Working Capital Management Practices and Financial Performance of Small and Medium Enterprises in Garissa County, Kenya
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Date
2025-04
Journal Title
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Volume Title
Publisher
The Strategic Journal of Business & Change Management
Abstract
Small and medium-sized enterprises (SMEs) are pivotal to economic growth and development but often face
persistent financial hurdles that threaten their sustainability. In Garissa County, Kenya, many SMEs encounter
financial difficulties stemming from inefficient working capital management practices. This study examined
how cash management impacts SME financial performance in the county, using descriptive and inferential
statistics on data from 278 SMEs. Results revealed that inventory and accounts receivable management
significantly enhance SME financial performance. Effective inventory management, characterized by
systematic stock monitoring and control measures, as well as efficient accounts receivable practices,
including streamlined credit policies and proactive debt collection, were associated with improved financial
outcomes. In contrast, accounts payable management was found to negatively influence financial
performance, highlighting the adverse effects of delays or inefficiencies in fulfilling payment obligations.
Although cash flow management demonstrated a positive relationship with financial performance, its
statistical insignificance underscored the need for enhanced liquidity management strategies. The study
concluded that efficient working capital management practices are essential for bolstering the financial
health of SMEs in Garissa County. It recommended that SME managers focus on optimizing inventory control,
implementing robust debt recovery mechanisms, and refining cash flow management strategies.
Additionally, policymakers were encouraged to promote financial literacy initiatives for SME owners and
advocate for best practices in working capital management. These insights offer actionable strategies to
address financial challenges and support sustainable growth for SMEs, benefiting entrepreneurs, researchers,
and policymakers alike.
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Citation
Abdiaziz, A. M., & Makori, D. (2025). Working capital management practices and financial performance of small and medium enterprises in Garissa County, Kenya. The Strategic Journal of Business & Change Management, 12 (2), 584 – 606.