Working Capital Management Practices in Sri Lankan Small Firms: An Organizational Learning Perspective

Abstract

The efficient management of working capital is crucial for small firms to ensure their prosperity and the survival. This paper aims to identify the working capital management practices in small firms. The study uses qualitative research approach by selecting five manufacturing firms with assistance of in-depth semi-structured interview. The data analysis utilized a set of qualitative techniques such as content analysis, pattern matching and explanation building techniques. The results show that working capital decisions of the small firms are heavily based on owner managers past experience, advices of specialists and shared norms and practices within the business sector. No specific methods based on calculating cost benefits of the decisions were found. The lack of awareness and knowledge about the importance of managing cash flows and liquidity and record keeping were further identified as some of weaknesses in the working capital process of the selected firms. In light of the findings of the study, it is recommended among other things that, they should avoid mixing business transactions with other transactions. The findings, further stress that neediness of establishing proper network between business firms and other helping and assisting organization to improve owner manager’s experience and access to information sources.