| dc.description.abstract | Small and medium enterprises have grown in importance in the global economy
during the last couple of decades. Although SMEs are growing speedily they face a
range of challenges which work against their progress. Lack of financial knowledge
has been a major setback to SMEs progress. Inefficient financial management may
damage SMEs profitability and, as a result, complicate the difficulties of SMEs.
Conversely, efficient financial management will help SMEs to strengthen their
profitability and, as a result, these difficulties can partly be overcome. This study was
motivated by the need to investigate the financial planning practices used by SMEs
and their impact on the financial performance of the SMEs.
The target population of this study was 332 SMEs operating in the Nairobi CBD. A
questionnaire-based survey method was used to collect data. Data collected was
mainly quantitative in nature and was appropriately analyzed using descriptive
statistics, while inferential statistics involved regression and ANOVA.
The study found that most SMEs practised financial planning practises by such as
periodical budget estimations, activity-based budgeting and financial analysis. These
financial planning practices had positive impacts on the performance of the SMEs
good maintenance of capital, managing risks, increased the efficiency of operations
and expanded the capacity of the SMEs to embrace opportunities. Further financial
planning has eased financial crisis, made credit accessible, reduced losses caused by
human errors, provide collaterals for securing loans and act as a frame work to guide
the activities of the businesses. The study recommended that awareness be created to
the SMEs on the importance of the financial planning in business operations. | en |
