An exploratory study of working capital management practices for successful small and medium-sized enterprises in Dar es salaam,Tanzania

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University of Dar es Salaam
Most of the existing literature discusses working capital management practices and their impact on firm performance for large established corporate bodies but few are found for small firms. It has been found that some of the generalizations may not work for small firms who have various constrains in carrying out their managerial activities in formal arrangements like large entities. This study, conducted in Dar Es Salaam aimed at exploring various practices that successful SMEs have employed concerning management of working capital. The research employed a qualitative approach involving semi-structured interview of selected successful firms across various sectors in Tanzania. Successful SMEs were considered to be those having existed for more than 6 years and employing more than 6 people. Theoretical saturation point determined the sample size to be included in the interview where a total of 6 SMEs owners/managers were involved. In data analysis, a summary of the conversation was written down, information relevant to the research objective was identified and finally the responses to particular questions were matched to each other’s while noting similarities and dissimilarities. The findings of this research reveal that successful SMEs throughout their growth paths have employed practices depending on the social and economic setting of their environment. Such Practices and ideas include rolling inventory ordering, demand and seasonal observance, only once credit sales policy, matching of payables and receivables in contracts, use of bank credit facilities, discipline on handling cash, only once credit purchase policy and prioritization. Further, the research reveals that another important aspect towards SMEs success is proper Human Resources selection and management. This study provides recommendations on how owners and managers of SMEs in Tanzania may improve financial performance of their businesses by benchmarking the practices employed by their successful peers. Educators and SMEs promoters alike are argued to transmit the workable practices employed by the successful SMEs to the struggling SMEs around Tanzania. Financiers and the policy making bodies can integrate the findings of this study into their body of knowledge and adjust various policies and regulations accordingly like creating an avenue for better financing sources. Lastly, the study recommends for further studies on SME’s working capital management practices industry-wise
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Working capital, Working capital (Financial Management), Small business, Dar es Salaam, Tanzania
Ambege, P. M (2011) An exploratory study of working capital management practices for successful small and medium-sized enterprises in Dar es salaam,Tanzania. Master dissertation, University of Dar es Salaam. Available at