Abstract:
This study sought to analyze the cash management practices and financial performance of Small
and Medium Enterprises (SMEs) in Nyeri town, Kenya. SMEs lack adequate skills to manage
and monitor their cash management practices, which results to possibly the limited financial
growth, and thus enable to face out their competitors while increasing their assets, opening more
branches and growing their sales, a gap this study sought to address. The study was guided by
four distinct objectives mainly on cash management practices and their effect on the financial
performance of SMEs in Nyeri town, Kenya. The study employed three major theories, which
include the Miller-Orr Model, Innovation Diffusion Theory and the Baumol Model. To achieve
the objectives of this study, a descriptive research design was adopted. Toe target population
constituted 311 registered SMEs in Nyeri town, Kenya. Toe study used a sample of 20% of the
target population, that is; 62 respondents SMEs and only 53 of them responded. A semi
staicrured questionnaire was distributed to the sampled population in Nyeri town in Kenya with
:. fhe help of trained administrators. A· pilot study was conducted to enable the researcher to
ascertain the validity and reliability of the instrument. The test of assurance was conducted using
Cronbachs Alpha of 0. 7. A self-administered questionnaire was distributed to the sampled
population. The important data was collected using questionnaires from 53 respondents
representing 85.5% response rate out of the probable 62. Collected data was analyzed applying
statistical package for social sciences (SPSS) to generate descriptive and inferential statistics.
Frequenciestables and percentages were generated from the data while multiple linear regression
analysis was done to establish the link between the variables in the study. The results indicated
., ,4,
that cash holding practices, technology use in cash management and cash pooling practices had a
relevant effect on the financial performance of SMEs in Nyeri town in Kenya when considered
alone and when combined with other variables under this study. The researcher recommended
that all stakeholders in business operations ranging from suppliers, customers, and financiers
should also embrace the use of technology to facilitate electronic data interchange. Tne study
recommends that future research could focus on comparative study of large organizations to
establish whether the same factors that affect SMEs financial performance also applies to the
large group.
