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BUSINESS ADMINISTRATION

THE IMPACT OF FINANCIAL MANAGEMENT ON THE EXPANSION OF SMALL AND MEDIUM-SIZED BUSINESSES

THE IMP OF MANAGEMENT ON THE EXPANSION OF SMALL AND MEDIUM-SIZED ES

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FIRST PART

INTRODUCTION

1.1 BACKGROUND OF STUDY

Small and Medium-d Enterprises (SME) are widely recognized as the engine of sustainable economic growth. According to UNDP (1974), developing countries, including Nigeria, have shown increased interest in the promotion of small and medium scale enterprises since the 1970s for three main reasons: the failure of past industrial policies to generate efficient self-sustaining growth; increased emphasis on self-reliant approach to development; and the recognition that dynamic and growing SMIs can significantly contribute to a wide range of developmental objectives. These objectives include, among others, the efficient use of resources, the creation of jobs, the mobilization of domestic savings for investments, the encouragement, expansion, and development of indigenous enterprise and technology, and the distribution of income. In order to facilitate the achievement of these goals, the government has created support programmes in the areas of finance, extension and advisory services, training, and infrastructure provision for the development of small and medium-sized enterprises (SMEs). However, due to numerous constraints, the full potential of SMIs in the development process has not been achieved.

Financial management is one of a number of functional areas of management crucial to the success of any small organization (Meredith, 2006). Financial management is the management of an organization’s finances in order to fulfill its financial objectives. McMahon et al. (2008) describe financial management as the mobilization and utilization of funding sources: Financial management is concerned with acquiring the finances necessary to finance the enterprise’s assets and activities, allocating these scarce funds among competing uses, and ensuring that the funds are used effectively and efficiently to accomplish the enterprise’s objective. This study’s definition of financial management consists of five (5) elements, including working capital management, which is further subdivided into cash management, receivables management, and inventory management. In addition to investment, financing, accounting information systems, and financial reporting and analysis, other financial management concepts include investment, financing, accounting information systems, and financial reporting and analysis. Ross et al. (2009) identified three types of business decisions that a company’s financial manager must make: the financing decision, judgments concerning short-term finance and pertaining to net working capital, investment, and financial reporting. Similarly, Ang (2002) identified three primary financial decisions, including investing, financing, and dividend selections. According to Meredith (2006), financial management is concerned with all areas of management that involve finance, including not only the sources and uses of finance in the enterprise, but also the financial implications of investment, production, marketing, and personnel decisions, as well as the enterprise’s overall performance. However, SMEs in Kenya are not currently embracing these areas, and therefore require immediate attention. Lack of good management throughout the early phases of a SME’s existence is also a key reason of company failure for small enterprises, whose owners typically manage their businesses themselves to reduce operating costs.

Ineffective financial management can harm corporate efficiency, and this will have an ongoing impact on the growth of small and medium-sized businesses. However, effective financial management is likely to assist SMBs in enhancing their business efficacy, and as a result, these challenges can be mitigated to some extent. Kazooba (2006) claims that although Kenya is one of the countries with the highest number of SME startups, it also has the highest number of SME failures and closures. However, the research done did not demonstrate how the components of financial management influence the total business effectiveness of SME’s. Numerous corporate failures have been ascribed to the incapacity of finance managers to adequately plan and oversee their firms’ current assets and current obligations (Mbaguta, 2002). Using Adeyemi oil palm PLC as a case study, this study focuses on the impact of financial management on the success of small and medium-sized businesses.

1.2 DESCRIPTION OF THE PROBLEM

ly, Nigerian small-scale businesses confront obstacles that impede their growth and development. This supports the adage that the success of any organization, no matter how little, huge, or enormous, is mostly dependent on the performance of its people, namely management, finance, and numerous and high-tax earners.

To assure the achievement of this Small-scale business management target, this research has been presented to overcome the following obstacles:

1. management issue resulting from inadequate planning

2. financial issue resulting from lack of financial assistance and inadequate funding

3. Numerous and High Taxes

According to Wanjohi (2009), both success and failure are possibilities when launching and maintaining a small firm. Due to their tiny size, a single management error is likely to result in the certain demise of a small business, which has no opportunity to learn from its prior errors. This can be linked to a lack of preparation, bad funding, and poor management, which have been recognized as the leading causes of small business failure (Longenecker, 2006). Despite the fact that it is evident that small and medium-sized enterprises (SMIs) play a crucial in economic development, the rate at which newly founded SMIs fail is unacceptable. In light of this awareness, the purpose of the present study is to explore the impact of financial management techniques on the expansion of SMIs. These issues make it obvious that a study on the effect of financial management on the expansion of small and medium-sized businesses is required.

1.3 OBJECTIVES OF THE STUDY

Using Adeyemi oil palm PLC as a case study, this paper seeks to analyze the impact of financial management on the expansion of small and medium-sized enterprises. The particular aims are:

Determine the impact of investing techniques on the expansion of Adeyemi oil palm PLC.

Determine the impact of working capital management practices on Adeyemi oil palm PLC’s growth.

Determine the impact of financial reporting and analysis processes on Adeyemi oil palm PLC’s growth.

Determine how financial planning procedures impact the issue of inadequate finance at Adeyemi oil palm PLC.

To examine the impact of accounting information systems on Adeyemi oil palm PLC’s growth.

1.4 RESEARCH QUESTIONS

Relevant research questions associated with this study include:

What impact do investing techniques have on the expansion of Adeyemi oil palm PLC?

What impact do working capital management strategies have on Adeyemi oil palm PLC’s growth?

What effect do financial reporting and analysis processes have on Adeyemi oil palm PLC’s growth?

How do financial planning techniques affect the lack of finance situation at Adeyemi oil palm PLC?

What effect do accounting information systems have on the expansion of Adeyemi oil palm PLC?

1.5 Significance of the Research

The findings of this study will assist the management of small-scale firms to better comprehend the need for a proper feasibility study and business plan prior to launching a company in order to facilitate management. The study will assist the government, the private sector, and aspiring small business owners to develop policies that will enhance the management of small businesses.

This study’s findings are significant because they illuminate the impact of financial management on the expansion of small and medium-sized businesses. per financial management is crucial to the sustainability of every organization.

This study will contribute to the existing body of knowledge by examining previously unexplored or unconsidered parts of the literature and incorporating these aspects into the current investigation. This work will therefore serve as the foundation for future research in the topic.

1.6 RADIUS OF THE STUDY

Using Adeyemi oil palm PLC as a case study, the scope of this study is limited to investigating the effect of financial management on the expansion of small and medium-sized businesses.

THE IMP OF MANAGEMENT ON THE EXPANSION OF SMALL AND MEDIUM-SIZED ES

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