 Literature Review
2.2.1 Introduction 19
2.2.2 Theoretical Literature Review 20
2.2.3 Financial Motives Theory 20
2.2.4 Operational Motives 21
2.2.5 Commercial Motives 22

Chapter- 3 Research Methodology
3.1 Introduction 23
3.2 Research Design 23
3.3 Population 24
3.4 Sample ; Sampling Techniques 24
3.5 Data Collection Instrument 24
3.6 Data Processing ; Analaysis 25

Chapter – 4 Analysis and Finding 26-44

Chaper – 5 Conclusion and Recommendations
5.1 Conclusion 45
5.2 Recommendation 46-47

Appendix
Questioner 48-52

References 53

CHAPTER ONE
INTRODUCTION
1.1 Background of the study
Credit management covers a diverse field of credit-related areas, from granting consumer credit requests to managing the credit options of large corporations to collecting delinquent debts. There are a variety of educational and career options in credit management.
Credit managers oversee the credit lending process for banks, credit card companies and other financial institutions that issue or deal with credit. Managers may develop credit rating criteria, define credit ceilings and oversee credit collection accounts. Both small and large financial institutions utilize credit management specialists, and those who work for smaller institutions are usually also responsible for assisting customers in filling out credit applications, responding to complaints made by customers and determining the company’s credit regulations. Credits managers can be found working in banks, credit card companies, credit unions, investment firms or in non-financial institutions that deal with consumer credit or investments, such as corporations, universities and hospitals.
Credit Risk Management
1.1.1 Credit Risk Management
Credit risk refers to the probability of loss due to a borrower’s failure to make payments on any type of debt. Credit risk management, meanwhile, is the practice of mitigating those losses by understanding the adequacy of both a bank’s capital and loan loss reserves at any given time – a process that has long been a challenge for financial institutions.
The global financial crisis – and the credit crunch that followed – put credit risk management into the regulatory spotlight. As a result, regulators began to demand more transparency. They wanted to know that a bank has thorough knowledge of customers and their associated credit risk. And new Basel III regulations will create an even bigger regulatory burden for banks.
To comply with the more stringent regulatory requirements and absorb the higher capital costs for credit risk, many banks are overhauling their approaches to credit risk. But banks who view this as strictly a compliance exercise are being short-sighted. Better credit risk management also presents an opportunity to greatly improve overall performance and secure a competitive advantage.
1.1.2 Challenges to Successful Credit Risk Management
• Inefficient data management. An inability to access the right data when it’s needed causes problematic delays.
• No group wide risk modeling framework. Without it, banks can’t generate complex, meaningful risk measures and get a big picture of group wide risk.
• Constant rework. Analysts can’t change model parameters easily, which results in too much duplication of effort and negatively affects a bank’s efficiency ratio.
• Insufficient risk tools. Without a robust risk solution, banks can’t identify portfolio concentrations or re-grade portfolios often enough to effectively manage risk.
• Cumbersome reporting. Manual, spreadsheet-based reporting processes overburden analysts and IT.
1.1.3 Best Practices in Credit Risk Management
The first step in effective credit risk management is to gain a complete understanding of a bank’s overall credit risk by viewing risk at the individual, customer and portfolio levels.
While banks strive for an integrated understanding of their risk profiles, much information is often scattered among business units. Without a thorough risk assessment, banks have no way of knowing if capital reserves accurately reflect risks or if loan loss reserves adequately cover potential short-term credit losses. Vulnerable banks are targets for close scrutiny by regulators and investors, as well as debilitating losses.
The key to reducing loan losses – and ensuring that capital reserves appropriately reflect the risk profile – is to implement an integrated, quantitative credit risk solution. This solution should get banks up and running quickly with simple portfolio measures. It should also accommodate a path to more sophisticated credit risk management measures as needs evolve. The solution should include:
• Better model management that spans the entire modeling life cycle.
• Real-time scoring and limits monitoring.
• Robust stress-testing capabilities.
• Data visualization capabilities and business intelligence tools that get important information into the hands of those who need it, when they need it.

1.2 Problem Statement
1.2.1 Uncollectibility of Extended Credit
Due to unstable security situation, it is very difficult to do business in Afghanistan. Especially in hospitality industry, the Kabul Serena Hotel faces many challenges on trying to get the maximum business by granting credit to its customers and the customers use this opportunity to get credit from Kabul Serena Hotel. But the collecting process of the payment from companies (Customer) takes more time. Kabul Serena Hotel always has problems in payment recovery and they have debt from many years ago, which is a large amount of money and a big problem for their staffs and hotel cash flow as well.

1.3 Objectives of the Research
? To find how to create an effective credit & collection Policies in Kabul Serena Hotel.
? To find out the effect of credit management in the profit and Loss of a business.
? To establish effective credit management for the betterment of financial performance of Kabul Serena Hotel.
? To suggest some good courses of actions for credit section of Kabul Serena Hotel.
? Establish how technology influences accounts receivables management in the hotel industry in Kabul Serena Hotel.
? Determine the effects of size of the organization in accounts receivables management in the hotel industry in Kabul.
? Establish the effects of marketing channels in accounts receivables management in the hotel industry in Kabul.
? Determine the effects of management structures in accounts receivables management in the hotel industry in Kabul.
? Determine how policies influence accounts receivables management in the hotel industry in Kabul Afghanistan.

1.4 Significance of the Study
? This research provide us that granting Credit to the customer is very beneficial for the expanding of our business as if we grant credit to our customer our customer will be more likely to buy our product or service, so if we grant credit to our customers it would be very difficult for us to recover our money from our customers, that is why it is very important to have a good credit management, so the main point of this research study is to provide information about the granting credit to customer, recovering the debt from our customers and minimizing the risk of bad debt.
? This study will be useful to the hotel industry in its management of accounts receivables which affects the working capital management and very often forces the hotel industry to seek costly alternative sources of finance. These alternative sources are either loans or overdraft facilities which would otherwise not be necessary, or would be required at reduced levels if the book values of the accounts receivables were reduced to minimal levels. This study will help in the identification of the factors most significant in the management of accounts receivables in the hotel industry to ensure the most effective and efficient management. This study can as well be used in other industries similar to the hotels in their management of accounts receivables. This study can help the hotel industry save heavy financing and staffing costs. This study can prompt researchers and scholars to further explore this area of receivables management in the hospitality industry.

1.5 Scheme of the study
This thesis is consisting of five chapters and each chapter is further divided in to sub-headings. Following is the research scheme:
Chapter 1:
Introduces the study and states the focus of the study, begins with background information regarding the problem under investigation. The Introduction will provide readers with a brief summary of literature and research related to the problem being investigated, and will lead up to the statement of the problem.
Chapter 2:
Chapter two is to provide the reader with a comprehensive review of the literature related to the problem under investigation. The review of related literature will greatly expand upon the introduction and background information presented in Chapter 1. This chapter may contain theories and models relevant to the problem, a historical overview of the problem, current trends related to the problem, and significant research data published about the problem.
Chapter 3:
Chapter three presents a discussion of the specific steps used in the literature review and collection of data for the study. This chapter generally begins with a restatement of the research problem (and usually includes accompanying hypotheses or research questions) and indicates the major sections to be included in Chapter 3. The information regarding methodology will be comprehensive and detailed enough to permit replication of the study by other researchers.

Chapter 4:
Chapter 4 provides results of data analyses and findings of the study, This chapter begins with an introduction (as do all chapters), which delineates the major sections to be included in the chapter, and may include a restatement of the research problem (and may include accompanying hypotheses or research questions).
Chapter 5:
Generally, this section summarizes the introduction, problem statement and hypotheses/research questions, literature review, methodology, findings and contains (will contain) a summary of the study and findings, conclusions drawn from the findings, a discussion, and recommendations for further study.

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CHAPTER TWO
LITERATURE REVIEW
2.1 Introduction
The Aga Khan Development Network (AKDN) is a group of private, international, non-denominational agencies working to improve living conditions and opportunities for people in the developing world.
The network’s organisations have individual mandates that range from the fields of health and education to architecture, rural development and the promotion of private-sector enterprise.
The Aga Khan Fund for Economic Development (AKFED) is an international development agency which promotes entrepreneurship in the private sector in specific regions of the developing world.
A for-profit institution, the Fund helps to build economically viable enterprises through strong equity participation combined with management and technical expertise and support.
AKFED companies promote sustainable economic development in South and Central Asia and sub-Saharan Africa with projects in industry, tourism, and financial services.
AKFED’s (Aga Khan Fund for Economic Development) involvement in tourism development in South Asia and East Africa takes place under the aegis of Tourism Promotion Services (TPS), with companies incorporated in Kenya, Tanzania, Zanzibar, Pakistan and Afghanistan.
Operating under the “Serena” brand name, Tourism Promotion Services owns and manages twenty three hotels in East Africa and Asia. The mandate of Tourism Promotion Services is to realize tourism’s potential in selected areas of the developing world, in an environmentally sensitive manner.
2.1.1 Kabul Serena Hotel
The Kabul Serena Hotel is excellently located in the centre of the Kabul city, close to all the Embassies, Ministries, and just 20 minutes from the airport. The hotel building is from the Soviet era, built some 50 years ago amid handsome gardens. Dominating a busy junction, it is in the city’s commercial centre, overlooking the Zarnegar Park.

The old building has undergone a phased rehabilitation, refurbishment and up gradation, to ultimately incorporate 177 luxurious rooms, which comprise of various categories of rooms & suites.
It also offers variety of restaurants, banqueting, business, conferencing, health facilities with an up-market shopping area, as well as a laundry shop and a pastry shop.
The hotel offers excellent facilities and to meet with some of the city’s needs for international standard accommodation and business facilities in a 5 star ambience.
2.1.2 Features and Facilities
2.2.1 Guest Room Information
01. ROOM CONFIGURATION
• 177 ROOMS ; SUITES
• 17 Suites
• 160 Standard Rooms (Including 18 Non Smoking Rooms)

02. CATEGORY OF ROOMS/ SUITES
Standard Rooms
Junior Suite
Executive Suite
Presidential Suite
2.1.3 Recreational Facilities
• Health Club
• Swimming Pool
• Gymnasium
• Steam Baths
• Sauna
• Jacuzzi
• Aerobic Room
• Massage Rooms

2.1.4 Food ; Beverage Facilities

• CAFÉ ZARNEGAR – COFFEE SHOP
? 104 Covers capacity at a time
? Multi-Cuisine and all day dinning ala carte
? Opens from 0630 to 2200 hours with three times buffet

• WILD RICE – SOUTH EAST ASIAN RESTAURANT
? 80 – 90 Covers capacity at a time
? Serving dishes from Thailand, Indonesia, Singapore, Malaysia, Japan, China and Vietnam
? Dinner Timings: 1830 to 2200 hours Except Fridays

• ROOM SERVICE
? 24 hours
? Selection from the menus of various restaurants

• THE CHAR CHATA
? 35 to 40 Covers
? Opens from 1100 to 2400 hours
? A wide variety of soft drinks and juices

• RESIDENTS’ LOUNGE
? Only for Resident Guests
? 40 Covers
? 0700 to 2130 hours

• SERENA PASTRY & BAKERY SHOP
? 0700 to 2000 hours

• BANQUETS:
? Eight meeting halls with different capacity
? Offering Conference facilities for up to 350 people
? Banquet facilities for up to 1000 people
2.1.5 Other Facilities
• Business Center
• Boutique
• Retail Shops ( Gift shop, Laundry shop, Pastry shop)
• Concierge Service

2.2 Introduction
This chapter reviews the literature advanced in the area of accounts receivables. The chapter starts by elaborating the theoretical framework and covers the individual theories in the area of accounts receivables and then illustrates the conceptual framework of the study after which the next section reviews the empirical research done in the area.

2.3 Theoretical Literature Review
A theory is a formal, testable explanation of some events that includes explanations of how things relate to one another. A theory can be built through a process of reviewing previous findings of similar studies, simple logical deduction, and/or knowledge of applicable theoretical areas at hand (Zikmund, Babin & Griffin, 2011). They are systematic grouping of interdependent concepts and principles that give a framework to, or tie together, a significant area of knowledge as scattered data are not information unless the observer has knowledge of the theory that will explain relationships (Olum, 2004). According to Trochim (2006) Aguilar (2001), and Tormo (2006), a theoretical framework guides research, determining what variables to measure, and what statistical relationships to look for in the context of the problems under study.
2.3.1 Financial Motives Theory
According to financial motives, firms benefiting from an easy access to credit markets are able to use this borrowing capacity and act as financial intermediaries in favour of firms that suffer from limited access to credit (Emery, 1984; Schwartz, 1974). Suppliers may be involved in credit activity as they hold a comparative advantage over traditional lenders in the resolution of information asymmetries. The supplier may have an advantage over traditional lenders in investigating the credit worthiness of his clients, as well as a better ability to monitor and force repayment of the credit. This may give him a cost advantage over financial institutions in offering credit to a buyer for an early exposition of the financing advantage theory of trade credit (Schwartz, 1974). There are at least three sources of cost advantage.
The supplier may visit the buyer’s premises more often than financial institutions would. The size and timing of the buyer’s orders also give an idea of the condition of the buyer’s business. The buyer’s inability to take advantage of early payment discounts may serve as a tripwire to alert the supplier of deterioration in the buyer’s creditworthiness. While financial institutions may also collect similar information, the supplier may be able to get it faster and at lower cost because it is obtained in the normal course of business (Smith, 1987). The theory only applies if we accept the assumption that financial markets are imperfect and that some buyers have an unsatisfied demand for bank and other institutional finance. Differences in size of firm, market structure or type of industry, the amount of liquid assets, which firms may accumulate, imperfections in the capital markets, and a variety of other institutional phenomena are reasons for the failure of the financial market to operate efficiently.
2.3.2 Operational Motives Theory
The operational motive (Emery, 1987) stresses the role of trade credit in smoothing demand and reducing cash uncertainty in the payments (Ferris, 1981). In the absence of trade credit, firms would have to pay for their purchases on delivery. This makes it possible to reduce uncertainty about the level of cash that needs to be held to settle payments (Ferris, 1981) and provides more flexibility in the conduct of operations, since the capacity to respond to fluctuations is provided elsewhere (Emery, 1984, 1987). This was supported by Long, Malitz ; Ravid (1993), who found that firms with variable demand granted a longer trade credit period than firms with stable demand. The existence of sales growth in a firm is also a factor that positively affects the demand for finance in general, and for trade credit in particular. Consequently it should be expected that firms with greater increases in sales will use more trade credit in order to finance their new investment in current assets.
2.3.3 Commercial Motives Theory
According to the commercial motive, trade credit improves product marketability (Nadiri, 1969) by making it easier for firms to sell. Trade credit can be used as a form of price discrimination by firms, according to whether delays in payment are allowed or not (Brennan, Maksimovic ; Zechner, 1988; Mian ; Smith, 1992). In this respect, Smith (1987) pointed out that suppliers can transmit information about the quality of their products by agreeing credit terms that allow their customers a period of evaluation. Lee ; Stowe (1993) argued that trade credit is the best way of guaranteeing products. Long, Malitz ; Ravid (1993) found that smaller and younger firms grant more trade credit than firms with a more consolidated reputation in the market. Firms use trade credit to signal the quality of their products. More recently, Pike, Cheng, Cravens (2005) demonstrated that, in the US, UK and Australia, trade credit can be used to reduce information asymmetries between buyers and sellers.
Payment on delivery is an extremely inefficient practice for most firms, particularly when deliveries are frequent. Many firms operate Just-in-Time stock policies, sometimes requiring twice daily deliveries. Operating inefficiencies would arise, particularly for larger firms, were the buyer to make separate payment transactions for each delivery rather than deal with the whole month’s delivery in a single payment transaction.

CHAPTER THREE
RESEARCH METHODOLOGY
3.1 Introduction
This chapter provides details about the methodology adopted to assist in achieving the research objectives. According to Newing (2011), a research methodology is concerned with what you will actually do in order to address the specific objectives and research questions you have developed.
This involves deciding on a research design structure, choosing the specific methods and developing a sampling strategy. It also involves describing what analyses to be carried out. This chapter covers research design incorporating type of research, population, sampling technique, sample size, instruments, pilot test and data analysis.

3.2 Research Design
Newing (2011) states that the term ‘research design’ is used both for the overall process described above (research methodology) and also, more specifically, for the research design structure. The latter is to do with how the data collection is structured. According to Lavrakas (2008), a research design is a general plan or strategy for conducting a research study to examine specific testable research questions of interest. Available research strategies include experiment, survey, case study, action research, grounded theory, ethnography and archival research.
The study adopted a descriptive survey design with experiential learning. Truth and meaning comes into existence in and out of engagement with the realities of the world. There is no meaning without a mind. Different people may construct meaning differently even in relation to the same phenomena (Crotty, 1998).

3.3 Population
Newing (2011) describes a population as the set of sampling units or cases that the researcher is interested in. According to Kothari (2004), a population refers to all items in any field of inquiry and is also known as the ‘universe’. The population of this study is 20 employees working in finance department of Kabul Serena Hotel Afghanistan which is 5 Star Hotel in Afghanistan.

3.4 Sample and Sampling Technique
A sample is a set of individuals selected from a population and is usually intended to represent the population in a research study (Neuman, 2000). Therefore the goal of a research is to examine a sample and then generalize the results to the population. How accurately we can generalize results from a given sample to the population depends on the representativeness of the sample.
This study used random sampling procedure to identify the sample units and a sample of 20 employees working in finance department of Serena was selected.

3.5 Data Collection Instruments
Data collection methods used included questionnaires and secondary data collection guide. Data was analyzed quantitatively and qualitatively and presented descriptively and illustrated by use of tables and charts. Kothari (2004) defines a questionnaire as a document that consists of a number of questions printed or typed in a definite order on a form or set of forms.
3.5.1 Primary Data Sources:
The study used questionnaire for collection of primary data and target respondent were the employees of finance department working directly or indirectly with credit policy and management of Serena Hotel.
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3.5.2 Primary Data Sources:
The study also relied on secondary sources of data collection for the purpose of getting an understanding of credit management policies, procedures, limitations, recent trends etc. For focused purposed different research papers, magazines and business articles were used in the study from of rated publishers.

3.6 Data Processing and Analysis
Data Analysis is the processing of data collected to make meaningful information out of them (Sounders, Lewis and Thornhill, 2009). This is necessary as raw data convey little meaning to most people. After data was obtained through questionnaires and secondary sources, it was prepared in readiness for analysis by editing, handling blank responses, coding, categorizing and keyed in using Microsoft excel package.

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CHAPTER FOUR
RESULTS AND DISCUSSION
4.1 Introduction
This chapter deals with the analysis of data. The data analysis is in harmony with the specific objectives where patterns were investigated, interpreted and inferences drawn on them.

4.2 Demographic Information
The researcher has find out that the total number of questionnaires that were distributed were 20 and it has been given to 16 males that makes 80% of it and 4 females that makes 20% of the total. They are currently working for the mentioned organization (Kabul Serena Hotel) in Finance Department.

4.2.1 Response Rate
The number of questionnaires, administered to all the respondents, was 20 questionnaires were properly filled and returned from the finance employees of Kabul Serena Hotel.
Table 4.2.1: Response Rate
No Gender Frequency Percentage
A Male 16 80
B Female 4 20
Total 20 100

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Figure 4.2.1

Gender of the Respondents
The respondents were asked to indicate their gender. Table 1: shows that majority (80%) of the respondents was male and 20% were female. The findings imply that the hotel industry is a male dominated field. According to this chart we noted that in spite of women being major actors in Afghanistan’s economy, and notably in agriculture and the informal business sector, men dominate in the formal sector citing the ratio of men to women in formal sector as.
Table 4.2.2: Age Bracket
No Age Frequency Percentage
A 18-24 3 15
B 25-30 9 45
C 31-40 6 30
D 41-50 2 10
E Over 50 0 0
Total 20 100

Figure 4.2.2

Age Bracket of the Respondents
The respondents were asked to indicate their age brackets. Results in Table 2 revealed that majority (45%) of the respondents were aged between 18 to 24 years, 30% were aged between 25 to 30 years, 15% were aged between 10 to 20 years, and 10% were aged between 41 to 50 years. the findings imply that most of the respondents were at their career peak. The findings also imply that a significant number of the respondents were youths hence young work force which can cope with long working hours in the hotel industry.

Table 4.2.3: How long have you worked in the Serena?
No years Period Frequency Percentage
A 1-3 years 3 15
B 4-6 Years 8 40
C 7-9 Years 5 25
D 10-15 Years 3 15
E Over 15 Yrs 1 5
Total 20 100.0

Figure 4.2.3

Period Worked in Hotel
The respondents were asked to indicate the length of period they have worked in the Kabul Serena Hotel. Table 3 illustrates that 40% of the respondents had worked for a period of between 4 to 6 years, 25% indicated 7 to 9 years .This also indicates that 15% of the respondents have worked in the Kabul Serena Hotel for between 1 years and 3 years. And 15% indicated over 15 years. The findings imply that the respondents had worked long enough in the hotel industry and hence had knowledge about the issues that the researcher was looking for.
Table 4.2.4: How long you have been working with account receivable?
No Period in receivable section Frequency Percentage
A 1-3 Years 7 35
B 4-6 years 8 40
C 7-9 Years 5 25
D 10-15 Years 0 0
E Over 15 Years 0 0
Total 20 100

Figure 4.2.4

Period Working With Accounts Receivables
The respondents were asked to indicate the period they have been working with accounts receivables. Results in Table 4 illustrate that 40% of the respondents indicated between 4 to 6 years, 35% indicated 1 to 3 years and 25% indicated 7 to 9 years. The findings imply that the respondents had worked long enough in the accounts receivables hence accurate responses.

Table 4.2.5: How many hours each week do you work with issues related to accounts receivables?

No Hours Frequency Percentage
A 30 Hours 1 5
B 20 Hours 6 30
C 15 Hours 2 10
D 10 Hours 5 25
E 5 Hours 6 30
Total 20 100

Figure 4.2.5

Average Hours Worked
The study sought to find out how many hours (average) each week do the respondents work with issues related to accounts receivables. Table 5 shows that an equal share of 30% of the respondents indicated 20 hours and 5 hours per week, 25% indicated 10 hours and 10% indicated 15 hours per week.
Table 4.2.6

Accounts receivables 1% -20% 21% -40% 41% -60% 61% -80%
Reminder letter 15% 40% 40% 5%
Reminder phone calls 5% 30% 50% 15%
Credit control system 50% 25% 10% 15%
Sending invoices 5% 0% 30% 65%
Sending interest invoices 50% 35% 5% 10%

Accounts Receivables Tools
The respondents were asked to indicate how much they work with the different aspect of accounts receivables. Table 6 indicates that 40% of the respondents used reminder letters extensively between 21-40%,40% of the respondents used reminder letters extensively between 40-60%, 50% of the respondents indicated they used reminder phone calls extensively, 50% indicated they used credit control to a lower percentage. 65% percent indicated that they sent invoices to a greater extent and 50% indicated that they sent interest invoices between 1% to 20% percentages. The findings imply that the hotel management used various accounts receivables tools in reminding their clients. These are letters; phone calls, sending invoices and a little sending interest invoices.

Table 4.2.7: What term of payment do you give to your most important customers?

No Important customer Term of payment Frequency Percentage
A 14 days 2 10
B 30 days 6 30
C 60 days 10 50
D 90 days 2 10
Total 20 100

Figure 4.2.7

Payment Terms for Important Customers
The study sought to establish the terms of payment the respondents allow to their most important customers. Results in Table 7 shows that 50% of the respondents indicated 60 days, while 30% indicated 30 days and 10% indicated 14 and 90 days. The findings imply that the customers were given enough duration to clear their debts.

Table 4.2.8: What term of payment do you give to your other customers?

No Other customer Term of payment Frequency Percentage
A 14 days 8 40
B 30 days 9 45
C 60 days 3 15
D 90 days 0 0
Total 20 100

Figure 4.2.8

Payment Terms for Usual Customers
The study sought to establish the terms of payment the respondents allow to their usual customers. Results in Table 8 shows that 45% of the respondents indicated 30 days, while 40% indicated 14 days and 15% indicated 60 days. The findings imply that the customers were given enough duration to clear their debts.

Part B:
4.3 Account Receivable
Table: 4.3.1
Statement Strongly disagree Disagree Neutral Agree Strongly
agree Liker
Mean
The company accounts receivable
processes are influenced by
written Manuals. 15% 40% 25% 15% 5% 0.51

Figure 4.3.1

This section tested the knowledge of the respondents on accounts receivables in Hotels. Table 1 show that 40% disagreed that the company granted credit on accounts receivables as influenced by written manual.

Table 4.3.2
Statement Strongly
disagree Disagree Neutral Agree Strongly
agree Liker Mean
Employee can influence the
Customers’ term of Payment. 35% 35% 15% 10% 5% 2.15

Figure 4.3.2

This section tested the knowledge of the respondents on accounts receivables in Hotels Table 2 shows that 35% disagreed that the employees can influence the customers’ term of payment and 35% is also strongly disagree that the employees can influence to customers’ term of payment.

Table 4.3.3
Statement Strongly
disagree Disagree Neutral Agree Strongly
agree Liker Mean
Employee use earlier experience
when approving credit on
accounts receivables.

0%

5%

40%

45%

10%

3.6

Figure 4.3.3

This section tested the knowledge of the respondents on accounts receivables in Hotels. Table 3 shows that 45% agreed that employee used earlier experience when granting credit on accounts receivables. And 45% is in neutral Position for this point.

Table 4.3.4
Statement Strongly disagree Disagree Neutral Agree Strongly agree Liker Mean
Accounts receivable affect the profit of the
company. 0% 0% 5% 60% 35% 4.3
Mean 2.64

Figure 4.3.4

Accounts Receivables Management Descriptive Analysis
This section tested the knowledge of the respondents on accounts receivables in Hotels. Table 4 shows 60% agreed that accounts receivables affected the profit of the company. The mean score for the responses was 2.64 which indicate that many employees agreed to the statements regarding accounts receivables procedures.
The findings imply that the hotels accounts receivables were influenced by written manuals indicating the terms of customer payment and the policies to be followed when dealing with customers. This further implies that hotels value accounts receivables because they affect profitability especially during the low seasons.
Part C
4.4 Management Policies on account receivable management.

Table 4.4.1

Statement Strongly
disagree Disagree Neutral Agree Strongly
agree Liker
Mean
Are there written policies and
internal operating procedures that
have been approved by the
governing body or senior
management on accounts
receivable? 0% 45% 25% 30% 0% 2.85

Figure 4.4.1

The first objective of the study was to determine the effect of policies on accounts receivables Management in Kabul Serena Hotel. Results in Table 1 shows that 45% of the respondents is disagreed that there are written policies and internal operating procedures that have been approved by the governing body or senior management on accounts receivables,

Table 4.4.2

Statement Strongly
disagree Disagree Neutral Agree Strongly
agree Liker Mean
Are roles and responsibilities
clearly defined in writing and communicated regarding the
issue on accounts receivables management. 0% 5% 70% 25% 0% 3.8

Figure 4.4.2

Results in Table 2 shows that 70% of the respondents is in neutral position that roles and responsibilities are clearly defined in writing and communicated regarding issues on accounts receivables management.

Table 4.4.3
Statement Strongly
disagree Disagree Neutral Agree Strongly
agree Liker
Mean
Are procedures in place to ensure that billings are prepared and sent as soon
as possible after the sale of goods or provision of services, not less
frequently than monthly unless
another interval is specified in a
written contract?

0%

0%

35%

45%

20%

3.85

Figure 4.4.3

. Results in Table 3 shows that 45% of the respondents agreed that there are procedures in place to ensure that billings are prepared and sent as soon as possible after the sale of goods or provision of services, not less frequently than monthly unless another interval is specified in a written contract.
And agreed that remittance advices and billings are maintained to support accounts receivable entries in the general ledger,

Table 4.4.4
Statement Strongly
disagree Disagree Neutral Agree Strongly
agree Liker Mean
If subsidiary accounts receivable
journals are maintained, are they
reconciled at least monthly with
the general ledger.
0% 0% 5% 65% 30% 4.25

Figure 4.4.4

Results in Table 4 shows that, 65% strongly agreed that subsidiary accounts receivable journals are maintained and reconciled at least monthly with the general ledger. And 30% is strongly agreed for this point.

Table 4.4.5
Statement Strongly disagree Disagree Neutral Agree Strongly
agree Liker
Mean
Are cash receipts properly and
promptly documented, posted
to accounts receivable records, and
deposited.

0%

0%

15%

45%

40%

4.25

Figure 4.4.5

Results in Table 5 shows that, 45% agreed that cash receipts are properly and promptly documented, posted to accounts receivable records, and deposited. And 40% is strongly agreed for this point which is mention.

Table: 4.4.6

Statement Strongly disagree Disagree Neutral Agree Strongly
agree Liker
Mean
Are there Separate person for
different duties to ensure that
different individuals prepare billings collect and deposit
cash and reconcile accounts receivable and cash receipts
entries to the general ledger. 0% 0% 5% 55% 40% 4.35
Mean 3.89

Figure 4.4.6

Results in Table 6 shows that 55% agreed that the hotel has adequate segregation of duties to ensure that different individuals prepare billings, collect and deposit cash, and reconcile accounts receivable and cash receipts entries to the general ledger .Finally the mean score for the response for this section was 3.89 which indicates that majority of the respondents agreed that management policies was a key determinant of accounts receivables.
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CHAPTER FIVE
CONCLUSIONS AND RECOMMENDATIONS
5.1 Conclusions
Based on the objectives and the findings of the study the following conclusion can be made.
1: Technology and Accounts Receivables Management
Technology was found to determine accounts receivables management in hotel industry in Afghanistan. The quality of technology facilities embraced at any hotel is very important because it influences accounts receivables management and hence improves the hotel performance at large.
2: Size of Organization and Accounts Receivables Management
Size of the organization had a positive effect on accounts receivables management in the hotel industry in Afghanistan. It can be concluded that the larger the hotel the higher the accounts receivables to be managed hence the need to have a strong management structures and policies in place. The study concludes that size of the organization is statistically significant in explaining accounts receivables in the hotel industry in Afghanistan.
3: Marketing Channels and Accounts Receivables Management
Marketing channels had a positive effect on accounts receivables management. It can therefore be concluded that competition was the major reason for granting trade credit in hotels and receivables help in attracting potential customers and retaining the older ones at the same time by weaning them away from the competitors. It was also possible to conclude that firms use trade credit instead of direct price reductions to push sales in periods when monetary conditions are unfavorable hence the hotels have also opted to trade credit.
4: Management Structures and Accounts Receivables Management
Management structures had an effect on accounts receivables management at the hotel industry in Afghanistan. It can therefore be concluded that there was an effective system for managing accounts payable and receivable and a monthly operating budget in hotels and the management was concerned with providing additional information to improve the clarity and comprehensiveness of the company’s accounts receivables.
5: Management Policies and Accounts Receivables Management
Management policies were a key driver to accounts receivables management in hotel industry in Afghanistan. It was possible to conclude that the hotels had put into place strict management policies and internal operating procedures approved by the senior management on accounts receivables. The policies are well written down and roles and responsibilities clearly defined and communicated on accounts receivables management. The study further concludes that management policies affect accounts receivables; if the policies are well governed they affect accounts receivables positively.

5.2 Recommendations
Based on the results, findings and conclusions the following recommendations have been deciphered.
It was found that management policies influenced accounts receivables management. It is recommended to the hotel management to ensure that the hotel has put in place policies and procedures to be adhered to during trade credit. The hotel management is also urged to ensure that there are standardized and written manuals with the policies regarding trade credit and its management.
Technology was found to be statistically significant in explaining accounts receivables. The study recommends the hotel management to ensure that the hotel is upgraded with the technological changes taking place in the whole world. It is recommended that the management conducts a market survey of the technological facilities in use in other hotels so as to minimize high competition from the competitors.
Management structures had an effect on accounts receivables management at the hotel industry in Afghanistan. It is recommended to the hotel management that they ensure the staff offers high quality of service so as to attract and retain their customers. It is also recommended that all employees should have a sense of urgency in treating and serving the clients, this will ensure that the clients are satisfied with the service and will always come back. The hotel management should ensure there are clear management structures on how commands are channeled to ensure that each and every function of the hotel is managed appropriately.
Size of the organization had a positive effect on accounts receivables management in the hotel industry in Afghanistan. It is recommended to the hotel management ensures that they have an aged accounts receivables report to help in the management of accounts receivables and should only issue trade credit mainly to big company/organization. Such agreement of credit terms helps in honoring the terms of credit and to avoid unnecessary follow ups by the hotel management.
The study also recommended that hotel management should ensure that they employ workers who can follow orders with minimum supervision and reward them well in terms of compensation to avoid cases of theft, complaints from customers and endorse a heavy penalty for any employee who provide substandard service.

Questionnaire

This questionnaire is a meant to collect data regarding the management of accounts receivables in Serena Hotel.

Section A: General Information

1: Respondent Particulars

Gender: Male Female

1. Age Bracket (tick as appropriate)

i) 10-20 ii) 21-30 iii) 31-40
iv) 41-50
v) Over 50

2. How long have you worked in the Serena (tick as appropriate)

a) 1-3 yrs d) 10-15 yrs

b) 4-6 yrs

e) Over 15 yrs

c) 7-9 yrs

3. For how long have you been working with accounts receivables or similar in

the company?

a) 1-3 yrs d) 10-15 yrs

b) 4-6 yrs

c) 7-9 yrs

e) Over 15 yrs

4. How many hours (average) each week do you work with issues related to accounts receivables?_ _ hrs (indicate no. of hrs

a) 30 hours d) 10 hours

b) 20 hours e) 5 hour

c) 15 hours

5. How much do you work with the different aspect of accounts receivables?

No Statement
1% – 20%
21% – 40%
41% – 60%
61% – 80%
1. Reminder Letters
2. Reminder Phone calls
3. Credit control system
4. Sending Invoices
5. Sending interest invoices
6. What term of payment do you give to your most important customers?
a) 14 days

b) 30 day

c) 60 days

d) 90 days

7. What term of payment do you give to your other customers?
a) 14 days

b) 30 days

c) 60 days

d) 90 days

Section B: Accounts Receivables

This section lists the accounts receivables procedures used by Serena. Please tick as appropriate in the boxes using a tick (?) or cross mark (x).

No
Statement Strongly
disagree
Disagree
Neutral
Agree Strongly
agree
1 2 3 4 5
1. The company accounts receivables processes are influenced by written manuals
2. Employees can influence the customers’ term of payment
3. Employee use earlier experience when approving credit on accounts receivables
4. Accounts receivables affect the profit of the company

Section C: Effect of Management Policies on Accounts Receivables Management

This section has statements regarding the effect of policy’s on management of accounts receivables of Serena. Kindly respond with the response that matches you opinion. Please tick as appropriate in the boxes using a tick (?) or cross mark (x).
No Statement
Strongly
disagree
Disagree
Neutral
Agree
Strongly
agree
1 2 3 4 5
1. Are there written policies and internal operating procedures that have been approved by the governing body or senior management on accounts receivables?
2. Are roles and responsibilities clearly defined in writing and communicated regarding the issue on accounts receivables management?
3. Are procedures in place to ensure that billings are prepared and sent as
soon as possible after the sale of goods or provision of services, not less frequently than monthly unless another interval is specified in a written contract?
4. If subsidiary accounts receivable journals are maintained, are they reconciled at least monthly with the general ledger?
5. Are cash receipts properly and promptly documented, posted to accounts receivable records, and deposited?
6. Are there separate person for different duties to ensure that different individuals prepare billings, collect and deposit cash, and reconcile accounts receivable and cash receipts entries to the general ledger?

No Statement Strongly
disagree Disagree
Neutral
Agree Strongly
agree
1 2 3 4 5
7 Do bank deposit slips have the official depository bank number pre-printed on the document and are checks deposited noted on the deposit slip by maker and amount?

Thank you for taking your time

?
Reference:
Brennan M. J., Maksimovic, V., ; Zechner, J. (1988). Vendor financing. The Journal ofFinance, 5, 1127-1141
Doug,M. and Scott, W.R. (2004). Organizations and Movements. In Social Movements and Organization Theory, xx-xx, Gerald Davis, Doug McAdam,
W. Richard Scott, and Mayer Zald. New York: Cambridge University Press
Emery, G. (1984). A pure Financial Explanation for Trade Credit. Journal of Financial and Quantitative Analysis, 9, 67-70.
Ferris, J.S, (1981). A Transactions Theory of Trade Credit Use. Quarterly Journal of Economics, 96, 243–270.
Long, H., Malitz, B. ; Ravid, S. (1993). Trade Credit, Quality Guarantees, and Product Marketability. Financial Management, 22(4), 117–127.
Meyer, J.W. and Rowan, B. (1991). Institutionalised Organisations: Formal Structures as Myth and Ceremony. American Journal of Sociology, Vol. 83, No. 2, 340 -363.
Schwartz, R.A. (1974). An economic model of trade credit. Journal of financial and quantitative analysis, 9, 643-657
Smith, J.K. (1987). Trade Credit and Informational Asymmetry. Journal of Finance 42, 863-872.
Zikmund, C., Babin, J. B., Carr, J. C. ; Griffin, M. (2011). Business research methods (8thEd). Boston, United States: South-Western College Publishing
R.M.V. Bass (1991) Credit management: how to manage credit effectively and make a real, UK:
Hope Services (Abingdon) Ltd.

Altman, E. and Saunders, A., (1997), „Credit risk management: Developments over the last 20 years?, Journal of Banking and Finance, Vol. 21, No.11-12, pp.1721-1742

Caouette, J., et al, (1998), Managing credit risk: The next great financial challenge, John Wiley and Sons Inc.

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