International Journal of Research and Innovation in Social Science (IJRISS) | Volume III, Issue VII, July 2019 | ISSN 2454–6186

Financial Management and Profitability among Small and Medium Enterprises (SMEs) in Uganda

Nuwatuhaire Benard and Andrew Ainomugisha
Kampala International University, Uganda

Abstract:-The study was carried out to examine the role of financial management on profitability among SMEs in Uganda. The data was collected from 200 respondents from selected SMEs in western Uganda. The study employed a descriptive correlation and cross sectional survey design. SPSS was used in data analysis. Regression analysis was also used to determine the effect of equity and debt financing on the components of performance which were profitability. Pearson’s Correlation Coefficient was used to establish the relationship between variables and to draw the conclusion on the hypothesis. The study revealed that that working capital management has a significant effect on profitability, internal control has significant effect on profitability in SMEs and that that there is a positive significant relationship between financial management and profitability in SMEs in Uganda, The study recommended that owners and managers of SMEs should improve on the management of working capital through reducing the level of inventory and credit collection from customers and that staff which is independent from those responsible for the system, such as the internal auditor, should provide additional assurance on the effectiveness and cost efficiency of the internal control system

Key words: Financial management, Profitability, SMEs profitability

I. INTRODUCTION

Like any other part of the country in Uganda, failure of SMEs in western Uganda is not an exception. Financial management analysis forms an area of concern to the owners of SMEs most especially if the attainment of business goals is constrained Padachi K (2006). Poor business performance has for long remained unexplained most especially in the third-world countries perspective where the Small and Medium Enterprises occupy the large part of the economy Garcia-Teruel (2007). However, some studies from developed nations (Nguyen, 2001) cite inefficient financial management practices to contribute immensely to SMEs poor business performance.