Assessment of Financial Management Practices of Small Businesses: Case Study of Sokoru District

Abstract

Small firms have been identified as an importation contributor to the economy. In Ethiopia economy, this sector contributes to the national objective of creating employment opportunities, generating income, and providing a source of livelihood for low income households. However, the small firms have not been able to contribute substantially as needed to the economic development mainly because of inadequate offinancial management practices. Given that the issues offinancial management is one of the key aspects of the well being and survival of a business enterprise in Sokoru District (Sokoru Town), as to those specific variables namely. working capital management, financing, investment, financial reporting, planning, analysis and control, and accounting information systems. To achieve the stated objectives of the study the primary data were obtained from the targeted groups of owners' small firms and trade and industry office of Sokoru District. Both stratified and simple random sampling methods were used to select sample in the study. The study found that the financial management practices of small firms are very weak - especially in the areas of financial planning, analysis, and control working capital management, and investment decision. The study also recommended that it advisable that the owners of small avail themselves with various training programs; better to evaluate the validity of their investment before starting operations; better to engaged infinancial planning, analysis, and control in order to compare their financial plan with performances; and maintain professional accountants so as maintain complete accounting records.