Why some small businesses ignore austere working capital management routines
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25 November 2022
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Purpose – The purpose of this paper is to investigate factors explaining take-up rate of working
capital management routines in small-scale businesses.
Design/methodology/approach – A cross-sectional survey research was employed using a sample
of 450 small-scale businesses in the central business district of Kampala, Uganda. Common working
capital management routines and activity rates were analyzed using descriptive statistics. While
binary logistic regression analysis was conducted to discriminate between businesses that engage in
working capital management frequently and those that do so less frequently.
Findings – The results show that on average, the most frequently performed routines relate to
safeguarding cash and inventory, and credit risk assessment. Payment management routines are least
performed. Second, business size, perceived usefulness and attitude explain high take-up rate of
working capital management routines in small-scale businesses. Business age, level of education and
financial management training are inconsequential in determining the likelihood to undertake working
capital management frequently.
Research limitations/implications – Paucity of studies world over on the input perspective of
working capital management limited comparison of the findings with previous research. Future
studies should be conducted to confirm the results.
Practical implications – The study findings imply that policy makers should develop work-based
training programs that take into account the business size effect.
Originality/value – This study contributes to existing working capital management literature by
explaining activity rate in a developing country perspective.
Keywords
Small business,Attitude,Working capital management,Perceived usefulness,Firm factors