Working Capital Management Practices of Small and Medium Enterprises (SMEs) in the Tarkwa Nsuaem Municipality of the Western Region of Ghana

Abstract

In a developing economy like Ghana, the contribution of Small and Medium Enterprises (SMEs) to the employment of the youth is highly recognized, but their contribution towards revenue to the national budget seems negligible. The reason is that some of the Enterprises do not manage their Working Capital as expected and this has affected the viability of their businesses. Mostly, the Operators of Small and Medium Enterprises possess limited formal education, weak managerial and financial management skills within the sector. This study evaluates Working Capital Management Practices among Small and Medium Enterprises (SMEs) in the Tarkwa Nsuaem Municipality of the Western Region of Ghana. One Hundred and Twenty (120) SMEs in the Tarkwa Nsuaem Municipality of the Western Region of Ghana were surveyed for this purpose. Statistical Package for Social Sciences (SPSS) was used to conduct several forms of analysis. The research hypothesized that among the demographic factors, only academic qualification of an entrepreneur and location of business have influence on Working Capital Management of SMEs in the Municipality. The Operators also carry out formal credit investigations before selling on credit especially for the first time. Again, the Enterprises appeared to be liquidity conscious and thus, refrain from financing long-term projects with short-term funds. One key issue the study revealed is that though the SMEs appeared to be managing their working capital well, they will do much better if they make use of entrepreneurial programmes offered by the National Board for Small Scale Industries (NBSSI) and Non-Governmental Organizations (NGOs) since these come with education and training.