Effect of Working Capital Management On The Profitability of Women Owned Small And Medium Enterprises In Nyeri Town, Kenya

Abstract

Working Capital management is one crucial element used to analyze the performance of organizations in their daily operations by ensuring that the there is a balance between profitability and liquidity. This research evaluates the effects of working capital management on the profitabilityof Small and Medium Enterprises. Specifically the study looks at the effect of cash, accounts receivables, accounts payables management on the performance of  women owned Small and Medium Enterprises in Nyeri Town, Kenya .The target population was 10 Women owned Small and Medium Enterprises registered by the County Government of Nyeri Kenya and had been in business for more than 5 years. Secondary data for a period of 5years between 2018 and 2022 was collected and analyzed using a panel regression analysis model. The study results indicated that all the three variables under observation, that is cash accounts receivable and payables management had a negative and significant effect on profitability of Women Owned Small and Medium Enterprises in Nyeri County, Kenya. The study recommends that the Enterprises should reduce their average collection period in order to improve their profitability. Data collected showed that the average accounts receivables collection period in the period of 2018 to 2022 was 182.4715 days. Thus to boost profitability the study recommends the Women Owned Small and Medium Enterprises should reduce the account receivables collection period by using incentives to encourage the debtors to pay on time.The average accounts payables payment period was 79.9924 days which was quite high.A firm with a long account payment period frustrates the supplier from supplying any more goods or services to the firms.Thus, the accounts payable period needs to be maintained as low as possible and the firms need to pay any debts promptly if possible.