Why some small businesses ignore austere working capital management routines

Laura Aseru Orobia · Kesseven Padachi · John Chrysostom Kigozi Munene

27 citations0/0 files storedJournal of Accounting in Emerging Economies

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Working Capital and Financial Performance Supply Chain and Inventory Management Financial Literacy and Behavior

Abstract

Purpose – The purpose of this paper is to investigate factors explaining take-up rate of working capital management routines in small-scale businesses. Design/methodology/approach – A cross-sectional survey research was employed using a sample of 450 small-scale businesses in the central business district of Kampala, Uganda. Common working capital management routines and activity rates were analyzed using descriptive statistics. While binary logistic regression analysis was conducted to discriminate between businesses that engage in working capital management frequently and those that do so less frequently. Findings – The results show that on average, the most frequently performed routines relate to safeguarding cash and inventory, and credit risk assessment. Payment management routines are least performed. Second, business size, perceived usefulness and attitude explain high take-up rate of working capital management routines in small-scale businesses. Business age, level of education and financial management training are inconsequential in determining the likelihood to undertake working capital management frequently. Research limitations/implications – Paucity of studies world over on the input perspective of working capital management limited comparison of the findings with previous research. Future studies should be conducted to confirm the results. Practical implications – The study findings imply that policy makers should develop work-based training programs that take into account the business size effect. Originality/value – This study contributes to existing working capital management literature by explaining activity rate in a developing country perspective.

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