Effect of Cash Management Practices on Financial Performance of Small and Medium Enterprises in Kenya. A Case Study of Mombasa County

Abstract

This study examined the effect of cash management practices on the financial performance of small and medium enterprises in Kenya. The study was anchored on four theories: The Rational Choice Theory, Modern portfolio theory, the cash flow theory and the cash management theory. A survey research design was adopted in the study. The researcher used census to select 98 respondents from all the registered hardware operating in Mombasa County. The researcher personally called the accountants and read for them the questionnaires and recorded the data. The data was tabulated, and then analyzed using descriptive and inferential statistics with the help of Statistical package for the Social Sciences (SPSS) version 26 software. Quantitative data was analyzed using descriptive statistics which included frequencies, percentages, mean and standard deviation. Inferential statistics included correlations and regression analysis using the model Y = B0 + B1X1+ B2X2+B3X3 + B4X4 + e to test the effect of the independent on the dependent variable. The results of the study were presented using tables. The study found that there is a significantly positive effect of bank reconciliation on the financial performance of SMEs in Kenya. The study also established that there is a significantly positive effect of credit management on the financial performance of SMEs in Kenya. The study found that cash planning had a positively significant effect on the financial performance of SMEs in Kenya. The study also established that cash flow had a significantly positive effect on that financial performance of SMEs in Kenya. The study concluded that cash management practices had a significantly positive effect on the financial performance of SMEs in Kenya. The study recommended that cash management practices such as bank reconciliation, credit management, cash planning and cash flow should be adopted by SMEs in Kenya in order to enhance their financial performance