Cash management and financial performance of small and medium business enterprises in Uganda; A case study: Cheap General Hardware

Abstract

The study was to examine the influence of cash management practices on the financial performance of SMEs. The study was guided by a number of objectives that is to say : To examine the effect of cash planning on performance; to assess the effect of liquidity management on performance; and to find out the influence of risk management on financial performance of the SMEs. The study took a descriptive research design and data was collected from both secondary and primary sources by use of questionnaires and observation for primary data and review of textbooks, journals and others while gathering secondary data. The study used 40 respondents who were purposively and randomly selected from the study population that comprised of employees from Cheap General Hardware. Findings revealed that the SME normally carry out its transaction according to the budgets, costs are always regulated to boost profit increase, the inventories are audited, records are normally taken, cash forecasts are used in budgeting process and immediate cash is normally acquired to meet higher demand. Findings also revealed that there are credit lines established to facilitate the costly running expenses in case of cash run out, employees of the business are trained on maximum utilisation of resources to avoid over purchase, cash floats are taken to the bank for miscellaneous use in the firm and huge transactions of the SME are made by bank payments as well in form of cheques and other notices. Further findings revealed that there is a positive strong relationship between cash management and financial performance of Cheap General Hardware with a significant value (r = 0.705 p 0.01). Assurance of Financial performance of the SME was revealed to be evident if there is increase in resource productivity, financial and operational efficiency, reduction in costs, greater revenue figures and customer retention reducing stock Further recommendation were also developed basing on the study findings such as employee training programs, proper record keeping, data management, increment on supervisory services and others.