WORKING CAPITAL MANAGEMENT AND PERFORMANCE OF SMALL AND MEDIUM ENTERPRISES IN AKURE, ONDO STATE NIGERIA

Abstract

This study investigates working capital management and performance of small and medium enterprises in Akure, Ondo State, Nigeria. The research design was descriptive survey which adopted descriptive method such as simple percentages, mean values, and frequency distribution tables with the use of structured questionnaire to collect primary data while secondary data were sourced through textbooks, journals, as well as internet access. Simple random sampling technique was adopted and the sample size was 284 respondents using Yamane’s (1967) formula; while the population of the study was 975 registered SMEs as given by the Small and Medium Enterprise Agency in Ondo State. The inferential statistic of Pearson Product Moment Correlation (PPMC) was used to analyse the data. The findings revealed that of all the three identified current assets financing policies adopted by the SMEs in Akure, the conservative approach is mostly used followed by matching approach and aggressive approach respectively. In considering the major sources of financing SMEs working capital in the study area, it was discovered that the first three ranking were bank loan, loan from other sources apart from bank and personal savings / retained earnings. Also, of all the four identified working capital components, cash is mostly used; followed by inventory; accounts receivable; and accounts payable respectively. On the other hand, the result showed that there are a number of problems associated with working capital management and performance of SMEs in Akure. They include: poor cash management; Lack of expert or skilled personnel in working capital management; Low level practice of modern technology e.g Enterprise Resource Planning (ERP) for inventory management; inadequate access to finance for working capital needs; and slack accounts receivable collection as well as poor accounts payable policy among others. In conclusion, notwithstanding the identified problems associated with working capital management in Akure, the result from correlation coefficient and T- test of hypothesis revealed that there is significant, positive relationship between working capital management and performance of SMEs in Akure, Ondo State.