Assessment of Working Capital Management Practices Case Study on Small Business Enterprises in Selected Towns of South West Shoa Zone, Ethiopia

Abstract

Working capital management is the most important part of financial management. Moreover, managing
the key components of working capital like cash, receivables, and inventories presumes paramount
importance. This study is aimed to assess the working capital management practices of small business
enterprises in selected towns of South West Shoa Zone. The type of research employed in this study was
descriptive research with a mixed approach. To achieve the objectives of the study, primary data were
used and a combination of dichotomous and Likert scale questions were used for the survey purpose.
Again, in the study proportional stratified sampling techniques was used. Questionnaires were distributed
to 425 small business owners which were obtained from the total population of 2,939. In addition,
interviews were made with managers of trade and industry office of South West Shoa Zone. To process
data obtained from primary sources, SPSS version-20 was used. To visualize and facilitate the
interpretation processes frequency tables, bar graphs, and pie charts were used. The findings revealed
that, the majority of small business owners didn’t undertake cash budget, bank reconciliation, and formal
credit investigations before offering credit for their customers. The study also found that, most small
business owners hardly keep proper records for their materials and goods and have no formal reorder
policy for their stocks. The study suggested that, small business owners should maintain cash budget,
prepare bank reconciliation, and formulate a convincing credit policy for their customers. Similarly,
small business owners need to keep proper records for their materials and goods and create a re-order
level policy. Lastly, all stakeholders such as government & non-government units, academic institutions
should provide short term training.