Receivables Management and Cash Flow Adequacy in Trading Companies in Enugu State

Inadequate receivables management has been identified as a significant contributor to cash flow shortfalls in trading companies operating in Nigeria's informal and semi-formal markets, where credit transactions are prevalent but collection enforcement mechanisms are weak. This study investigated the relationship between receivables management practices and cash flow adequacy in trading companies in Enugu State. The study was anchored on the cash flow theory of the firm, which emphasizes the centrality of operating cash flow to business continuity and financial flexibility. A survey and documentary research design was adopted, with a population of 298 financial managers, credit controllers, and accountants in registered trading companies within Enugu metropolis. A sample of 170 was drawn using stratified random sampling. A questionnaire and company financial records served as data collection tools, and data were analyzed using Pearson correlation and multiple regression analysis. Findings revealed that average collection period, credit policy stringency, and accounts receivable aging review frequency were the most significant predictors of cash flow adequacy. Companies with collection periods exceeding 60 days consistently reported operating cash flow deficits. The study concluded that efficient receivables management is a critical determinant of cash flow health in trading companies. It was recommended that trading companies in Enugu State should adopt automated receivables tracking systems and implement tiered credit approval processes to reduce collection periods and improve liquidity.

Keywords: Receivables management, cash flow adequacy, trading companies, cash flow theory, credit policy