International Journal of Research and Innovation in Social Science (IJRISS) | Volume IV, Issue VIII, August 2020 | ISSN 2454–6186

Financial Management Practices and Financial Performance of Construction Companies in Nairobi County

Njeri M. N.¹, Dr Muhoho J.², Kiarie J.³

^1,2,3 St. Paul’s university, School of Business. 00217, Kenya

Abstract: Nowadays, competition is becoming very stiff in the business environment Due to this fact, business firms are trying hard to create better interaction with customers and suppliers. Similarly, wise decision making is very crucial to the success of the business firm. This study sought to establish the relationship between financial management practices and financial performance of construction companies: A case study of construction companies in Nairobi County. Specifically, the study sought to establish the effect of internal controls on financial performance of construction industry in Nairobi County. The target population consisted of 167 registered construction firms in Nairobi County. This study adopted census sampling technique since the population size was small. The mean and standard deviation stood in for the descriptive technique.Correlation and regression analysis were the inferential statistics used in the study. The study concludes that internal control has a positive influence on financial performance of construction companies in Nairobi County in Kenya.

Key words: internal controls, financial management practices and financial performance

I. INTRODUCTION

Many people who start to run a business do not engage themselves in financial matters. The reason may be because they do not have enough knowledge or interest in recording transactions, preparation and analysis of financial statements and secondary they are extremely involved in other aspects of business like managing people, sales, purchases and production. These entrepreneurs rely on their accountants to run the financial side of their business. While financial management is a critical element of the management of a business as a whole, within this function the management of its assets is perhaps the most important. In the long term, the purchase of assets directs the course that the business will take during the life of these assets, but the business will never matures if it cannot plan an appropriate policy to effectively manage its working capital. This cause the poor financial management of owner or lack of financial management is the main underlying cause affecting the construction companies’ financial management (Chung & Chuang, 2013).