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I nternational Journal of Business and Management Cases Vol. 1 No. 2

June|2012 www.ijbmc.com Page |1

Assessing Working Capital Management of SMEs inGhana Using Inventory and Trade Credit

ASIAMAHYEBOAH, Lecturer/ HOD, Department of Marketing, Faculty of Business and ManagementStudies, Kumasi Polytechnic

AbstractEven though, the SME sector plays a major role in the development of the Ghanaian economy yet, they arefaced with huge challenges including inadequate knowledge and skills in managing the business and itsfinances. However, in as much as finance is the life blood of all firms, SMEs have to manage their finances

properly in order to be better and competitive. The aim of this study is to explore the working capital

management of SMEs using stock or inventory and credit to customers as factors. The study was qualitativeusing questionnaire and personal interview to gather data from fifty (50) participants. The findings showed that

small businesses try to manage their working capital well and their working capital management practices arestrong with the exception of their trade credit and collection aspect that was found to be weak. Based on thefindings, recommendations were given to help improve the sampled businesses working capital.

Key words: Working Capital, Inventory, SME, Financial Management, Credit, Economy

1. IntroductionOne of the significant yardsticks used to measure a flourishing economy is a vibrant small- and medium- scale

enterprises (SME) sector. The world economy, arguably, is riding on the crest wave of the success of small- andmedium- scale enterprises. SMEs continue to spring up in almost every part of the globe. Even countries likeCroatia, Slovenia, China, Russia, Vietnam and many others whose economies were controlled by the state arenow providing favourable environment for the setting up of small businesses and their growth (Zimmerer and


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Scarborough, 2008). SMEs thrive in virtually all industries, although the majority is concentrated in the services,commerce and retail industries (ibid).

The role that small and medium enterprises play in the development of an economy cannot be underestimated.

SMEs contribute to economic development by creating jobs for the worlds growing labour force, particularly indeveloping countries. In an article, Fida (2009) stated that:

According to statistics, in industrialized countries, SMEs are major contributors to private sector employment.

SMEs contribute to over 55 per cent of Gross Domestic Product (GDP) and over 65 per cent of totalemployment in high income countries. account for over 60 per cent of GDP and over70 percent of total

employment in low income countries, while they contribute about 70 per cent of GDP and 95 per cent of totalemployment in middle income countries

In Ghana, SMEs play important role in engendering growth and development because they form significant part

of the economy. In an article by Abor and Adjasi (2007) it was stated that SMEs contribute about 85 per cent ofmanufacturing employment and account for 92 per cent of businesses in Ghana (Cited in Steel and Webster,1991).

In spite of the important role that SMEs play in the Ghanaian economy, they are faced with huge challenges.These challenges are inadequate knowledge and skills in managing the business and its finances, inadequate and

erratic financing or credit facilities, lack of access to improved technology, inadequate socio-economicinfrastructure, and lack of ready market for their products and services (Mustapha, 2009) among others.

However, to make these SMEs better and competitive, their finances have to be managed properly. This stems

from the fact that finance is the life blood of every organization whether big or small. If managed well it canspur businesses to grow and provide value for their owners. On the other hand, if ill managed, it can facilitatethe collapse of a business and plunge its owners into debt. Financial management capabilities therefore arecrucial for the survival of business organization.

Most small business owners in Ghana do not use proper working capital management techniques or tools as aidsin their working capital decision making. They rely on other managers experience, their intuition, hunches and

what other businesses are doing. This results in incorrect stock holding, poor credit screening, frivolousspending of cash, unnecessary acquisition of assets not benefiting the core business, and lax debt collectionpractices. All these are common factors that account for SME failure (Zimmerer and Scarborough, 2008).

A lot of studies on working capital management have been done but the emphasis has been on large public andprivate (corporate) businesses in developed countries. The issue of whether the findings and recommendationsare applicable and relevant to SMEs has received little attention. Commenting on this issue Zingales (2000)

asserts that, empirically, the emphasis on large companies has led us to ignore (or study less than necessary)the rest of the universe: the young and small firms, who do not have access to public markets (Cited in Aborand Biekpe, 2005). The few studies in this area tend to concentrate on SMEs of advance economies with often

varied and inconclusive results (Abor and Biekpe, 2005).This issue has received little attention in the Ghanaiancontext. This study therefore aims at assessing the working capital management of SMEs in Ghana usinginventory and trade credit. The contribution of this paper is two-fold. Firstly, it introduces a novel construction

which links inventory and credit management to the companys performance arguing that effective stock andcredit management can help improve firms financial performance. Secondly, from a managerial point of view,the findings of this paper can be used to support managerial decision making both at operational and strategiclevels aiming towards improved operational quality.

The first section of the paper after this introduction reviews literature relevant to assessing working capitalmanagement in SMEs using stock and credit for the purpose of performance improvement. This reviewsummarizes the main literature used in developing the construction. Next, the study methodology is describedand the case company and the developed construction are introduced. Finally, the results of the study arepresented and discussed, followed by the conclusions and implications for management and further research.

2. Literature Review2.1 Introduction to Financial ManagementThe contribution of Financial Management to the development of modern businesses dates back to the 1900s.Van Horne and Wachowicz (2005) assert that financial management during this period was basically concerned

with raising of funds and managing firms cash positions. The increasing popularity of present value conceptsencouraged financial management to become concerned with choosing capital investment projects (ibid).


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In order to judge that a financial management decision has been efficient, there is the need to have an objectivethat will serve as a yardstick for the measurement of actual performance. Although various objectives arepresent, Van Horne and Wachowicz (2005) claim the most important goal is the maximization of the wealth of afirms present owners. Ross et al (2004) also identifies profit maximization as an alternative goal. However, the

meaning of this goal is unclear; whether it means accounting net income or earnings per share. There is noappropriate trade-off between current and future profits (ibid). Maximizing earnings per share (EPS) is oftenadvocated as an improved version of profit maximization (Van Horne and Wachowicz, 2005).

The shortcomings of EPS are that it does not specify the timing of expected returns; risk is not considered and itdoes not allow for a dividend policy on market price of the stock (ibid). In view of these drawbacks, maximizingthe market price per share is the appropriate objective because it serves as a barometer for business

performance; it indicates how well management is doing on behalf of its shareholders (Van Horne andWachowicz, 2005: p 4). Various stakeholders with interests in the firm results in businesses adopting many non-financial objectives, examples of which are: survival, diversification, maintaining a satisfied workforce, growth,

being environmentally conscious and so on (ACCA, 2002). Ross et al (2004) make a case for businesses thathave no traded stock. They argue that since the total value of the stock in a corporation is simply equal to thevalue of the owners equity, the objective should be stated as to maximize the market value of the existing

owners equity (ibid). The researcher agrees with this assertion because it cuts across all forms of businessownership: sole proprietorship, partnership and Limited Liability Company.

2.1.1 The Scope of Financial ManagementFinancial management is concerned with the acquisition, financing and management of assets (Van Horne andWachowicz, 2005). The boundary of financial management covers three main decision areas: the investment,financing and asset management (ibid). Ross et al (2004) shed more light on these areas by explaining that

capital budgeting concerns the planning and managing long term investments; capital structure refers to mixtureof long- term debt and equity maintained by a firm and working capital management which is a firms short-term assets and liabilities. Another scope identified by ACCA (2002) is raising of finance; efficient allocation ofresources; and maintaining control over the resources.

2.1.2 Overview of Working Capital ManagementWorking capital management is a significant area of financial management, and the administration of working

capital may have an important impact on the profitability and liquidity of the firm (Shin and Soenen, 1998).There are two major concepts of working capital. Net working capital according to Van Horne and Wachowicz(2005) is the difference between current assets and current liabilities while gross working capital is the currentassets. They assert that working capital is synonymous with current assets. ACCA (2002) describes working

capital management as the management of all aspects of both currentassets and current liabilities, to minimizethe risk of insolvency while maximizing the return on assets. Van Horne and Wachowicz (2005) on the orderhand say it concerns the administration of the firms current assets along with the financing needed to s upport

current assets. According to Garcia- Teruel and Martinez- Solano (2007) firms can choose between two basictypes of strategies for net working capital management: they can minimize working capital investments or theycan adopt working capital policies designed to increase sales. In determining the appropriate amount, or level of

current assets, the trade- off between profitability and risk must be considered. Profitability varies inversely withliquidity and profitability moves together with risk (ACCA, 2002, and Van Horne and Wachowicz, 2005).Management of the firm, argues Garcia- Teruel and Martinez- Solano (2007), therefore has to evaluate the

trade- off between expected profitability and risk before deciding the optimal level of investment in currentassets.

Working capital can be classified by components (cash, marketable securities, receivables, and inventory) and

by time either permanent or temporary. Permanent working capital is the amount of current assets required tomeet a firms long- term minimum needs. Conversely, temporary working capital is the amount of current assetsthat varies with seasonal needs (Van Horne and Wachowicz, 2005 and Ross et al, 2004). ACCA (2002) alsoclassifies working capital as short term net assets which are made up of stock, debtors and cash less short- termcreditors.

2.2 Cash ManagementKeynes (1936) suggests three reasons why individuals hold cash: transaction, speculative and precautionarymotives. It has been noted that businesses also hold cash for these same motives (ACCA, 2002 and Van Horneand Wachowicz, 2005, Ross et al, 2004). Cash management entails the efficient collection and disbursement ofcash and temporary investment of idle cash (Ross et al, 2004). Gitman (1974) argues that the cash conversion

cycle was a key factor in working capital management. The cash conversion cycle represents the averagenumber of days between the date when the firm must start paying it suppliers and the date it begins collectingpayments from its customers (ibid). Van Horne and Wachowicz (2005) posit that a firm generally benefits by


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speeding up cash collection and slowing down cash payments. The process of cash concentration areengaged in by (large) businesses to improve control over corporate cash, provide for more effective short- terminvesting and reduce idle cash balances (Ross et al, 2004 and Van Horne and Wachowicz, 2005). Methods usedto control disbursement include the use of payable through drafts, the maintenance of separate disbursement

accounts, zero balance accounts, and controlled or remote disbursing (ibid).

The concept of cash concentration, which is, speeding up cash collection and slowing down cash payments, in

the opinion of the researcher cannot be effectively practiced by small businesses because they consume a lot of

money in a bit to grow and they risk losing their credibility if they unduly delay payments.

2.2.1 Management of Debtors and CreditorsHoworth and Wilson (1998) assert that trade credit plays an important role as a component of net workingcapital and a source of short term finance for businesses. Granting trade credit boost up a firms sales in manyways- it can act as price cut (Brennan et al, 1988; and Peterson and Rajan, 1997); serves as incentive for

customers to acquire goods at periods of low demand (Emery, 1987); and help firms to strengthen long- termrelationship with their customers (Ng et al, 1999). However, creditor management, Rafuse (1996) contends, Isessentially a Darwinian situation- the survival of the fittest. Large companies enforce their terms with smaller

companies, who in turn enforce their terms with those smaller yet. The intention of most [UK] companies is todefer payment well beyond the agreed arrangements and actual payments frequently extend beyond the terms(ibid). In order to manage this late payment which has been cited as a major problem of small businesses (FPB,

1996) there is the need for businesses to formulate and implement aggressive credit and collection policies (Joseet al, 1996 and Deloof, 2003). These policies explain Van Horne and Wachowicz (2005) entail severaldecisions: the quality of accounts accepted; the length of the credit period; the size of the cash discount (if any)for early payment; any special terms such as seasonal dating; and the level of collection expenditures. In order to

maximize profits, firms are advised to vary these policies together until they achieve an optimal solution. Theoptimal solution would be the one that results in the marginal gains equaling the marginal costs (Van Horne andWachowicz, 2005 and Ross et al, 2004). Figure 2.4 on the next page illustrates this assertion.

Tinkering with the various policies to achieve the optimal solutions is not simple as simple as it seem. It takesexperience, frequent practice and long time to achieve this result.

Figure 2.2: The costs of granting credit: Source: Ross et al, 2004

Even though a careful credit analysis and scrutiny may result in significant reduction in trade credit grantedwhich in turn may provoke a decrease in sales from customers (Garcia- Teruel and Martinez- Solano, 2007), it isstill essential to determine what the maximum amount of credit or credit line should be (Van Horne andWachowicz, 2005).

2.2.2 Inventory managementInventory management remains a serious concern for businesses wishing to remain competitive and survive in

the marketplace (Wallin et al., 2006). Monczka et al., 2002 and Handfield, 2002 estimate that typicalmanufacturing firms spend 56 percent of revenue to cover the direct cost of purchased goods; this figure is evenhigher for the typical wholesaler and retailer. The indirect cost of having to manage the purchased goods is also

estimated to be between 30-35 percent of the value of the purchased goods (Chase et al., 2004). Ordering andmaintaining inventory has several costs. These include capital cost, administrative charges, storage charges,


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shrinkage, taxes and insurance (Holdren and Hollingshead, 1999; Ross et al., 2004). Most of these costs varydirectly with the average quantities of inventories held and the obvious strategy of cost avoidance is to reduce oreliminate inventories (ibid). Koumanakos (2008) agrees with the inventory reduction or elimination strategy byarguing that too much inventory consumes physical space, creates a financial burden, and increases the

possibility of damage, spoilage and loss. He goes further to state that excessive inventory compensates forsloppy and inefficient management, poor forecasting, haphazard scheduling and inadequate attention to processand procedure (ibid). However, reducing or eliminating inventory has its shortcomings. It disrupts

manufacturing operations and often leads to customer dissatisfaction which may cause a customer to switch to a

competitor (Koumanakos, 2008). The inventory management goal is to adopt an optimal strategy that managethe inventory efficiently (by minimizing cost or maximizing profit) and at the same time provide an acceptablecustomer service (Holdren and Hollingshead, 1999; Koumanakos, 2008).

The researcher thinks that achieving the trade- off between managing inventory efficiently and acceptablecustomer service is very difficult. This is because a lot of factors impact efficient inventory management.

2.2.3. Inventory Management Control TechniquesTraditionally, academic literature on inventory management have focused on the transactions approach

characterized by the trade- off between holding costs and ordering costs represented by the ABC and theEconomic Order Quantity (EOQ) models (Ross et al., 2004 and Koumanakos, 2008). Koumanakos (2008)asserts that the expansion of the Operations Management frontiers has led to the addition of new inventory

control techniques like the Just-in-Time (JIT) and the materials requirements planning systems (MRP) methods.The ABC classification model is a refinement of Paretos 80 percent/ 20 percent grouping (Holdren andHollingshead, 1999). This inventory management technique is to divide inventory into three (or more) groups.The underlying idea is that small portion of inventory in terms of quantity might represent a large portion in

terms of inventory value (Ross et al., 2004).This enables the firm to devote more management attention and careto controlling the more valuable items (Van Horne and Wachowicz, 2005). The figure (2.7) below illustrates anABC comparison of items in terms of the percentage of inventory value represented by each group versus thepercentage of items represented

Figure 2.3: An ABC inventory analysis model Source: Ross et al, 2004

The EOQ model is best- known model to explicitly establish an optimal inventory level. It affirms that theoptimal quantity of an inventory item to order at any one time is that quantity that minimizes total cost over aplanned period (Ross et al., 2004; Van Horne and Wachowicz, 2005). An inventory items order point is that

quantity to which an inventory must fall to signal a reorder of the EOQ amount. Under conditions ofuncertainty, a safety stock must be provided. By varying the point at which orders are placed, one varies thesafety stock that is held (ibid). Figures 2.5 and 2.6 below illustrates the EOQ model under conditions of

certainty and uncertainty


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Figures 2.5 and 2.6 below illustrates the EOQ model under conditions of certainty and uncertainty

Figure 2.4: Economic order quantity model with order point when lead time is nonzero and certain. Source: Ross et

al, 2004

Frame A: Expected demand and lead time occur

Frame B: Actual demand and lead time differ from what was expected

Figure 2.5: Safety stock and order point when demand and lead time are uncertain: Source: Ross et al, 2004

The JIT model is used to manage dependent inventories. Inventories are acquired and inserted in production atthe exact time they are needed (Ross et al., 2004; Van Horne and Wachowicz, 2005). The JIT managementphilosophy focuses on pulling inventory through the production process. The goal of JIT system is to reduceinventories, continuously improve productivity, product quality and manufacturing flexibility (ibid).

The MRP model is a computer- based system for ordering and or scheduling production of demand dependentinventories. According to Ross et al., (2004) the basic idea behind the MRP is that, once finished goodsinventory levels are set, it is possible to determine what levels of work-in-progress inventories must exist tomeet the need for finished goods. It is then possible to calculate the quantity of raw materials that will beneeded.

Wallin et al., (2006) also identify four basic approaches to managing inbound inventory, raw materials,components, sub- systems, or retail inventory. These are inventory speculation; inventory consignment; reverseinventory consignment; and inventory postponement. With the inventory speculation, a firm purchases

inventory items and physically hold these items in its storage facilities before these items are used or demand iscertain (Bucklin, 1965). Inventory consignment approach is where a firm physically holds purchased items in its

inventory but ownership resides with the supplier (Coughlan et al., 2001). Reverse inventory consignment iswhere a firm pays for and own inventory but will not take custody of inventory until needed (Wallin et al.,

2006). Inventory postponement is where the firm deliberately delays the purchase of inventory until the demandis determined with certainty (Bucklin, 1965).


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Wallin et al., (2006) argues that there is no one-size-fits-all inventory management approach that is right forevery firm or for every context. Notwithstanding the practical and theoretical drawbacks associated with thesetechniques, Koh et al., (2007) assert that their application in real business setting should produce results.Financial managers should therefore critically analyse the various models and approaches to come out with

those that will be optimal for a firms inventory management

3. Methodology

This study used a qualitative approach involving top 50 Ghanaian SMEs across industries. To ensure theauthenticity of their stances, respondents were selected using purpose sampling based on their positions,

qualifications, affiliation, length of working experience and their expertise in the areas of corporate governance.One hundred (100) participants were approached personally or telephone, but only 50 participated. Theparticipants were from four categories namely; owner (30%), chief executive officer (40%), general manager

(20%) and others, representing junior and middle level managers (10%). Based on Marshall and Ross man(2006) they are considered as group elite because they are influential, prominent and well -informed, and haveindepth knowledge of the subject. Therefore, they can provide rich information for the study.

The data of this study were obtained and analyzed through content analyses

4. Data Presentation, Analysis And DiscussionTable 1. Background of Participants

DemographicsCharacteristics

ParticipantsOwner(N = 15)

CEO(N = 20)

General Manager(N = 10)

Others(N =5)

1. Age (years)MeanMinimumMaximum

2. GenderMaleFemale

3. Educational QualificationOthersHND1stDegreeMastersPHD

4. Experience in Corporate Management

(years)MeanMinimumMaximum

615369

104

105360

17

1237

473955

123

82560

9

616

504555

120

63120

12

616

534264

63

31020

14

420

The above table indicates that the oldest business owner is 69 years where as the youngest is 53 years. The ageof management of the sampled SMEs also range from 42 to 64 years with a minimum of four years corporateexperience to a maximum of thirty-seven years. With regards to qualification of management, the least is HNDand the highest is Masters degree, some of them also have a combination of academic and professional

qualification. On sex, the table indicates that out of fifty sampled management only ten of them are females andforty are males.

Table 2. Description of 50 Ghanaian SMEs based on Industry Sector

No. Industry sector Number of company Percentage

1

234

56

7

Trading & Services

Herbal MedicineMicro FinanceBasic & Secondary

EducationConstructionAgro-Processing

Sachet Water

12

51210

33

5

24

102420

106

6Total 50 100


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From table two (2), 12 companies representing 24% belong to the trading and services, 5 companiesrepresenting 10% belong to herbal medicine sector, 12 of the companies which represent 24% are from microfinance whilst 10 companies representing 20% belong to basic and secondary education. Construction sector ismade up of 3 companies which represents 10%, the agro- processing sector has 3 companies which represents

6% and the sachet water sector also has 5 companies and that also represents 6% selected for the study to reflectthe situation on the ground.

Table 3. Class of Customers Offered Credit

Class of customers Frequency Percentage (%)

Loyal customers 28 56

Big customers 12 24

Small customers 5 10

New customers 0 0

Old customers 5 10

Other 0 0

Total 50 100

Source: Field data

Table 3 depicts the class of customers respondents said they offer credit to. Twelve respondents (70%) said theyoffer credit to loyal customers while twenty percent (4 respondents) offered credit to big customers. Ten percent

(2 respondents) gave credit to old customers. This is represented graphically below;

Figure 1; Class of customers offered credit Source: Field data

Table 4. Duration credit is given to customers

Duration Frequency Percent (%) Cumulative Percent (%)

One week- 2 weeks 10 25 25

2 weeks- 1 month 24 60 85

1 month- 2 months 6 15 1002 months- 3 months 5 10

3 months plus 5 10

Total 50 100

Source: Field data

On the issue of duration or repayment of credit, longest period is three months plus constituting ten percent andthe earliest is two weeks also constituting twenty-five percent. However, the bulk of credit granted stood at sixty

percent spanning from two weeks to one month. This indicates the SMEs awareness of the fact that grantinglong term credit can affect their operations negatively.

0

10

20

30

40

50

60

70

Frequency

Percentage (%)


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Figure 5: Response to usage of stock management tools Source: Field data

From the figure 5 above, it can be seen that as many as 60% of respondents said they used some stockmanagement tool while the remaining 40% said they do not use any. This is further illustrated in figure 6 below;

Figure 6 : Stock management techniques SME managers use :Source: Field Data

Of the sixty percent of the respondents who said they use some stock management tools or techniques, 42% use

the Just-in-Time (JIT) model, 33% use the Economic Order Quantity (EOQ) model, 17% employ the ABCmodel and 8% uses other (Periodic Review System) technique.

4.1.1 Findings on the Credit Management of the Selected SMEs

Based on the findings of the analysis in the previous chapter, it can be deduced that the selected SMEs managedthe credit they extend to their customers well. This can be inferred from the high rate of respondents who

offered credit to only loyal customers because they see them as true stakeholders in their businesses. The factthat they do not give credit to just any customer and they make conscious effort to screen customers before thetrade credit is given is an indication that they want to control the level of credit and also reduce the default rate.Also, the post dated cheque and the bank guarantee that the respondents demand as security goes to buttress

this assertion.

The relatively shorter period that majority of the respondents gave to their customers is an indication that theyare aware of the negative effect that granting long credit periods can have on their cash flow and for that mattertheir working capital.

The tacit admission of the respondents to the fact that their customers deliberately defer payments beyond the

agreed time; that their big customers are not sanctioned when they flout agreed terms unlike small customers

0

10

20

30

40

50

60

Yes No Do not Know

Frequency

Percent (%)

17%

33%

42%

8%

Stock management techniques SME managers use

ABC Model Economic Order Quantity (EOQ) model

Just-in-Time(JIT) Model Other(Periodic Review System)


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and that their credit and collection policies are not strong enough shows how SMEs are vulnerable to theircustomers. The vulnerability stems from their inability to enforce their terms due to their size.It can be generally conclude from the findings that the selected SMEs managed the trade credit they offered to

their customers well notwithstanding the weaknesses identified.

4.1.2 Findings on the Stock Management of the Selected SMEsThe fact that all the respondents said they kept stock is an indication that the selected SMEs are aware of the

importance of stock to their working capital combination. Excessive stock or stock out, cause a lot of problems

to businesses either by piling avoidable costs or causing customer disaffection and switching. The greaternumber of managers sampled who said they are not comfortable with either of them shows that they areseemingly aware these problems and would want to avoid them.

Holding stock entails incurring some cost which when managed well can ensure the profitability of businesses.The high proposition of respondents who said they know the stock management techniques available and that

they use it often to their advantage suggests that the selected businesses are concerned about minimizing theircosts especially ordering costs which they identified to be their most important concern.

Again, the respondents use of such factors as the anticipated demand for their goods, impending shortages, theseason or time of the year, the perishable nature or ease of obsolescence of their products and the interest oncapital invested in the stock to guide them in arriving at the optimal stock levels to hold in addition to using the

stock management techniques proves that they want to minimize costs at all times.

Furthermore, the majority of the managers or owners who were sampled indentified interest payment andspoilage as their major problems when they hold excessive stock. Juxtaposing this with the fact the majority of

the respondents said their most important reasons of holding stock are to decouple their businesses fromfluctuations in demand and to hedge against future price increases depicts a trend that the respondents seek toincrease their sales and by extension their profits and at the same time trying to minimize their costs. It can beconcluded that respondents actively manage their inventory well.

5. ConclusionThe contribution of SMEs to the economy of Ghana is enormous. They are found in almost all the sectors of theeconomy. Notwithstanding the important role that they play in nation building, they face serious challenges such

as inadequate finance, difficulties in marketing their products and lack of financial management discipline just

to mention a few.

The objective of this research was to assess the extent of working capital management practices of some

selected SMEs in Ghana. The scope of the study was narrowed to trade credit and stock. The research adopted acase study strategy so that a research can deeper insight and to see new phenomena. Quantitative data collectiontechnique questionnaires) was adopted to gather the primary data. The research was conducted with bothsecondary and primary data. The data collected was analyzed using a combination of qualitative and quantitative

techniques. The findings showed that small businesses manage their working capital efficiently and also theirworking capital management practices are strong with the exception of their trade credit and collection aspect

that was found to be weak. Based on the findings, recommendations were given to help improve the sampledbusinesses working capital.

Asiamah Yeboah(DipM, MCIM, CharteredMarketer, B.Ed, MBA),

Lecturer/ HOD,Department of Marketing,

Faculty of Business and Management Studies,Kumasi Polytechnic, Ghana

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