Analyzing cash flow management among Small and Medium Enterprises (SMEs) in Kampala.

Abstract

This study examined cash flow management practices among Small and Medium Enterprises (SMEs) in Kampala. The objectives were to assess current cash flow management practices, identify challenges faced by SMEs in managing cash flow, and propose strategies to improve these practices. A descriptive research design with a quantitative approach was adopted to gather data on a broad range of variables in a single instance. The target population comprised 250 registered SMEs operating within Kampala, spanning various sectors including retail. Using Krejcie and Morgan’s sample size determination table, 152 SMEs were selected, and data were collected through self-administered questionnaires from managerial-level employees, resulting in a response rate of 70%. The demographic analysis revealed that 54.4% of respondents were male, 38.4% held a bachelor’s degree, and the largest departmental representation (29.6%) was from finance. Most respondents had 1 to 3 years of experience in SME or cash flow management, and micro-enterprises with 1 to 5 employees constituted the majority. Findings indicated that a majority of SMEs lacked structured cash flow management practices such as regular forecasting, daily tracking, and reinvestment of profits, which limited their financial stability and growth. Key challenges included delayed customer payments, high operational costs, limited access to affordable credit, poor financial literacy, and blurred lines between personal and business finances. Although some SMEs were aware of improvement strategies like digital financial tools and emergency reserves, adoption was low due to limited skills and resources. The study recommended enhancing financial literacy, improving access to financial tools, and implementing supportive government policies. Future research should explore the role of FinTech in cash flow management, conduct longitudinal studies on sustainability, and compare urban and rural SME challenges.