The Effect of Financial Management Practices on The Financial Performance of SMEs in Seeta, Goma Division, Mukono District

Abstract

The study sought to examine the effect of financial management practices on the financial performance of SMEs in Seeta, Goma Division, Mukono District. The study was guided by three objectives: finding out the contribution of cash flow management on the financial performance of SMEs, analysing the contribution of record keeping on the financial performance of SMEs and establishing the contribution of budget control on the financial performance of SMEs in Seeta. The study was carried out using cross-sectional survey research design where quantitative research approach was utilized. Stratified sampling method was used to get a sample of 222 SME owners or managers operating in Seeta, Goma Division, Mukono District although 200 of these respondents responded to the questionnaires. The findings of this study underscored the critical role of financial management practices, including cash flow management, record keeping, and budget control, in driving the improved financial performance of SMEs in Seeta, Mukono district. SME owners in this region have demonstrated a proactive approach to managing their businesses, with majority implementing effective cash flow management systems, maintaining optimal working capital, and practicing diligent record keeping. These practices, coupled with budget control strategies such as financial analysis and activity-based budgeting, collectively contribute to the overall financial success of SMEs in Seeta, Mukono district. These insights provide valuable guidance for SME owners and policymakers seeking to foster sustainable economic growth and development within this vibrant business community. Finally, the study recommends that managers/owners of the SMEs need to make utilization of financial management practices as a key priority. The study also recommends that before the adoption of any particular financial management practice, the managers/owners of the SMEs to first determine the suitability of that particular financial management practice based on the organization structure, culture and policies.