Working Capital Management and Financial Sustainability of Small and Medium Enterprises.

Abstract:

The study examined the nexus between working capital management and sustainability of small and medium enterprises (SMEs) in Bayelsa State. A quantitative design was adopted and the population of the study was 1256 SMEs and a sample of 303 SMEs was selected through a stratified sampling procedure. The data were collected to through a structured questionnaire while content validity and Cronbach alpha was applied to determine the internal consistency of the measurement of the instruments. The data was analysed through structural equation modelling using a process-based approach of Smart PLS. The study found that account receivable management had a significant positive effect on financial sustainability of SMEs while cash management and inventory management had a positive but non-significant effect on the financial sustainability of SMEs in Bayelsa State. It was recommended that there should be a robust policy framework to promote effective receivable collection process and minimize bad debts. Further, managers should improve access to financing options foe SMEs and facilitate cash inflows and inventory management. There should also be an integrative working capital management processes to ensure financial sustainability of SMEs.