Financial planning and the financial performance of small and medium enterprises

Abstract

Small and medium enterprises have grown in importance in the global economy during the last couple of decades. Although SMEs are growing they face a range of challenges which work against their progress. Lack of financial knowledge has been a major setback to SMEs progress. Inefficient financial planning may damage SMEs performance complicate the difficulties of SMEs. The study sought to establish a relationship between financial planning and financial performance of SMEs .It was guided by the following objectives; to examine the relationship between cash management and SME performance, to establish the relationship between financing strategies and performance of SMEs, to examine the relationship between liquidity and SME performance The study adopted a cross sectional study design. Data was collected by use of questionnaires which were distributed to 44 respondents but 38 were obtained back. Findings indicated that there is a significant relationship between cash management and financial performance of SMEs, liquidity and financial performance as well as financing strategies and performance. The study recommends that SMEs should adopt the culture of financial planning to include drawing of financial statements