Abstract: Cash management is necessary service mismatches between the timing of payments and the availability of cash may interfere with operations of a firm. Studies have noted that many SMEs have maintained large cash reserves and liquidity positions within their investment portfolios in an effort to partially accommodate unforeseen expenditure. However, inadequate cash management practices among the SMEs has led to slow rate of service delivery. The purpose of this study was to determine the effects of cash management practices on financial performance of SMEs in Kicukiro District. The objectives of the study were; to evaluate the effects of cash planning on financial performance of SMEs in Rwanda. The study adopted a cross-sectional survey research design and in-depth interviews which allowed the collection of primary quantitative data through structured questionnaires. Target populations of 300 finance managers/ accountants of SMEs comprising 164 trading 26 manufacturing, 10 hairstyling, 62 dressmaking, and 38 carpentry enterprises. Stratified random sampling technique was used to obtain a sample of 172 SMEs both primary data and secondary data was used for the study. Primary data was collected using a well-structured questionnaire. The study utilized questionnaires as an instrument for data collection. Data was analyzed for descriptive and inferential statistics using SPSS version 21. Descriptive statistics such as tables, graphs, charts and percentages analysis were used for presentation of data. Also, a linear regression model was used to analyze quantitative data and was developed and tested to explain the relationship between various proxies of cash management practices and financial performance of SMEs in Rwanda. The findings indicated that there were significant correlation coefficients were established between effects of cash management practices on financial performance. Very good and positive linear relationships were established between effects cash management practices on financial performance: Cash planning (r=0.690, p= .023).The results revealed that cash planning was statistically significant in explaining Financial Performance of SMEs in Rwanda. The study concluded that SMEs need to ensure there are adequate cash management controls to ensure all the time there is optimal cash where there are strategies to be in place during minimal cash and surplus cash since either of the side will contribute to liquidity risks to the organization. The study recommends SMEs to strengthen cash collection avenues by encouraging payment in other forms and move from cash payments, with the advent of mobile money and cash payments to banks where this can be audited for proper payment systems.
Keywords: Cash management practices, Cash planning, financial performance.
Title: EFFECT OF CASH MANAGEMENT PRACTICES ON FINANCIAL PERFORMANCE OF SMALL MEDIUM ENTERPRISES IN RWANDA: CASE STUDY OF SMEs IN KICUKIRO DISTRICT
Author: NIWEMUTONI SYLVIE, Dr. PATRICK MULYUNGI, Dr. JAYA SHUKLA
International Journal of Management and Commerce Innovations
ISSN 2348-7585 (Online)
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