Analysis of working capital management in small and medium enterprises in Uganda : A case of Rubaga Division Kampala

Abstract

Managing working capital effectively is important for any business, running an SME is no exception because without efficient and effective working capital management practices it will be difficult for the business to see its first birthday. Efficient and effective working capital management practices are still a major challenge facing SMEs in Uganda especially those at the starting level. Hence this study sought to analyse the working capital management practices among SMEs in Uganda, Rubaga division, Kampala. The study was guided by objectives which include; cash management practices, receivables management practices and inventory management practices in SMEs in Uganda. The study used a Cross sectional design with a quantitative approach. Primary data was collected using open ended and close ended questions. The data was analysed using a statistical package SPSS version 23. The findings of the study reveal that most SMEs have designed clear policies, procedures and practices the management and control of cash, receivables and inventory. Most SMEs recorded all their cash transactions, credit sales and all inventory transactions. However, almost all (over 95%) of the SMEs do not use computerised systems in the management of their working capital. The study recommends that SMEs should adopt the use of computerised systems in the management of their working capital to increase the security of their information plus their efficiency and effectiveness in their daily operations and services. They should also plan well for their inventory using well known techniques to avoid stock pile ups that could lead to damage. They all need to have bank accounts for the smooth management of cash.