Cash, receivables and inventory management practices in small enterprises: their associations with financial performance and competitiveness

Abstract

This article examines cash, receivables and inventory management in small businesses and their associations with financial performance and competitiveness. The data used in the study is collected from 188 small and medium-sized enterprises through structured questionnaires and four hypotheses are tested by using structural equation modelling (SEM). Findings of the regression analyses show that the higher degree of conduct of receivables and cash management practices is positively associated with financial performance while a weaker degree of association is found for inventory management practices. The results also indicate a significantly strong positive correlation between financial performance and business competitiveness. The study aims to contribute to both financial management and small business management literatures with its focus on working capital management practices and competitiveness associations through improved financial performance and offers valuable implications to small business owner/managers and regulators, by proposing financial performance as a crucial factor that enhances competitiveness in small businesses.