Working capital management practices of small and medium scale enterprises in the Agona West Municipal Assembly of the Central Region of Ghana

Abstract

The study was to examine working capital management among small and medium scale enterprises (SMEs) in the Agona West Municipal Assembly in the Central Region. The study employed a survey research design of which the targeted population was the SME operators in the Agona West Municipal Assembly. The study sampled 155 respondents using simple random sampling technique. Questionnaire was the main data collection instrument. Furthermore, the data were processed using SPSS version 21.0. The analysis was done using percentages and frequencies and results were presented using tables and charts. The study found that SMEs do not follow a formalize working capital policy (cash management, inventory management, receivable management and payables management) and therefore are not able to analyse properly their effectiveness and efficiency in managing working capital. Finally, Computer illiteracy of accountants, insufficient funds to employ professional accountants and upgrading the skills of non-professional accountants were some of the challenges that impeded the smooth utilisation of working capital by the entrepreneurs. The study concluded that most SME operators do not have proper working capital management practices. It is therefore, recommended that established organisations and groups like civil society organisations, regional, district, community and interest groups should jointly organise and sponsor training programmes for their accounting personnel. Also, SMEs should formulate credible credit policies for their enterprises and should create a re-order level policy for their businesses that will create an enabling environment for them to request for the supply of moderate and high quality stocks.