Effects of cashflow management practices on business profitability of Small and Medium Enterprises at Narok Town.

Abstract

The cash flow management is the life-blood and nerve center of a business firm. The management of its components namely; the cash, receivables, inventory and payables in an effective manner will lead to enhancement of firm’s profitability. The purpose of this research was to determine effectiveness instilled by SMEs in managing cash flow components and suggest how they can manage inventory, cash and receivables effectively to realize maximum profit. The motivating factor behind this came from the fact that within the town there were so many SMEs and most of them did not care about cash flow management and they didn’t have a standard credit policy. The SMEs only run business and mostly focus on cash receipts and what their bank position is. However it is not known how these entrepreneurs manage their finances to come up with successful businesses that can stand test of time. The chapter two of the research will present the literature review relevant to this research and will bring out the theoretical concepts of cash flow management and summary of gaps to be filled. The conceptual framework will have components of cash flow management; cash, receivables and inventory as the independent variables and profitability as the dependent variable. Chapter three of the research will present the methodology to be adopted by the researcher, the research design; populations of 32 SMES in electronic and electrical business will be studied. The study will adopt a descriptive survey design to explore the study. Data will be collected mainly through questionnaires. Primary method of data collection will be used and preliminary discussion will be held with the representatives and owners of small and medium enterprises. In chapter four of this study graphs will be used to present the data collected for ease of understanding and analysis.