Relationship between Accounts Receivable Management Practices and Growth of Small and Medium Enterprises in Kakamega County, Kenya

Abstract

The objective of this study was to determine the effect of Account Receivable management practices on growth of SMEs. The practices identified were, accounts receivable analysis, Extension, risk assessment, collection, financing practices, and how the level of financial literacy of Accounts receivable management practices affect growth of SMEs. The target population was 5401 registered SMEs under Single Business Permit Registration. Proportionate stratified random sampling technique was used to select 359 SMEs. The wards were identified as the unit of sampling. The study was premised on the portfolio theory, the pecking order theory and the growth theory. The study adopted a mixed survey research design. Primary data was collected using semi-structured questionnaire .Data was analyzed using statistical Package for Social Sciences (SPSS) .Pearson product moment correlation was computed to assess the relationship between Accounts receivable management practices and growth of SME. Descriptive statistics such as mean, standard deviation and homoscedasticity were used to test for normality of data. Ordinary Least Square method was utilized to establish the cause-effect relationship between variables while hypotheses were tested at5% significance level. The overall model was statistically significant at F=11.298and p-value (0.000< 0.05). The findings revealed that efficient Accounts receivable management practices, when adopted by SMEs lead to growth. The study recommended that owners and managers should be trained and made to understand the various techniques of managing Accounts receivable levels. The findings would form a basis for government and policy makers in management decision making, to formulate Accounts receivable management strategies that would help minimize bad and delinquent debt. The study also forms a basis for further research and adds to the existing body of knowledge.