WORKING CAPITAL MANAGEMENT PRACTICES OF SMALL AND MEDIUM SCALE ENTERPRISES IN NIGERIA
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WORKING CAPITAL MANAGEMENT PRACTICES OF SMALL AND MEDIUM SCALE ENTERPRISES IN NIGERIA
ABSTRACT
The primary goal of this research is to reveal the working capital management methods of small and medium-sized businesses in Akwa Ibom State, Nigeria. A well-designed and implemented working capital management system is supposed to contribute favourably to the development of a company’s values.
The study used a descriptive and analytical sample survey to describe and analyse the data. The results demonstrate that 87.4% of the entrepreneurs worked as sole proprietors, 14.1% as partnerships, and the remaining 1.5% as cooperative societies.
The data show that 46.1% received credit from suppliers, with the average credit length granted by SMEs to their credit customers ranging from seven to sixty days (7-60 days).
According to the report, the two most common challenges that SMEs experience when dealing with credit consumers are late payments and bad debts.
The findings suggest that 52.8% of respondents utilise note books to represent cash books, whereas none (0%) employ computer inventory management. 65.3% of respondents have bank accounts for their business.
Personal savings contributed for approximately 35.7% of start-up capital, and SMEs view inflation/price hikes as more problematic than high debtor turnover periods and low stock turnover.
SMEs should form organisations and groups, such as civil society organisations, regional, district, community, and interest groups, to jointly plan and support accounting training sessions for their employees.
In addition, SMEs must determine their investment objectives, particularly those that are critical to the long-term viability of their operations. They should set aside a portion of their funds to finance and achieve these goals, allowing them to earn extra revenue or profits to reinvest in other areas of their businesses.
It is also recommended that SMEs develop a budget each time they want to incur large expenses. This prevents needless, unwanted, inflated, and underestimated expenses.
There is also a requirement for SMEs to develop a credit policy for their business and a re-order level policy for their institution, which will allow them to seek supplies of moderate and high quality stocks.
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