Working Capital Management and the Performance of SMEs in Delta North
DOI:
https://doi.org/10.57125/FS.2024.09.20.07Keywords:
Working Capital Management, Debtor’s Collection Period, Performance, Creditors’ Payment Period, Cash Conversion CycleAbstract
This study sought to investigate the relationship between working capital management practices and the operational performance of small and medium enterprises (SMEs) situated in the Delta North region. The specific objectives of the study were to examine the effects of debtor’s collection period, creditors’ payment period and cash conversion cycle on the performance of SMEs. The research implemented a multistage sampling technique to select a total of 281 registered SMEs. Data were collected via questionnaires and analyzed using a regression model. The results showed that a one-unit increase in the debtors collection period was associated with an increase in the performance of SMEs (β= 0.584; p-value < 0.01), a one-unit increase in the creditors payment period was associated with an increase in the performance of SMEs (β= 0.295; p-value < 0.01), and that a one-unit increase in cash conversion cycle was associated with an increase in the performance of SMEs (β= 0.112; p-value = 0.01). The findings showed that debtor's collection period, creditors' payment period, and cash conversion cycle had significant effects on the performance of SMEs in the Delta North region, suggesting that better management of working capital can boost the performance of SMEs in the region. The study concluded that debtor’s collection period, creditor’s payment period, and cash conversion cycle are effective working capital management metrics that can significantly affect the performance of SMEs. The study recommended that firms should put adequate measures in place in order to reduce their debtor’s collecting period and creditor’s payment period so as to increase their corporate performance.
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