Working capital management and financial performance of small and medium enterprises in Kampala Capital City Authority: a case study of Kawempe division urban council

Abstract

The study investigated the influence of working capital management on financial performance of Small and Medium Enterprises with in Kawempe Division, Kampala District. The general objective of the study was to examine the influence of working capital management on financial performance of Small and Medium enterprises with in Kawempe division , it was guided by four objectives ;assessing the influence of creditor management on the financial performance of small and medium enterprises, examining the influence of accounts receivables on the financial performance of small and medium enterprises, analyzing the influence of cash management on financial performance of small and medium enterprises and assessing the role of inventory management on financial performance of small and medium enterprises . A population of 250 employees from different small and medium sizes entities was targeted and a sample of 100 respondents was used. A simple random sampling technique was used and all the members of the finite population were given equal chances to be included in the sample since the target respondents were either engaged or had an idea about financial performance of small and medium enterprises, these were in a better position to respond to the research questions appropriately. This removed the possible bias that may have arisen as the result of research favoring some members of the population. Data was collected using Questionnaires as a research instrument. The study used an exploratory research design. A conclusion about the relationship of the variables found out that creditors management had a positive and significant (F=20.553, p- value <0.01) relationship with financial performance of small and medium enterprises with in Kawempe Division. Also it was revealed that accounts receivables management had a positive and significant (F=54.784, Sig level = 0.000) relationship with financial performance of small and medium enterprises with in Kawempe Division, Cash management was also presented and it established that there existed a positive significant (F=52.910, sig level = 0.000) relationship with financial performance of small and medium enterprises with in Kawempe Division. And lastly was the inventory management which showed a positive significant (F=70.69, p-value< 0.01) relationship with financial performance of small and medium enterprises with in Kawempe Division. The study recommended that working capital management affects the financial performance of Small and Medium Enterprises with positive significant relationship (F=23.095, p-value<0.01). The study recommends that Small and Medium Enterprises should manage their debts very well, manage their receivables, manage their cash and ensure that inventory retention is also well managed if they are to improve their financial performance