The impact of cash flow management on the profitability and sustainability of small to medium sized enterprises

Abstract

Small to medium sized enterprises (SMEs) are important in Zimbabwe because they contribute much towards creation of jobs. Sound cash management practices must be implemented to guarantee success of SMEs through profitability and sustainability. The purpose of this study was to classify the cash flow management practices that are currently practiced by Zimbabwean SMEs and try to figure out the effects of these practices on the profitability and sustainability of SMEs. Both qualitative and quantitative research approaches were adopted in this study. The target population was 14 small businesses in Harare and Gweru giving a total of 55 targeted participants. The sample was calculated using the Yamane formula which gave a result of 50 respondents. The data collection methods used includes questionnaires and interviews and the results from the data collection methods were presented in tables, graphs and pie charts. These results were analysed and tested using the chi square test method which revealed that most cash management practices that are being exercised by SMEs are significantly affecting the profitability and sustainability of these businesses. The results also revealed that most SMEs are reluctant to effectively apply cash management practices causing them to fail.