Accounts Receivable Management Practices and Financial Performance of Small and Medium Enterprises in Kisii County
DOI:
https://doi.org/10.47941/ijf.2721Keywords:
Accounts Receivable, Management, Collection Practices, Financing, Risk Assessment, Extension Practices, Financial Performance, SMEsAbstract
Purpose: The study focused on assessing the relationship between accounts receivable management practices and financial performance of small and medium enterprises in Kisii County.
Methodology: Descriptive was used because it allows for contextual interpretation and understanding of the subject under consideration. The study's population consisted of small and medium-sized enterprises in Kisii County. The estimated target population was 240 SMEs. The research used appropriate data collection instruments and procedures.
Findings: The findings reveal that all four practices significantly influence financial performance, with collection practices and risk assessment practices having the strongest impact. Specifically, SMEs that adopted effective collection strategies, such as using aging reports and regular follow-ups, as well as those that formalized credit risk assessment processes, reported better financial outcomes. Financing practices like factoring and using receivables as collateral also enhanced financial performance, while extension practices such as credit scoring models and internal rating systems contributed to improved profitability, albeit to a lesser extent.
Unique Contribution to Theory, Policy and Practice: The study recommends that SMEs invest in improving their accounts receivable management practices and explore modern financing and risk assessment tools. This research contributes to the understanding of accounts receivable management in the SME sector, particularly in Kisii County, and offers insights for both practitioners and policymakers seeking to enhance financial outcomes for SMEs in the region.
Downloads
References
Ahmet, G. S., & Emin, H. C. (2012). Effects of working capital management on firms performance. International journal of economics and financial issues, 2(4), 488-495.
Amenc, N., & Le Sourd, V. (2003). Théorie du portefeuille et analyse de sa performance. Economica.
Berry, A., & Jarvis, P. (2005). Accounting in a business context. Cengage Learning EMEA.
Brealey, R. A., & Myers, S. C. (2003). Capital investment and valuation.
Deloof, M. (2013). Does working capital management affect profitability of Belgian firms?. Journal of business finance & Accounting, 30(3‐4), 573-588.
Demirgüç-Kunt, A., & Maksimovic, V. (2002). Funding growth in bank-based and market-based financial systems: evidence from firm-level data. Journal of financial Economics, 65(3), 337-363.
Duru, A. N., Ekwe, M. C., & Okpe, I. I. (2014). Examined the Impact of Receivables Management on Financial Performance of Food and Beverages Manufacturing Companies in Nigeria. European Journal of Accounting, Auditing and Finance Research, 2(10).
Gill, A. (2011). Factors that influence working capital requirements in Canada. Economics and Finance Review, 1(3), 30-40.
Kimutai, N. H., & Muigai, R. G. (2018). Effect of Working Capital Management on the Financial Performance of Small and Medium Enterprises in Nairobi County, Kenya. Journal of International Business, Innovation and Strategic Management, 2(3), 126-146.
Mbula, K. J., Memba, S. F., & Njeru, A. (2016). Effect of accounts receivable on financial performance of firms funded by government venture capital in Kenya. IOSR Journal of Economics and Finance, 7(1), 62-69.
Michalski, G. (2008). Corporate inventory management with value maximization in view. Agricultural Economics, 54(5), 187-192.
Myers, S. C., & Majluf, N. S. (1984). Corporate financing and investment decisions when firms have information that investors do not have. Journal of financial economics, 13(2), 187-221.
Pike, R., & Neale, B. (2006). Corporate finance and investment: decisions & strategies. Pearson Education.
Sharma, A. K., & Kumar, S. (2011). Effect of working capital management on firm profitability: Empirical evidence from India. Global business review, 12(1), 159-173.
Zopounidis, C., & Doumpos, M. (2002). Multi‐criteria decision aid in financial decision making: methodologies and literature review. Journal of Multi‐Criteria Decision Analysis, 11(4‐5), 167-186.
Downloads
Published
How to Cite
Issue
Section
License
Copyright (c) 2025 Beatrice Siro, Dr. Julius Miroga
This work is licensed under a Creative Commons Attribution 4.0 International License.
Authors retain copyright and grant the journal right of first publication with the work simultaneously licensed under a Creative Commons Attribution (CC-BY) 4.0 License that allows others to share the work with an acknowledgment of the work's authorship and initial publication in this journal.
