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CHAPTER ONE
Introduction
1.1 Background of the Study 
In the business environment, trade credit is not a new thing. It has been in existence with business and has continued to develop with it. The complexity of modern business environment and the increased volume of transition have conferred on trade credit. According to Oluwi (1990), trade credit is a vital tool in the development of trade and industries. This important instrument, if granted unchecked can bring about disastrous effect on a company. According to Kishore (2004), trade credit is usually abused by buyer who fails to honour their own part of credit obligation by defaulting in payment. This situation is very common in the business world today and often creates apprehension on the usefulness of trade credit. Some company or business are so much afraid of granting trade credit to buyer to the extent that credit worth customers have been denied the opportunity of obtaining goods and services on credit resulting in both the supplier and purchaser loosing the benefit of trade credit. Those who have granted credit are afected by default in payment and suffering the adverse effect it has on their financial position. Defect in payment of debit generally bring about debt which can lead to legal bankruptcy of the company. Incidence of default in payment is not favourable to the development of trade and industry and does not indicate proper management and control of trade credit. To every firm or organisation, various finance alternatives are available such as short-term medium term and long-term sources of finance. According to Omolumo (2003), short-term source of finance, which include trade credit can simply said to be capital made available for a short period of time, ranging from one day to, say, twelve financial months. This type of short term fund is generally needed to manage the working capital of a business and, usually, it is financed with short-term borrowing. According to Pandey (2005), trade credit can simply refers to the credit that a customer gets from suppliers of goods in the normal course of business. According to Olubi (1990), defines that trade credit is extended by one company to another on the purchase and sales of goods and equipment. He also said that trade credit is one of the most important forms of short term finance in the economy.
1.2  Statement of Problem
Trade credit is not without its own problem in adequate trade management and control leads to bad debt, low profit.
- Distortion in production activities
- Excessive granting of credit.
- Increase in trade credit risk.
- Hindrance in the department of trade and industries. Also, if the opportunity of trade credit is not given to credit worth customer, the company may loose substantial sales which in turn affect their returns. Various bad debt that arises from trade credit given to the customers, if granted unchecked can bring about a disastrous effect on a company. So credit given to customer must be properly managed and checked so as to guide against default in payment.
1.3   Objectives of Study
Every action has a motive, no matter how remote; hence, there is a motive for embarking on this project work. The objective of this write up will be consider in many dimension one of which is the area of management of trade credit as short-term finance and control and planning of trade credit as short term finance. This project is therefore desired to meet the need for effective trade credit planning and control. It also aim in considering the meaning of trade credit and the importance of trade credit to both the sellers and buyers. Again, it is written in order to strike a balance between the risk arrived in trade credit and the benefit accruable. The need for management of trade credit planning for trade credit, function of trade credit department and manager and the credit control system.
1.4  Significance of Study
The finding of this study is useful to the following set of people. Management: it enables the firm to conduct a management audit to identify the management weaknesses of the customer’s business. Debtor: trade credit creates debtors (book debt) or accounts receivable. It is used as a marketing tool to maintain or expand the firm’s sales. Investors: a firm’s investment in accounts receivable depends on volume of credit sales and collection period. Student: this research wok will assist student in further research work on this topic and as a point of references.
1.5   Scope of  the Study
An attempt will be made in this paper to explain what is meant by management trade credit and its operations. Eort was made to spell the characteristics of trade credit and the objectives of management in short term finance. There will also be a discussion that link trade credit, profitability objectives and decision making together and how the combination can assist the management in planning and controlling.
1.6  Limitation of the  Study
It was the desire of the writer of this project to have an in-dept exploration into this research topic; however, certain factors may limit such desire. The most likely limiting factor may be the unco-operation attitude of the officials with regards to supply the information. Another lattices or limitation that can inhibit this study may be time and financial constraint which may be from both sides of researcher and respondents. However, this will not affect the validity of my findings, instead conclusion arrived at, will be generalized and extended to other similar organisations with little or no modification.
1.7   Research Hypothesis 
The project is embarked upon to prove either of the following sets of hypothesis;
Hypothesis one
H0: Trade credit management is a vital tool in the development of trade and industry
H1: Trade credit management is not a vital tool in the development of trade and industry.
Hypothesis two
H0: checked trade credit does not bring about a disastrous effect on a company.
H1: Unchecked trade credit brings about a disastrous effect on a company.
1.8   Definition of Terms
In the process of writing this research, these are some terminology’s that are used and peculiar to the topic. “Management and control of Trade credit as short–term finance in business organisation” which might be understood by readers of this project. The term and their definition are as follows.
Debtor: This is the person who owed money that is the person who purchase on credit.
Creditor: This is the person to whom money is owned, that is service rendered or sold to customer on credit. Bad Debt: a debt is said to be bad if it cannot be recovered and therefore written o to the profit and loss account.
Profitability: This is used to explain the performance of business so as to know whether it is visible or not.
Consumer Credit: This is the credit granted that are not for resale but for house hold consumption.
Cash Credit: This is concerned with borrowing money from bank and other institutional lenders to finance business activities.
Liquidity: Ability of a business to pay its short-term creditor to meet its current obligations.
Age of Debtors: This is the period for which debtor settle their account (debt).
Public Credit: This type of credit is used by various Government units such as Federal, State and local Government.
Accrued Expenses: This permit the firm to receive services before paying them.
Deferred Income: This represents the fund received by the firm for goods and services which it has agreed to supply in future.
Management: This is the process of doing something using resources to accomplish corporate objectives. Also according to Olaoye (2005), defines management as a set of people entrusted with a responsibility to accomplish certain objectives.
Control: this is concerned with the efficient use of resources to achieve previously determined objectives, or set of objectives.
1.9  REFERENCES
Olaoye, F. O, (2005): Management Accounting (First Edition), Ibadan, Aseda Publishing. Oluwi, G. B, (August, 1990): Financial Management (First Edition), Ibadan, Onibonoje Press and Book Industries. Omolumo, I. G. (2003): Financial Management in Nigeria, Lagos, Omolum Consult. 

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