Revenue Controls and financial performance of Small and Medium Enterprises in Eldoret Town, Kenya

Abstract

Small and medium enterprises (SMEs) are widely recognized for their important role in economic development, job creation, and GDP growth. In fact, SMEs account for 56% of private sector employment and 36% of global GDP. This is particularly true in Iraq, where they make up 99% of private sector companies, and in Africa, where they contribute 75% of total employment. Despite their significance, SMEs often encounter challenges when it comes to managing revenue controls, which are essential for their financial performance. To address this issue, this study focuses on the impact of revenue controls on the financial performance of SMEs in Eldoret, Kenya. We specifically examine various aspects of revenue controls, such as credit terms, customer creditworthiness, revenue recognition, and segregation of duties. Our findings reveal a statistically significant positive relationship between revenue controls and SME financial performance. In other words, SMEs that effectively implement revenue controls experience improved financial outcomes. Interestingly, larger SMEs tend to benefit more from stringent controls compared to smaller ones. Based on these results, we conclude that revenue controls play a crucial role in determining the financial success of SMEs. Proper implementation of these controls leads to enhanced financial performance. Our findings are consistent with existing literature, highlighting the importance of robust accounting control practices for the growth and sustainability of SMEs. Overall, this study provides valuable insights for SME owners, policymakers, and financial managers, helping to strengthen revenue management strategies. By recognizing the significance of revenue controls and adopting effective practices, SMEs can improve their financial performance and contribute to their own growth and the overall economy.