Financial Management Practices In Small And Medium Enterprises in Selected Districts In Western Uganda.

Abstract

This study was done to determine the extent of financial management practices in Small and Medium Enterprises(SMEs) in selected districts in Western Uganda. The objectives of the study were; to determine the extent of financial management employed by SMEs as to these dimensions:working capital management (cash management, accounts receivable management, inventory management practices), investment, financing, financial reporting and analysis and accounting information systems;The study used ex-post facto or retrospective and prospective designs together with descriptive design and descriptive comparative as well as correlation design. 335 questionnaires were distributed to respondents and were the ones used for analysis. The study found out that majority of SMEs owners (52%) in western Uganda are female, more than 69% of the SMEs owners are in their early adult hood and majority of the SMEs owners are high school leavers (30.1%), over 50% of the SMEs are sole proprietorship businesses and majority of the SMEs (42.4% have been in business between1-4 years. The findings further revealed that the extent of financial management is low among SMEs (Average Mean = 2.19). The Theory of  Pecking Order (Myers 1984) which states that Management has a preference to choose internal financing before external financing, was proven in this study in the aspects of SMEs using internally generated funds as compared to borrowed funds. The recommendations from the study included; the Ministry of Finance and Economic Planning, Bank of Uganda should provide a favourable platform for SMEs to access financing that can enable them to run their businesses at a reasonable cost of financing. ICPAU, ACCA Uganda, URA should sensitize the SMEs owners on the relevance of bookkeeping, financial reporting and analysis as well maintaining proper books of analysis.

Key Words: Financial Management, Small and Medium Enterprises (SMEs)