Working Capital Management Practices and Financial Performance of Horticultural Farms in Laikipia and Nakuru Counties, Kenya
Ngunju, Mumbi Eunice
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Kenya's horticultural market is one of the main areas contributing to economic growth in the region. It produces around Kenya 93.7 billion shillings annually. Nevertheless, by affecting the working capital of individual companies in the industry, this sector faces problems that threaten its efficiency. The general purpose of the study was to evaluate the effects on financial performance of horticultural farms in Laikipia and Nakuru using working capital management practices. The specific objectives were to analyze the effect of cash management, accounts receivable management, accounts payable management, and inventory management on the financial performance of horticultural enterprises in the Laikipia and Nakuru Counties. Mixtures of descriptive and explanatory research design were used for the analysis. Primary data and secondary data were included in the analysis. Primary data was collected by use of questionnaires administered to the personnel involved with the daily management of working capital. The target population of this study comprised all the 84 horticultural farms in Laikipia and Nakuru Counties that were registered by the Kenya flower council. The sample size was 84 horticultural farms selected through census approach. Data was analysed through the use of descriptive and inferential statistics. Descriptive statistics included the use of means, standard deviation, frequencies and percentages, whereas inferential analysis included regression and correlation analysis. Data were presented using figures and tables. The respondents were guaranteed anonymity by requesting them not to write their names in the questionnaire. According to the findings account receivable management, account payable management and cash management had significant effect on financial performance. Cash management practices improved the financial performance of Farms significantly. Inventory management, on the other hand, had insignificant effect on financial performance of Horticultural Farm’s. The study recommends farms directors should develop a policy on credit collection detailing the policies and practices to be followed by the Horticultural farms. This policy should allow a combination of multiple collection techniques to be used concurrently to ensure that the organization not only reduces losses from bad debt but also increases its cash flow by shortening the average collection period. To enhance their accounts receivables and remove bad debts while boosting sales and inventory turnover, farm owners should rigorously follow up on debts, assess consumers before providing debts, give incentives for early debt payments, and build a solid debt management strategy.