THE EFFECT OF WORKING CAPITAL MANAGEMENT

Abstract

The main thrust of this study is to unveil the working capital management practices of Small and Medium Enterprises (SMEs) in the Ashanti Region of Ghana. The study used descriptive statistics for the presentation and analysis of findings. The results show that 16 percent of SMEs receive credits from their suppliers and the average credit period range between two weeks to one month. On the other hand, the credit period given by SMEs to their credit customers range is less than months. From the study, two main problems faced by SMEs in dealing with credit customers are late payment and bad debt. The results show that 50 percent of respondents use note books while only 0.7 percent uses computers for inventory control. Fifty-seven (57) percent of the respondents had bank account for their businesses. Personal savings accounted for about 38 percent of start-up capital and SMEs consider inflation/price increases to be more problematic than even higher debtors turnover period and low stock turnover. Consequently, it is recommended that there should greater collaboration between the Business Advisory Centres (BACs) and the various associations of SMEs for the financial training of entrepreneurs. Government will have to expand the BACs currently located in only the district and regional capitals. The National Board for Small Scale Industries (NBSSI) should design and print more simplified record keeping document, like their current cash book, for use by the SMEs. The SMEs should use their association in a co-operative manner to procure inventory. Key words: Working capital management, inventory, cash, accounts receivable, Accounts payable, Ashanti region, Ghana.