ABSTRACT

This study aims to assess the credit administration practices at Salvation Pharmacy in Buea, Cameroon. Credit administration refers to the processes and procedures involved in extending credit, monitoring credit accounts, and ensuring timely repayments. Effective credit administration is crucial for managing financial risks, ensuring liquidity, and maintaining operational stability, especially in small and medium-sized enterprises like pharmacies.

The study employs a case study approach, focusing on Salvation Pharmacy as a representative example of credit administration practices in the pharmaceutical industry in Buea. Data was collected through interviews with pharmacy staff, particularly those responsible for financial management, as well as through the analysis of financial records related to credit transactions. The study also uses structured questionnaires administered to customers of the pharmacy who have utilized credit services, providing insights into their experiences and challenges with the pharmacy’s credit system.

The research finds that credit administration at Salvation Pharmacy involves a formalized process, where credit is extended to regular customers, particularly for essential medicines. This practice helps to build customer loyalty and ensures access to medication for customers who may not have immediate cash availability. However, the system is largely informal and lacks structured credit risk assessment tools, which increases the risk of default.

One of the key challenges identified is the lack of a clear credit policy. The absence of written guidelines on credit limits, repayment schedules, and interest rates results in inconsistencies in credit approvals and collection efforts. This leads to delayed repayments, with some customers accumulating large debts over time, negatively impacting the pharmacy’s cash flow.

The study also highlights the inadequate monitoring of credit accounts. Salvation Pharmacy does not use automated or systematic methods to track outstanding credit balances, leading to a reliance on manual record-keeping, which is prone to errors. Without effective monitoring systems, the pharmacy faces difficulties in following up on overdue accounts, increasing the likelihood of bad debts.

Another issue identified is the lack of staff training on credit management. Employees tasked with administering credit have limited financial training, particularly in assessing creditworthiness or implementing strategies to reduce credit risk. This lack of expertise hinders the pharmacy’s ability to develop more robust credit control measures and creates a vulnerability to financial losses from unpaid debts.

Despite these challenges, the study finds that customers generally appreciate the flexibility of the credit system, which allows them to access medication during times of financial difficulty. Many customers reported that the credit system is one of the reasons for their continued patronage of the pharmacy, indicating that credit provision plays a key role in customer retention.

To address the identified challenges, the study recommends that Salvation Pharmacy formalize its credit policy, including establishing clear criteria for credit approvals, setting credit limits, and developing a standardized repayment schedule. Additionally, the introduction of credit risk assessment tools could help the pharmacy evaluate the creditworthiness of customers before extending credit, reducing the risk of defaults.

The study also suggests the implementation of automated credit tracking systems to improve the monitoring of outstanding balances. This would allow for more accurate and timely follow-ups on overdue accounts, improving cash flow and reducing bad debts. Training pharmacy staff on credit management practices is also recommended to enhance their ability to manage credit accounts effectively.

In conclusion, while Salvation Pharmacy’s credit administration practices offer valuable flexibility for customers, the lack of formal structures, monitoring tools, and staff training presents significant risks. By addressing these gaps, the pharmacy can enhance its credit management processes, reduce financial losses, and improve overall operational efficiency.

Keywords: credit administration, financial risk, credit management, pharmacy, customer loyalty, cash flow, credit policy, Buea.