The research design is descriptive in nature and provides a footing for farther research. It sought to find the extent to which working capital direction is practiced in SMEs in Kenya. The scheme that was used was experience study, which means the study of proprietors or directors of SME ‘s.
3.2 Population and Sampling
The mark population was little and Medium Sized Enterprises located in Kenya. This was based on the SME Solutions Centre-IFC ( 2007 ) definition that classifies an SME as:
a officially registered concern
an one-year turnover of between Ksh. 8 million to Ksh. 100 million
an plus base of at least Ksh. 4 million
5 to 150 employees
Harmonizing to a 2004 Kenya SME Country Study commissioned by the IFC, there are an estimated 22,000 SME ‘s in Kenya, stand foring 66 % of all officially registered private endeavors. However, a published beginning list was non available. The trying method to be used was purposive sampling, whereby the research worker chose the nearest and most convenient SMEs since they largely exemplify similar features. The survey was conducted within Nairobi. The research worker screened endeavors by analyzing background information in the questionnaire to look into if they fitted in the standard of an SME. The industries considered were:
Manufacturing
Sweeping
Retail
Service
However due to the different industries and sectors that SMEs are in, a sample of 100 was chosen, 25 from each class. Sampling from the entire population was done because the population of SMEs is big. In add-on, the research had limited beginnings of financess and therefore a sample was more economical.
3.3 Data Collection Methods
For this research, primary information was collected utilizing questionnaires through primary beginnings of informations. This refers to informations collected first manus by the research worker. Responses were determined utilizing questionnaires addressed or manus delivered to the direction comptroller, finance director, or pull offing manager of each of the SMEs.
A missive was obtained from the Faculty of Commerce presenting the research worker and the purpose of research, which was attached to the questionnaire to increase response rate and for intents of confidentiality.
3.4 Data Analysis
This involved the careful scrutiny of collected informations to guarantee that it met the aims stated and answers the inquiries asked. First and first, all questionnaires were coded and stored safely as they contained sensitive information. The questionnaires were checked for completeness and edited where necessary. Thereafter, the questionnaires were sorted in conformity with the similarity of response given to different inquiries.
The information was analyzed critically utilizing the mean to assist generalise and pull decisions of the findings. It was so presented utilizing presentational tools such as frequence distribution tabular arraies, saloon graphs pie charts and per centums to let decisions to be drawn more clearly.
Chapter FOUR
4.0 DATA ANALYSIS AND FINDINGS
4.1 Introduction
The intent of this chapter is to present and exemplify the findings of this research. The research was conducted to set up the extent and the jobs faced by SMEs in working capital direction. Data was collected by usage of questionnaires. The respondents were selected on the footing of convenient trying within Nairobi. The respondents were drawn from four different sectors:
Manufacturers
Jobbers
Retailers
Service
A sum of 100 respondents were issued with questionnaires but merely 49 were received. The response rate was hence 49 % .
The sample comprised of respondents selected largely from the Central Business District. The comptrollers or directors filled in general information about the concern. This formed the first subdivision of the questionnaire. It gave background information about the respondents concern.
The footing for making as an SME for intents of this survey was a house that has either or both of the followers:
Annual turnover of between Ksh. 5 million to 100 million
5 to 150 employees
4.2: General Information
The research showed that bulk of respondents within Nairobi is Limited liability companies as illustrated by table 4.2.1
Table 4.2.1 Form of concern ownership
Frequency
Percentage
Sole proprietary
8
16 %
Partnership
9
18 %
Limited Liability Company
32
65 %
( Beginning: Research Data )
This could farther be shown in figure 4.2.2
Figure 4.2.2
( Beginning: Research Data )
Consequences from the informations collected showed that some respondents non merely cover with one industry, but that some are involved in different industry sectors for illustration, fabrication and wholesaling. Other respondents were even involved in fabrication, wholesaling and retailing. This characteristic is illustrated in table 4.2.3
Table 4.2.3 Distribution of respondents by industry
A
Frequency
Percentage
Manufacturing
1
2 %
Sweeping
6
11 %
Retailing
32
56 %
Service
18
32 %
Sum
57
100 %
( Beginning: Research Data )
Majority of respondents ( 71 % ) have between 5-49 employees as shown in table 4.2.4. Those with less than 4 employees qualified on the footing of an one-year turnover of over Ksh5 million.
Table 4.2.4 Number of employees in the respondents sampled
A
Frequency
Percentage
0 to 4
10
20 %
5 to 49
35
71 %
50 to 99
2
4 %
100 to 150
1
2 %
Over 150
1
2 %
Sum
49
100 %
( Beginning: Research Data )
Consequences indicated that most respondents have an one-year gross turnover of between Ksh 5 million to 25 million. These formed 53 % of the respondents. 29 % of the respondents, though holding an one-year turnover of less than Ksh 5 million still qualified as respondents because they had 5-150 employees. The same applied to respondents with an one-year turnover of over Ksh 100 million.
Table 4.2.5 Gross one-year turnover of respondents
A
Frequency
Percentage
Ksh 0 to Ksh 5,000,000
14
29 %
Ksh 5,000,001 to Ksh. 25,000,000
26
53 %
Ksh 25,000,001 to Ksh 50,000,000
3
6 %
Ksh 50,000,001 to Ksh 75,000,000
1
2 %
Ksh 75,000,001 to Ksh 100,000,000
2
4 %
Over Ksh 100,000,000
3
6 %
Sum
49
100 %
( Beginning: Research Data )
By and large respondents are considered to be immature concerns that are reasonably new. This was confirmed by the research which put 37 % of respondents at less than three old ages old. However, findings of the research showed in table4.2.6 demonstrated that besides there are some respondents that are rather old in the concern and have remained as such over the old ages. These comprised 41 % of the sample.
Table 4.2.6 Number of old ages in concern
Old ages in concern
Frequency
Percentage
0 to 3
18
37 %
4 to 6
9
18 %
7 to 10
2
4 %
over 10
20
41 %
Sum
49
100 %
( Beginning: Research Data )
This is illustrated further in figure 4.2.7.
Figure 4.2.7
( Beginning: Research Data )
One of the steps of working capital direction is holding a policy that gives counsel on how to manage debitors, creditors, hard currency and stock. 73 % of the respondents had no such written policy while merely 27 % had such a papers. Those that did non hold such a papers managed their on the job capital demands based on what they feel they should make on a state of affairs by state of affairs footing.
Table 4.2.8 Written Policy Statement
Frequency
Percentage
Yes
13
27 %
No
36
73 %
Sum
49
100 %
( Beginning: Research Data )
Of the respondents that had a on the job capital policy statement, its distribution as per country of working capital covered was as shown in table 4.2.9:
Table 4.2.9 Area Covered by Working capital policy
Frequency
Percentage
Cash
5
26 %
Inventory
5
26 %
Debtors
1
5 %
Creditors
2
11 %
All of the above
6
32 %
Sum
19
100 %
( Beginning: Research Data )
The research showed that most concern usage a computerized system or a combination of computerized and manual system for their accounting map. This was as follows.
Table 4.2.10 Accounting System in usage
Frequency
Percentage
Computerized
18
37 %
Manual
13
27 %
Combination of both
18
37 %
Sum
49
100 %
( Beginning: Research Data )
Of the houses that use a computerized accounting system, the package they used was as in table 4.2.11. Other package class included package such as systematic, pharmsoft and tally.
Table 4.2.11 Accounting Software used by respondents
A
Frequency
Percentage
QuickBooks
17
53 %
Sage
2
6 %
Pastel
2
6 %
Other package
11
34 %
Sum
32
100 %
( Beginning: Research Data )
The respondents were asked to rank each individual country of working capital direction in footings of the figure of jobs faced. The undermentioned graduated table was used:
1=Least jobs
2=Few Problems
3=Many jobs
4=Most jobs
The response from the respondents in table 4.2.12 showed that
Cash direction had few jobs
Inventory direction had least jobs
Debtors direction had many jobs
Creditor Management had few jobs
Table 4.2.12 Area of Working capital
Ranking
A
A
A
A
1
2
3
4
Cash
35 %
41 %
15 %
11 %
Inventory
44 %
37 %
12 %
7 %
Debtors
31 %
29 %
31 %
10 %
Creditors
31 %
50 %
12 %
7 %
( Beginning: Research Data )
Firms identified the countries of working capital direction that are in demand of preparation. Cash direction topped the list at 33 % , followed by stock list direction ( 23 % ) and debitors ( 23 % ) while creditor direction needed least preparation at 16 % . This is depicted in table 4.2.13.
Table 4.2.13 Area of Working Capital necessitating preparation
Frequency
Percentage
Cash
24
33 %
Inventory
20
27 %
Debtors
17
23 %
Creditors
12
16 %
Sum
73
100 %
( Beginning: Research Data )
This is farther illustrated in figure 4.2.14
( Beginning: Research Data )
4.3 Cash Management
The first inquiry under hard currency direction sought to happen out if which houses use formal hard currency direction theoretical accounts. Of the respondents, 88 % do non utilize any kind of formal hard currency direction theoretical account. A mere 12 % use these hard currency direction techniques. This is illustrated in table 4.3.1
Table 4.3.1 Knowledge of formal hard currency direction techniques
Frequency
Percentage
Yes
6
12 %
No
43
88 %
Sum
49
100 %
( Beginning: Research Data )
Of the houses that use formal hard currency direction theoretical accounts, 50 % said that they use hard currency budgets while for the remainder, theirs response was as follows:
Table 4.3.2 Models used in hard currency direction
Frequency
Percentage
Baumol Model
A 0
0 %
Miller Orr Model
A 0
0 %
Stone Model
1
17 %
Break Neck
2
33 %
None of the above
3
50 %
Sum
6
100 %
( Beginning: Research Data )
The research besides sought to happen out for what periods of clip do respondents be after for hard currency. Most respondents ( 27 % ) program for hard currency on a day-to-day or hebdomadal footing. This frequence of planning of hard currency is shown in table 4.3.4.
Table 4.3.4 Frequency of planning hard currency
Frequency
Percentage
Daily
13
27 %
hebdomadal
13
27 %
Fortnightly
6
12 %
Monthly
12
24 %
Other
5
10 %
Sum
49
100 %
( Beginning: Research Data 2008 )
The budgeting and investing patterns used by the respondents were as shown in table 4.3.5. The consequences were as follows:
Most respondents ( 43 % ) ever budget for their hard currency and besides a high per centum of respondents ( 45 % ) control expenses and grosss of hard currency.
35 % of the respondents invested excess hard currency sometimes and merely 8 % ever invest extra financess while a similar 8 % do non put excess hard currency
Table 4.3.5 Cash budgeting and investing
A
Never
Barely of all time
Some times
Largely
Always
Does the house budget its hard currency?
2 %
16 %
18 %
20 %
43 %
Does the house control expenses and grosss of hard currency?
0 %
8 %
14 %
33 %
45 %
Does the house invest any extra hard currency?
8 %
20 %
35 %
29 %
8 %
( Beginning: Research Data )
Table 4.3.6 showed that bulk of the respondents bank the hard currency on a day-to-day footing ( 51 % ) while 28 % of the respondents bank hard currency when it comes into the house.
Table 4.3.6 Frequency of banking hard currency
Frequency
Percentage
Daily
25
51 %
Weekly
9
18 %
Fortnightly
1
2 %
Monthly
1
2 %
Other
13
27 %
Sum
49
100 %
( Beginning: Research Data )
The frequence of banking hard currency is farther illustrated in figure 4.3.7:
( Beginning: Research Data )
Of the assorted investing options, a immense per centum of respondents ( 60 % ) left their money to turn in their bank history ( table 4.3.7 ) . 24 % of the respondents invested in marketable securities such as portions while none invested through loaning money. 7 % invested in existent estate while 9 % of the respondents reinvested the extra financess into the concern inform of more stock.
Table 4.3.8 Cash investing
Frequency
Percentage
Bank Deposits
27
60 %
Marketable securities
11
24 %
Lending
A 0
0 %
Real estate
3
7 %
Other investing
4
9 %
A TOTAL
45
100 %
( Beginning: Research Data )
Another country looked at in hard currency direction was entree to hard currency. Their responses were summarized in table 4.3.8. The respondents were asked to rank the easiness of entree of beginnings of financess that the house can entree utilizing the undermentioned graduated table:
1= Easiest to entree
2= reasonably easy
3= Easy
4= reasonably hard
5= Most hard
Table 4.3.9 Beginnings of Fundss
1
2
3
4
Sacco
15 %
15 %
15 %
55 %
Friends and relations
24 %
28 %
38 %
10 %
Banks
56 %
21 %
15 %
9 %
Microfinance Institutions
27 %
36 %
18 %
18 %
( Beginning: Research Data )
The consequences showed that SACCOS were most hard to acquire financess from while Bankss were the easiest to entree financess from. Friends and relations were easy to acquire financess from while Microfinance establishments were reasonably easy to entree financess from.
4.4 Histories receivable
This subdivision sought to happen out how the respondents manage their debitors. The respondents were to rate each inquiry on the footing of: ne’er, barely of all time, sometimes, largely and ever. The following were the common patterns displayed by the respondents:
Having a recognition policy
Gross saless on recognition
Giving hard currency price reductions
Defaulting in debitors payments
Lack of a recognition aggregation policy
Failure to factor debitors
The responses to each inquiry by all the respondents were as shown in table 4.4.1.
Table 4.4.1 Analysis of debitor direction
A
Never
Barely of all time
Some times
Largely
Always
Does the house have a recognition policy?
16 %
14 %
27 %
16 %
27 %
Does the house offer some gross revenues on recognition?
16 %
8 %
47 %
16 %
12 %
Does the house offer hard currency price reductions?
20 %
14 %
45 %
14 %
6 %
Do most debitors stick to the recognition period?
6 %
18 %
24 %
39 %
12 %
Make some of the debitors default in payment?
16 %
31 %
43 %
10 %
0 %
Does the house suffer bad debts
29 %
29 %
39 %
4 %
0 %
Is legal action taken to retrieve them?
47 %
20 %
18 %
6 %
8 %
Does the house screen clients or do client mention before giving recognition?
18 %
18 %
27 %
14 %
22 %
Does the endeavor analyze and study of debitors aging?
20 %
16 %
22 %
14 %
27 %
Does the house proctor receivables?
4 %
4 %
37 %
24 %
31 %
Does the house factor debitors?
39 %
6 %
20 %
12 %
22 %
Is there a recognition aggregation policy?
24 %
16 %
16 %
16 %
27 %
( Beginning: Research Data )
4.5 Histories Collectible
Table 4.5.1 shows the responses on how the respondents manage their histories collectible. They engage in:
Obtaining recognition purchases
Prompt payment of creditors
Failure to keenly supervise creditors
Not working trade recognition every bit much as possible.
Table 4.5.1 Analysis of histories collectible
A
Never
Barely of all time
Some times
Largely
Always
Does your company obtain services on recognition?
10 %
6 %
35 %
35 %
14 %
Make your providers offer hard currency price reductions?
8 %
20 %
53 %
8 %
10 %
Do they besides offer measure price reductions?
10 %
20 %
43 %
14 %
12 %
Are all creditors paid on clip?
0 %
2 %
12 %
63 %
22 %
Does the house usage ratios in supervising trade recognition?
45 %
33 %
8 %
10 %
4 %
Does the house exploit trade recognition every bit much as possible?
10 %
29 %
18 %
18 %
24 %
( Beginning: Research Data )
The respondents were besides asked about the easiness of entree to short term finance. They were to rank the easiness of entree on the undermentioned graduated table:
1= easiest to entree
2= reasonably easy to entree
3= easy to entree
4= somewhat hard to entree
5= really hard to entree
6= most hard to entree
The consequences were as shown in figure 4.5.2
Table 4.5.2 Beginnings of short term finance
Beginning of Fundss
1
2
3
4
5
6
Bank Loans
12 %
47 %
18 %
18 %
6 %
0 %
Overdraft
15 %
50 %
15 %
20 %
0 %
0 %
Bill Discounting
4 %
17 %
17 %
33 %
21 %
8 %
Letter of Credit
10 %
13 %
13 %
35 %
26 %
3 %
Working Capital Loan
0 %
22 %
22 %
26 %
19 %
11 %
( Beginning: Research Data )
4.6 Inventory Control
This subdivision sought to happen out what direction patterns do the respondents use in direction stock and the effectivity of those patterns.
The first inquiry was to find what type of stock the house dealt with. Consumer goods were divided into fast moving and decelerate traveling. Consequences indicated by table 4.6.1 showed that 40 % of the respondents dealt with fast traveling consumer goods. Services were a 2nd favourite.
Table 4.6.1 Item of trade
Frequency
Percentage
Fast traveling consumer goods
22
40 %
Slow traveling consumer goods
6
11 %
Servicess
18
33 %
All of the above
9
16 %
Sum
55
100 %
( Beginning: Research Data )
The 2nd inquiry sought to happen out what stock direction theoretical account was used by the respondents. The findings as shown in table 4.6.2 indicated that bulk of the respondents used ad hoc or intestine feeling in pull offing their stock. There was no formal procedure.
Table 4.6.2 Stock Management Model
Frequency
Percentage
Merely in Time
10
22 %
Economic Order Model
9
20 %
Both
4
9 %
Ad hoc/Gut feeling
15
33 %
None of the above
8
17 %
Sum
46
100 %
( Beginning: Research Data )
Another country of involvement in working capital direction was the type of stock list system in usage. A immense per centum ( 51 % ) of the respondents operated a manual stock list system, 10 % used a computerized system and 1 % used a combination of both. Merely 2 % used intestine feeling in pull offing their stock.
Table 4.6.3 Type of stock list system
Frequency
Percentage
Manual
23
51 %
Computerized
10
22 %
Both Manual and computerized
11
24 %
None of the above
1
2 %
Sum
45
100 %
( Beginning: Research Data )
The concluding country of the questionnaire was meant to mensurate extent to which the respondents command their stock. Their responses were as in table 4.6.4.
In drumhead, the respondents
Have equal stock to run into demand at all times
Are frequently overstocked
Maintain safety stock
Use economic order measure
Have control over stock
Table 4.6.4 Responses on stock list control
A
Never
Barely of all time
Some times
Largely
Always
Does the house have equal stock to run into demand at all times?
0 %
5 %
10 %
56 %
28 %
Are there times when the house is under stocked?
3 %
37 %
61 %
0 %
0 %
Are there times when the house is over stocked?
8 %
29 %
50 %
13 %
0 %
Does the house maintain safety stock?
5 %
15 %
15 %
33 %
31 %
Does the house offer measure price reductions?
10 %
5 %
51 %
23 %
10 %
Does the house know the economic order measure?
26 %
5 %
8 %
31 %
31 %
Does it utilize it each clip it orders stock?
23 %
5 %
10 %
33 %
28 %
Does the house maintain up to day of the month stock records?
3 %
13 %
8 %
40 %
38 %
Is the reorder degree known?
8 %
15 %
21 %
23 %
33 %
Does the house usage accounting ratios in supervising stock?
35 %
19 %
19 %
11 %
16 %
Are there controls over security and mandate of stock?
10 %
15 %
8 %
28 %
38 %
Is the system in usage and effectual?
5 %
8 %
18 %
44 %
26 %
( Beginning: Research Data ) Chapter Five
5.0 treatment and decision
Introduction
The aim of this chapter is to supply an reading of the findings of the research and back up the decisions reached by the research worker utilizing grounds from the survey. This chapter focuses on
Answering the research inquiries
Compares findings to old surveies
Explain fluctuations in the informations findings from the accounts
Finally it will give countries for farther survey.
The aims of the research were:
To find the extent to which working capital direction is practiced in the respondents sector
To place working capital direction challenges confronting respondents in Kenya
5.2 Extent to which working capital direction is practiced in the respondents sector
The first aim of the research was to find the extent to which working capital direction is practiced in the respondents sector in Kenya. Given that 73 % of the respondents indicated that they do non hold a written on the job capital policy statement, it is just to state that working capital direction in respondents is rather informal. The survey looked into the assorted patterns and techniques that respondents employ in the direction of working capital. It was looked at from the four countries of working capital that is hard currency direction, debitors ‘ direction, creditor direction and stock list direction.
5.2.1 Cash Management
Formal hard currency direction in respondents leaves a batch to be desired. Give that merely 12 % utilize formal hard currency direction techniques showed that hard currency direction is chiefly done informally or by ad hoc techniques with small order. These 12 % group of respondents chiefly used interruption cervix theoretical account, rock theoretical account and simple hard currency budgeting ( 50 % ) .However a inquiry to reply here is “ Do they really ever use these theoretical accounts? . ” The findings showed that most of the respondents banked their hard currency daily. More probe would necessitate to be done here to find whether it was due to the nature of concern or whether they received big sums of hard currency on a day-to-day footing. By and large respondents program for their hard currency on a day-to-day or hebdomadal agenda perchance as a consequence of the little scale nature of their concerns. The investing patterns in respondents are non encouraging as most of these endeavors ( 60 % ) merely leave their net incomes in the bank which give a really minimum involvement payment. This determination is rather similar to the research of Perret ( 2003 ) which showed that Romanians little concerns engage in high economy.
5.2.2 Debtors Management
The research showed that respondents by and large pattern debitors ‘ direction at a moderate degree and are non really strict. For illustration with respects to holding a recognition policy, merely 27 % of the respondents have such a policy in topographic point ever. The remainder have such a policy sometimes while 16 % ne’er have such a policy. This shows direction hapless committedness to formal and organized debitor direction. Selling on recognition was a extremely common pattern amongst respondents as indicated by the higher per centums. Chittenden et all ( 1998 ) reported that allowing of recognition has existed every bit long as trade itself. In their findings more than 96 % of little concerns provide recognition to their clients. Control over bad debts could be said to be weak in respondents as 67 % of those who incurred bad debts ne’er or barely of all time sought legal action to retrieve the bad debts. With respect to analysing and describing on debitors aging, this was a common pattern among respondents ( 80 % ) while merely 20 % of the respondents ne’er did such a thing. Of great concern is the deficiency of factorization of debitors amongst respondents. A high proportion of the respondents ne’er factor their debitors at all. ( 39 % )
5.2.3 Creditor Management
The research showed that the respondents chiefly obtain services or purchase goods on credit.35 % or the respondents obtain goods on recognition sometimes while a similar per centum obtain the same most of the clip. The research showed that the respondents are able to have hard currency and measure price reductions to minimise payments. The respondents were imposingly prompt in paying their creditors as demonstrated by the high proportion of respondents that paid creditors in clip. This was possible as a consequence of the demand to bask uninterrupted support from them. However, it can be said that respondents besides do non utilize formal ratio analysis of creditors as demonstrated by the high per centum of those that do non, to optimise the payments. With respect to merchandise recognition, the respondents chiefly use overdraft installations, ( 50 % ) and bank loans ( 47 % ) as they are reasonably easy to entree. However the respondents ne’er use working capital loans. Bills Dismissing and letters of recognition are used but on a smaller graduated table by respondents
5.2.4 Inventory Management
Majority of the respondents pattern stock list direction to some extent. They use either of the following techniques:
Merely in clip
Economic Order Model
Gut feeling
With respect to whether they use a manual or computerized system, bulk of respondents use a manual system to maintain path of their stock list. ( 50 % ) Of concern was the 2 % that did non hold any system to pull off their stock list. The research further showed that for the respondents that deal in stock, they largely have adequate stock to run into demand at all times. In add-on, bulk of houses utilize the economic order measure ( 74 % ) which shows that they seek to minimise ordination and retention costs. Most respondents besides use ratios in supervising stock ( 65 % ) although 38 % usage these ratios ever.
5.3 Working capital direction challenges confronting respondents in Kenya
5.3.1 Cash Management
As respects hard currency direction, there is deficiency of cognition refering formal hard currency direction ( 88 % of respondents ) . This is a critical job as these theoretical accounts are frequently the most efficient to utilize. Another job indicated by the research was the deficiency of proper investing chances as most invested merely in bank sedimentations. Harmonizing to Marwanga, Okomo, & A ; Epstein ( 2002 ) , the most distressing challenge faced by SMEs is funding. However, this research showed that respondents are able to acquire financess from Bankss with comparative easiness. This could be attributed to the current high competition in gross revenues witnessed amongst Bankss that has lowered loaning demands for everyone.
5.3.2 Debtors Management
Previous researches showed that respondents do non pattern debitor direction. McMahon and Holmes ( 1991 ) found that owner-managers tend to pretermit histories receivable direction and that it is exogenously determined and beyond their active control. This research showed that they do but are non really strict in this pattern. By and large the respondents faced a consistent job of debitors defaulting in payment. There are many avenues that can be utilized but the findings showed that the respondents are non rigorous in the pattern. For illustration, merely 8 % ever use legal action to retrieve bad debts and merely 22 % really screen clients ever before giving recognition. It can be safely said that this is an country that needs betterment.
5.3.3 Creditor Management
With respect to creditor direction, it was shown that a immense per centum of respondents do non supervise trade payables. This means that they do non optimise trade recognition although most houses pay their creditors in clip ( 64 % ) . This can be reaffirmed by the fact that most of the respondents do non work trade recognition every bit much as possible. In add-on, the respondents faced a job as respects the entree to short term recognition. Working capital loans were either unavailable or were non known to be to the respondents. The signifiers of trade recognition accessed by the houses were chiefly bank loans and overdraft. More demands to be done with respects to entree of financess.
5.3.4 Inventory Management
The research showed the respondents by and large had accurate records of stock list ( 97 % ) . Another challenge in stock list direction was monitoring of stock list. A high proportion of respondents ( 35 % ) did non utilize any ratios n supervising their stock to optimise stock direction. Stronger controls over security of stock and mandate of stock motion are required.
5.4 Decision
The research showed that respondents really pattern working capital direction to a minimum extent. This is in line with Kargar and Blumenthal 1994 who noted that little concerns are non really good at pull offing their on the job capital. Besides, it showed that respondents face immense challenges in hard currency direction, debitor direction and creditor direction despite the fact that respondents although the respondents indicated that they had few jobs in hard currency, stock list and creditor direction. This deficiency of consistence in consequences from the research workers and the respondents could hold been as a consequence of misinterpretation of the peculiar inquiry asked. Research in the United States reported the internal jobs related to hard currency flow direction, stock list control and unequal capital ( Dodge et al, 1994 ) .
This research indicated that houses chiefly use informal theoretical accounts in pull offing on the job capital but should prosecute in formal theoretical accounts. This will assist cut down chance of concern closing ( Peel and Wilson 1996 ) . The survey of Grablowsky ( 1976 ) and others have showed a important relationship between assorted success steps and the employment of formal working capital policies and processs. More attempt demands to be put in by respondents in this country. Harmonizing to Tambunan ( 2006 ) SMEs in least developed states face issues such as no entree to formal preparation and as a consequence deficiency of accomplishments in peculiar managerial expertness. This was confirmed by the findings of this survey.
5.5 Recommendations
There need to be a capital direction policy to take attention of the working capital direction which will include hard currency, debt, recognition and stock list direction.
Factoring of debitors in their formal policy as ways to cover with debt direction.
Use of formal ratio analysis in recognition direction
Making it cardinal cognition of formal hard currency direction to replace the informal hard currency direction.
Rigorous pattern in the history receivable direction that is exogenously determined and beyond at that place active control.
Easy entree to financess to assist in recognition direction to optimise trade recognition.
Stronger controls over security of stock and mandate of stock motion are required.
5.6 Areas for farther research
Possible countries for farther research are:
Wayss in which respondents can better on their on the job capital direction
Reasons as to why the respondents use informal agencies in pull offing their working capital
The consequence of working capital direction on profitableness of respondents.
5.7 Restrictions of the survey
The survey had the undermentioned restrictions:
The procedure of roll uping informations was greatly delayed as a consequence of the station election force in Kenya. It was insecure for the research worker to go at the clip.
Some of the respondents took really long to make full in questionnaires and the research worker had in some cases made legion trips to travel and look into on the advancement of the questionnaires.
Many respondents chose non to make full in the questionnaires because of privateness concerns as respects the information sought. Hence a 100 % response rate was non possible.
There were cases of inaccessibility of the comptrollers as most respondents had portion clip comptrollers so it was hard for the research worker to run into the comptrollers.
The direction of some of the organisations was hesitating to react at first as they felt that the information to be provided for the research was instead sensitive. The research worker had to plead to be assisted.
Due to restraints of clip and fundss, the research worker was unable to carry on the research in besides rural countries which was of involvement to the research worker
Lack of a sample frame. There was no list of respondents to work from.
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Appendix 1:
Letter OF INTRODUCTION
P.O BOX 9298-00100
Nairobi Kenya
24th May, 2012
To Whom It May Concern:
Beloved Sir/Madam:
Rhenium: Research Undertaking
I am a Masters of Business Studies pupil at ESAMI University. I am presently set abouting my MBA research undertaking an analysis of the pattern of working capital direction in SMEs in Kenya. Attached is a questionnaire that I am kindly bespeaking you to make full out in full. All the information that you will supply in the undermentioned questionnaire will stay purely confidential.
The research is for academic intents and the information you provide will be treated with extreme assurance. Privacy will be observed to guarantee confidentiality and the survey results and study will non include mention to any persons or organisations.
The research worker requests the direction comptroller or pull offing manager to make full the questionnaire to ease the completion of the survey. The research worker will pick the questionnaire. If you are interested in the findings of this research, they shall be mailed to you upon petition. Your cooperation and aid will be extremely appreciated.
Thank you.
C. O. Oyaro
