WORKING CAPITAL MANAGEMENT: FOUNDATION OF STRATEGIC COMPETITIVENESS OF SMES IN RWANDA

Abstract

Inadequacy of working capital may lead the enterprise to insolvency and excessive working capital implies idle funds which earn no profit for the business. Managing the SMEs’ working capital is a day to day activity that ensures that an enterprise has sufficient resources to continue its operation and avoid costly interruption. This study sought to examine the relationship between working capital management and strategic competitiveness of Small and medium sized enterprises taking reference to Urwibutso Entreprise. The study adopted purposive sampling and simple random sampling approaches to select the required respondents relying on their experience of knowledge about the functioning of the enterprise. The target population was thirty (30) respondents from Urwibutso enterprise who among others were the employees from different departments, management and clients who were chosen for the study. In this study the researcher used statistical techniques and qualitative techniques such as regression and correlation analysis with help of Ms Excel and Ms Word to clearly come up with the relationship between working capital management strategic competitiveness of small and medium enterprises. Urwibutso enterprise’s choices about how to make and distribute its product as well as how to interact with its customers affected its strategic competitiveness as confirmed by 75.2% of the respondents. Consequently, the findings of the study were that, working capital management practices affect strategic competitiveness of small and medium sized enterprises in Rwanda, hence there was need for small scare enterprises to insist on strategies which aim at sourcing raw materials and to embrace efficient working capital by trying to build long term relationship with suppliers.