The Relationship Between Financial Management and Performance of Small Business Enterprises in Bugolobi Nakawa Division

Abstract

The study examines to establish the relationship between financial management and performance of small business enterprises.The objectives of the study are: To find out the effect of budgeting on performance of small business enterprises; To find out the effect of risk assessment on performance of small business enterprises and to find out the effect of working capital management on performance of small business enterprises

The study used a case study design and also adopted quantitative and qualitative approach for the study. The sample size was determined by the Sloven formulaewhich obtained a sample size of 70 respondents and close ended questionnaireswere used to collect data.

The findings show that budgeting has helped entrepreneurs to set activities of forecasting the financial demands, to anticipate the levels of sales, cash flows and probable costs, or adapt finances to any changes in financial circumstances, to keep control and monitoring performance of their business and furthermore forecasted balance sheets and income statements are frequently prepared. It was also exposed that assessing risks had assisted entrepreneurs in identifying, analyzing, and monitoring key business risks, to highlight any opportunities for improvements, to evaluate and measure the probability and severity of risks, to efficiently allocate their resources and to prioritizing key business risks for the SME. It was also discovered that working capital meets the short-term financial requirements of the business, helps to avoid interruptions in operations and to ensure that surpluses are invested in ways that will generate suitably high returns for the business. It was also observed that working capital management has enabled cash to pay for wages, power and other costs and it is an excellent way for many SMEs to improve their earnings. This has resulted into increased profits, sales revenues, improved asset and customer base, more efficient and effective operations and adoption of new technologies.

It was recommended that in the budgeting process, the management should set the meeting to scrutinize a certain year's process and think through improvements for next year while the current pain points are fresh in your mind. Reviews of both the process and enabling technology should be included. It was also recommended that during risk assessment the organization management must examine carefully what in the workplace could cause harm to its employees, other employees and other people, including customers, visitors and members of the public.

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