Cash Management Practices on Financial Performance of Small and Medium Enterprises in Nyeri Town, Kenya

Abstract

Small and Medium Enterprises (SMEs) lack adequate skills to manage and monitor their cash management practices leading to limited financial growth hence inability to compete while increasing their assets, opening more branches and growing their sales. This study sought to analyze effect of cash management practices (cash holding practices, use of technology and cash pooling practices) as well as analyze the combined effect of the cash management practices on financial performance of SMEs in Nyeri town, Kenya. The study employed a descriptive research design with target population being the registered SMEs in Nyeri town. Data was collected using a self-administered semistructured questionnaire from a sample population of 62 SMEs operating in Nyeri town and registered by the business registrar’s office in Nyeri County. Data was analyzed using statistical package for social sciences (SPSS) to generate descriptive and inferential statistics. Results obtained indicated that cash holding practices and use of technology in cash management had a relevant effect on financial performance of SMEs in Nyeri. The study recommended that all stakeholders in business operations ranging from suppliers, customers, and financiers should embrace use of technology to facilitate electronic data interchange. Future research could focus on comparative study of large organizations to establish whether the same factors affecting SMEs financial performance also affect large businesses.