Working Capital Management Practices Of Small And Medium Enterprises In Nigeria

Working Capital Management Practices Of Small And Medium Enterprises In Nigeria

Chapter One

General Introduction

Background Of The Study

There live lots and lots of business gambles that are run by individualities, group of people or

association, enterprises, diligence and government with the end of maximizing gains. They

range from small scale to medium and large enterprises. In the Nigerian frugality the small scale

enterprises are the most common form of business. The end of any frugality( either

industrialized or non industrialized) depends largely on how well organised the small and

medium scale enterprises are( for case if we look at the standard of practices of small-

scale diligence in the economically developed Countries). The small enterprises in Nigeria feel too stagnant, less audacious than developed countries because the consecutive

governments haven’t appreciated their significance to the public frugality.

originally, utmost of the small businesses are es

companies sole procurement business adventure.

Small enterprises play critical places in furnishing job openings, nurturing a culture of entrepreneurship and opening up new business openings. They’re recognised and conceded worldwide as vital and significant contributors to the profitable development, preface and prolixity of new technology, capability in generating implicit entrepreneurs and professed workers for the industrialization process both nationally and internationally( Ch ng Hakng Zephkee- Yun & 198625) Cha.

Small and Medium- Scale enterprises development can encourage the process of bothinter-and intra-indigenous decentralization; and they may well countervail profitable power of larger enterprises.

More generally, the development of SME s is seen as accelerating profitable objects, including poverty relief( cook & Nixson, 2000).

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Small and Medium enterprises are new and growing business which( for any number of reasons) don’t grow beyond a certain size( Thomson & Martin 2005). The Nigerian Bureau of Statistics( NBS) consider enterprises with smaller than ten workers as small- scale enterprises and their counterparts with further than ten workers as medium and large sized enterprises. The GSS in its public accounts considered companies with over to 9 workers as SMEs.( kayanula & Quartey 2000).

SME s accountforsignificant share of the profitable exertion in Nigeria and can play an important part in achieving the Millennium Development Goals( MDGs). The long term

pretensions is for SME s to maximize their contr development with respect to product, income distribution and employment and the closer

integration of women and people in pastoral areas within the public frugality( NBSS, 1981).

One of the significant characteristics of flourishing and growing frugality is roaring small and medium enterprises( SMEs).

Small and Medium enterprises play an important part in the development of Nigeria in colorful ways by creating employment for pastoral and civic growing labour force, furnishing desirable sustainability and invention in the frugality as a whole.

The small and medium scale enterprises have egregious advantage for a developing country like Nigeria because it provides the means of entry for new entrepreneurial gift.

Small and medium scale business sector serve as a seed bed from which new large companies will grow but lack of directorial know- style places significant constrains on SMEs development. Indeed though SMEs tend to attract motivated directors, they can hardly contend with large enterprises.

The failure of operation gift, current in utmost countries in the region, has significant

impact on SME s( ParkerThelack of et support al, services1995) or their relatively. advanced

unit cost caneffort hampertoimprovetheir managementSME s of working capital( ibid). In

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view of their sizes and complications of their operations, utmost small and medium scale enterprises fail to keep proper records of fiscal conditioning which affect their working capital. This has taxation, credit operation and security recrimination. The lack of proper business records makes most small and medium scale businesses come virtually constrained in managing their working capital veritably well.

Statement Of The Problem

Working capital operation is inadequately understood by utmost small and medium scale enterprises in numerous corridor of the developing world of which Nigeria is one.

The dynamic part of small andindevelopingmediumcountries scale have been linked as the means through which rapid-fire industrialization and other development pretensions of these countries can be realized.

numerous small and medium scale enterprises which are profitable are forced to cease their operations due to the incapability to meet their short term debts scores. Not that they don’t have finances to operate, but the problem is how they manage their working capital. Blunt and vague ideas about miracle will be misnomer.

To gain empirical sapience into this state of affairs, there’s a need to conduct an disquisition into the operation practices of small and medium scale enterprises insofar as their working capital is concerned and why small and medium scale enterprises which are profitable collapse.

Objects Of The Study

General objects

Holistically, the study examined the working capital operation practices of small and medium scale enterprises in the Uyo Local Government Area.

Specifically, the study sought to

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ascertain styles that were used/ book keeping practices of SMEs

examine strategies SMEs used in the administration of accounts receivables.

determine the force operation system of SMEs with respect to working capital operation

explore the credit operation mechanisms that are being used by SMEs

examine the impediments gumming the applicable operation of working capital by SMS investors

Exploration Questions

The following exploration questions guided the study These include;

What are the stations of operation towards working capital operation practices in the small and medium scale enterprises in Nigeria?

What ways do SMEs in Nigeria use in managing their accounts receivables and accounts payables?

How are matters on force operation approached with respect to Working

Capital Management?

4 How do SMEs in Nigeria mange their cash overflows?

5 What are the excrescencies witnessed by SMS investors in managing their working capital?

The Compass Of The Study

It’s worth mentioning that, the study was limited to Uyo Local Government Area because of propinquity and cost saving. Selection was also grounded on the fact that it has a number of artificial units in the Western Region.

The small- scale enterprise in structures or non endless include pavilion, vessel and related demesne.

the Original Government Area operates under either physical physical structures. The non endless physical structures garage. The endless physical structures are part of own

The study design espoused was descriptive check, it was chosen in view of the fact that this small scale study of fairly short duration and its involves a methodical collection and clear picture of a particular situation.

It was aimed at getting applicable information related to working capital operation practices of small scale enterprises in the Uyo Local Government Area.

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Significance Of The Study

It’s hoped that the result of this study concerning working capital operation in the Uyo Local Government Area would contribute to current knowledge on growth of small scale enterprises at the National Board for small scale diligence( NBSSI), the Business Advisory Centre( BAC) and other creation agencies.

Secondly, the finding exhumed will be useful not only to small scale business in the UyoLocal Government Area but also to all small- scale business throughout the country. This would also help stakeholders in business to formulate and apply programs that will help them to effectively manage working capital. Determining ways operation can effectively ameliorate their working capital operation.

To ameliorate the book keeping and accountingTohelp p the SMEs gain access to finance and ameliorate their fiscal operation chops. Help SMEs

to borrow prudent directorial programs as well as professional moxie for effective directorial workshop.

Eventually, this study would give useful information for designing strategies to impact the growth of small- scale enterprise. The information would also help officers of the Ministry of Trade and diligence in formulating small- scale diligence growth programs and programmes

which are responsive to entrepreneur susefultonon- loca governmental associations playing vital places in small- scale entrepreneurial chops and

development in Nigeria and the UyoLocal Government Area.