Submit your papersSubmit Now
For Enquiries: [email protected]
IIARD LogoIIARD

Effect of Cash Management Techniques on Performance of Small and Medium Enterprises (SMES) in Nigeria

Ayimaje Sule, Inyada Sunday Joseph, Iyodo Babayaro

Abstract

Small and Medium Enterprises SMEs in Nigeria are experiencing major problems in controlling their financial activities especially in cash projections, budgeting and receivables control. These problems result in inefficient operations, problems with liquidity, and usually poor financial decisions. The chief aim of the study is to analyze the impact of cash management methods on performance of small and medium enterprises in Nigeria. The research used a quantitative design study and regression analysis on the data that was gathered on 396 SME owners and managers in Nigeria. The SPSS 23 was used to analyze the data to establish the correlation between the financial management practices and the operational performance. Study findings indicate that cash forecasting, cash budgeting, and receivables management variables are all found to possess a statistically significant positive influence on operational performance of the SMEs. Precisely, cash forecasting (p = 0.003), cash budgeting (p = 0.002), and receivables management (p = 0.005) were all discovered to play a significant role in enhancing the operational results. The findings indicate that proper financial management practices are vital in improving liquidity, decision making as well as sustainable growth of SMEs. The study suggests using the following recommendations based on the results: the SMEs in Nigeria ought to focus on the implementation of their effective cash forecasting, and reinforce their cash budgeting exercises to new heights and improve their strategies in managing their receivables. The practices will enhance financial stability, decrease uncertainty, and lead to the operational success in the long term.

Keywords

SMEsCash ForecastingCash BudgetingReceivables ManagementOperational PerformanceFinancial Management.

References

Ayyagari, M., Demirgüç-Kunt, A., & Maksimovic, V. (2017). SME finance in emerging markets: A global perspective. Journal of Corporate Finance, 47, 1-18. https://doi.org/10.1016/j.jcorpfin.2017.07.003 Badamasi, S. (2023). The role of financial management practices in the performance of SMEs in Nigeria. International Journal of Business and Management, 11(2), 101-115. https://doi.org/10.5539/ijbm.v11n2p101 Benzing, C., & Chu, H. (2019). Entrepreneurial finance and performance: A comparative study of SMEs in developing economies. Journal of Small Business Management, 57(1), 136-156. https://doi.org/10.1111/jsbm.12447 Cassar, G. (2004). The financing of business start-ups. Journal of Business Venturing, 19(2), 261- 283. https://doi.org/10.1016/S0883-9026(03)00055-7 Chatterjee, S., & Kumar, A. (2020). SME financial management in emerging markets: The role of financial literacy and management practices. International Journal of Emerging Markets, 15(5), 877-896. https://doi.org/10.1108/IJOEM-10-2019-0638 Chenhall, R. H. (2023). Management control systems and performance: A review and extension. Accounting, Organizations and Society, 45, 54-72. https://doi.org/10.1016/j.aos.2023.102084 Cohen, J., & Bunker, L. (2014). Financial management and the success of SMEs: A case study analysis. International Journal of Financial Studies, 2(3), 211-225. https://doi.org/10.3390/ijfs2030211 Drury, C. (2013). Management and cost accounting (9th ed.). Cengage Learning. Feroz, A. (2019). The impact of cash flow management on business sustainability of SMEs in Africa. African Journal of Business and Economic Research, 14(2), 101-120. https://doi.org/10.5897/AJBER2019.0995 Gallo, A., & Villegas, S. (2016). The role of budgeting in SMEs: A study of small business owners. Journal of Small Business and Enterprise Development, 23(4), 1235-1249. https://doi.org/10.1108/JSBED-09-2015-0107 Ghosh, S., & Ranjan, R. (2018). Receivables management practices and firm performance: Evidence from SMEs in India. Journal of Finance and Accounting, 6(4), 123-137. https://doi.org/10.11648/j.jfa.20180604.11 Haruna, M. S., et al. (2020). The relationship between financial management practices and SME performance in Nigeria. African Journal of Business Management, 14(6), 94-101. https://doi.org/10.5897/AJBM2019.8951 I??k, M., & Giritli, H. (2019). Impact of receivables management on financial performance in Turkish SMEs. Journal of Economics and Finance, 43(1), 75-89. https://doi.org/10.1007/s12197-019-00430-0 James, M., et al. (2024). Small business financial management: An empirical investigation into practices and challenges in developing economies. International Journal of Entrepreneurial Behavior & Research, 30(2), 206-222. https://doi.org/10.1108/IJEBR-12- 2023-0539 Jorfi, S., et al. (2017). The impact of financial management on SME performance in Iran. Journal of Business Economics and Management, 18(6), 1378-1392. https://doi.org/10.3846/16111699.2017.1405797 Kinyanjui, M. W., et al. (2020). Financial management practices and SME performance: A case of Kenyan SMEs. Journal of African Business, 21(2), 181-196. https://doi.org/10.1080/15228916.2020.1716748 Lazaridis, I. (2016). Cash management and firm performance: Evidence from small and medium- sized enterprises in Greece. Journal of Accounting and Finance, 16(4), 55-67. https://doi.org/10.2139/ssrn.2864517 Lazaridis, I., & Tryfonidis, D. (2006). The relationship between liquidity and profitability: Evidence from the Athens Stock Exchange. Journal of Financial Management & Analysis, 19(1), 42-50. Molinero, M. A. (2023). Financial forecasting and SMEs' success: A longitudinal analysis in Spain. International Journal of Business Economics, 43(3), 74-85. https://doi.org/10.1108/IJBE-09-2023-0152 Musa, F. (2023). Impact of receivables management on SMEs' operational performance in Nigeria. African Journal of Business and Economic Research, 17(3), 99-115. https://doi.org/10.5897/AJBER2023.0213 Raheman, A., & Nasr, M. (2007). Working capital management and profitability: Case of Pakistani firms. International Review of Business Research Papers, 3(1), 279-300. Shin, H. H., & Soenen, L. (1998). Efficiency of working capital and corporate profitability. Financial Practice and Education, 8(2), 37-45. Sullivan, R., & Dooley, L. (2008). Financial management practices and SME performance in Ireland. Journal of Small Business and Enterprise Development, 15(4), 675-692. https://doi.org/10.1108/14626000810915765 Teece, D. J. (2024). Dynamic capabilities and strategic management: Organizing for innovation and performance. Oxford University Press

More Articles from JOURNAL OF ACCOUNTING AND FINANCIAL MANAGEMENT

Cashflow Management and the Performance of Commercial Banks in Nigeria

Author: Jeffrey Ayas Iyakonbogha, Clement E. Ozele

The Nigerian Code of Corporate Governance and Financial Performance of Deposit Money Banks in Nigeria

Author: i, Eneaniofu Daniel Mmaduakonam, ii, Azolike Nkiru Nkechi, iii, Emeter Patrick Okechukwu, iv, Okwor Emmanuel Ejimnkonye