Working Capital Management Practices of Small Firms in the Ashanti Region of Ghana

Abstract

In a developing economy like Ghana, the contribution of small firms to the employment of the youth is highly recognised, but their contribution towards revenue to the national budget seems negligible. The reason is that some of the firms do not manage their working capital as expected and this has affected the viability of their businesses.

The study revealed that the operators of small firms possess limited formal education, weak managerial and financial management skills within the sector. They also lack qualified accounting staff and suitable accounting software which are motivators to effective working capital management practices. Owners/managers were found to act as barriers to efficient usage of working capital management practices.

Recommendations on credit control and collection policies, the importance of the use of computer spreadsheets, training and education which the study found to be problems with the sample small firms have been suggested to the owners/managers.

Keywords: Small Business Management, Working Capital Management, Financial Management Practices, Developing Countries