FINANCIAL MANAGEMENT PRACTICE AND PERFORMANCE OF SMEs IN NIGERIA (A CASE STUDY OF SELECTED SMEs IN EKET LGA). A RESEARCH PROJECT MATERIAL ON BANKING AND FINANCE
The survey research design was adopted to determine whether the financial management practices of small firms in Nigeria impacted on their profitability, growth and survival. Five independent variables (accounting systems, financial management information, working capital management, budgeting practices and managerial planning) were used in the evaluation which was restricted to six small firms. Results indicate that two financial information variables (accounting system and financial management information) alone dominate the risk perception of fund providers. As a result, small firms find it difficult to source adequate funds for business operations. The study also reveals that the five independent variables have significant impact on the survival, growth and profitability of small firms. SME firms are therefore advised to employ the services of qualified accountants in order to upgrade their financial management practices to enhance their overall performance.
1.1 Background to the study
Small firms play vital roles in the process of industrialization, sustainable economic growth (Ariyo, 2005); encouragement of entrepreneurship, employment generation (Ogujiuba et al, 2004); reduction of poverty and contribution to the Gross Domestic Products (GDP) of many countries (Taiwo, Ayodeji and Yusuf 2012; Audretch, 2010; Paul, 2009; Rogers, 2002). They perform such vital roles through innovation and the production of various goods and services which empower the process of economic development. For small firms to carry out such important tasks, they need credit facilities in terms of short and long-term loans. The process of sourcing such funds as well as the effective utilization and efficient management of the funds constitute major challenges for the accountants of SMEs. The challenges require the involvement of well trained/professional accountants which SMEs lack the resources to attract. The role of the accountants in SMEs is often broader than the conventional definition of the accounting function. Apart from the basic accounting functions of providing the accounting information, auditing, tax matters, the SMEs accountant is responsible for providing general leadership in all aspects of financial decision making like working capital management, budgeting and financial planning.