Current Assets Management Practices of Small And Medium Enterprises in Kenya [MBA Thesis a Ccompanied by a CD-ROM] PDF Download

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Languages : en
Pages : 71

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Book Description
The purpose of this study which was to investigate the current asset management practices of small and medium enterprises in Nairobi County. The research was guided by the following research objectives: firstly to determine the cash management practices of SMEs; secondly to ascertain the account receivables management practices of SMEs; finally to examine the inventory management practices of SMEs. Descriptive research design was adopted due to the population under study. Stratified random sampling was used because the population can be segregated into several mutually exclusive subpopulations, or strata therefore, it was easier to make inferences on the specific groups of the population because the groups share attributes or characteristics. There were five strata representing sectors. The first represented agriculture sector, the second was the industry and manufacturing, the third one was technology, the fourth one hospitality and the final one the energy sector. Data was collected using a structured questionnaire while analysis was done using Statistical Package for Social Sciences (SPSS) and spreadsheet and presented by way of figures and tables. In terms of findings, the study revealed that The SMEs used mostly used their own cash sources to finance their business. Most of the SMEs do not regularly set cash targets for their business. In the event of cash shortages the financial institutions are mostly used in order to plug this gap. The SMEs are ambivalent on the need of budgeting their cash. Furthermore the SMEs used the banks as a source of both storage and source of cash. All SMEs record their daily cash transactions. Finally, the surplus cash generated by the SMEs is re-invested back into the business. More than half of the SMEs sell their products and services on credit. The average collection period is 30 days, although this varies depending on the individual agreements between the SMEs and their buyers. The fear of credit defaults makes some of the SMEs not to sell their goods and services on credit. The SMEs also use formal credit investigation to determine the credit worthiness of their debtors. They check the debtors? credit history with their business and also cross reference with other businesses. In case of a default most of the SMEs take legal action against the defaulters or cease from supplying them with their products and services. The SMEs record the credit history on IOUs and delivery notes The SMEs source their inventory both in the local market and in the foreign market with some using a hybrid of the two markets. In order to prevent large inventory holding costs most SMEs do not stock-pile their inventories. Inventory record is well entrenched practice with these SMEs. Some SMEs conduct regular stock takes, with the stock take on average happening periodically on a monthly basis. The SMEs lack re-order level policies to monitor the inventory re-order levels. In conclusion the findings from this study show that most of the investors conformed to the conventional liquidity management mechanisms of business institutions. They did this by safeguarding financial records, supplementing cash shortages with loans from the bank, saving profits on a daily basis and spending within their financial capability. Investors also use credit sales geared to promote growth in their industries. Furthermore buying of stocks from local companies at moderate quantities and regular stock-taking were the strategies used by the operators in managing their inventory machineries. On the basis of the findings, it is recommended that in order to optimize cash asset management SMEs need to identify their investment priorities particularly those that are crucial in sustaining their businesses in the long run. They should pursue strategies that can generate sufficient funds to augment their cash target. The medium and small entrepreneurs should also formulate a credible credit policy for their enterprises. In crafting such a policy criteria should be set as to the conditions and terms for credit granting. On the inventory front a re-order level policy should be established that will create an enabling environment for them to request for the supply of moderate and high quality stocks therefore optimizing their cash utility.