Financial Management Practices and Performance of Small and Medium Enterprises in the Sekondi-Takoradi Metropolis

Abstract

Proper financial management is essential for business survival because firm’s inability to identify and implement relevant financial management practices can affect its performance. This study examines financial management practices and their relationship with performance of small and medium enterprises (SMEs) in the Sekondi-Takoradi Metropolis. The financial management practices covered financial records keeping, asset management, receivables management, cash management, inventory management and payables management. A sample of 147 SMEs made up of 133 small firms and 14 medium enterprises were used. Multiple linear regression analysis model was used to test the relationship between financial management practices and SMEs performance. The results show that receivable management, cash management, inventory management and asset management practices influence SMEs performance. Firm’s age has a moderating effect on the association between financial management practice and SMEs performance. It is recommended that SMEs should incorporate good financial management practices such as credit management, cash management, inventory management and asset management in their operations.

Keywords: Asset management Financial management, Financial performance, Records keeping practices, Small and Medium Enterprises, Working capital management

JEL Classification: L25, L26