Assessing the effectiveness of working capital management practices in Mukwano Group of Companies

Abstract

The purpose of this study was to assess the effectiveness of working capital management practices at Mukwano group of companies. Specifically, the study was guided by three objectives which are: assessing the effectiveness of working capital management practices of Mukwano group of companies, identifying the challenges constraining working capital management practices of Mukwano group of companies and suggesting strategies that will facilitate effective working capital management practices at Mukwano group of companies. A qualitative approach was employed to address the research objectives and as such, qualitative data from 15 employees of Mukwano was collected using an interview and analyzed using thematic content techniques. Study findings indicated that the company excels in managing its cash, inventory, accounts receivable, and accounts payable through strategic and advanced practices. These efforts center around optimizing cash flow, minimizing waste fostering robust relationships with both customers and suppliers and utilizing sophisticated tools and systems for efficient management. The study identified significant challenges across cash flow management, inventory control, accounts receivable, and accounts payable. Cash flow issues stemmed from inaccurate forecasting due to market volatility, delays in payments, and unexpected expenses. Inventory management faced difficulties in demand forecasting, supply chain disruptions, and limited storage. Accounts receivable struggled with delayed payments, credit risk, and inefficient collections. Accounts payable management grappled with negotiating terms, assessing discounts, and cash flow constraints affecting timely payments. Therefore, this study suggests that working capital management practices can be improved through: maintaining a strategic balance between ………. while periodically reviewing and refining its liquidity management approaches to sustain operational stability alongside continuous growth. It should adopt dynamic cash flow forecasting to navigate these fluctuations, ensuring smoother operations while optimizing overall financial health. It should consistently update and communicates these policies, periodically reviewing credit limits and enhancing credit check processes to maintain financial stability.