ABSTRACT: The study investigated financial management techniques and the growth of small business organization. Three research questions and three hypotheses were formulated. The population of the study consisted of 1536 small business organizations in the study area. Sample sizes of 300 small business organizations were selected using a simple random sampling technique. The instrument used for data collection was a questionnaire captioned “Financial Management Techniques and the Growth of Small Business Organization Questionnaire (FMTGSBOQ)”. t-test statistics was employed for data analysis.
Financial Management Techniques and the Growth of Small Business Organization
Findings revealed that there is a significant influence of working capital on the growth of small business organization in the study Area, there is no significant influence of financing on the growth of small business organization in the study area, and also there is a significance of financial report and analysis on the growth of small business organizations in Abak Local Government Area. Based on the findings, it was recommended that government should provide small business owners with small interest loans to encourage them to develop their businesses.
CHAPTER ONE
INTRODUCTION
1.1 Background to the Study
Small business organizations make important contributions to Economic and Social Development of any country. In most developing countries like Nigeria small business organizations from a significant part of the Economics growth. Consequently the growth of small business organizations directly affects the performance of the nation in all economics they constitute the vast majority of business establishment and are usually responsible for the majority of employment opportunities created which account for one third or two thirds of the private sector’s turnover (Ntsika 2002).
It is estimated that small business organization contribute 56% of private sector employment and 36% of the Gross Domestic Product (GDP) world wide (Arianff, 2010) in many countries small business organization have been a major engine of growth in employment and cut put over decades in developing countries they are seen as major self help instrument for poverty eradication due to the ease of entry and exist.
Small business organization contributes greatly to the economic of all countries regardless of their level of development. The term small business organization covers a wide range of perceptions and measure, varying from country to country the sources reporting small business statistics commonly used criterions like the number of employees, total net assets and investment level. However, the most common definition used based on employment but, there is a variation in defining the upper and lower size limit of a small business organization (Ayyagari, and Damigue 2006).
According to Hattan (2008) the term small business organization is used in the European Union and other in international organization to designate companies that have a limited, specified number of employees. Classification as a small business organization is based on the number of employees, generally between 10 and 100, depending on the country in which the business is set up (Norla Phoompipat, 2008).
The small business organization plays an important role in the Nigeria economy. According to the economic survey report, the sector contributed over 50 percent of new jobs created in the year 2005. Recent evidence shows that small business organization from the bulk of Nigeria private sector, it is inevitable that more attention must be paid to addressing the key bottleneck of small business organization’s growth and competition (National Bureau of Standard 2007). Good financial management practices have been viewed as critical elements in the success of small business organization in developing countries.
Financial management is one of the several functional areas of management which is central to the success of small business (Meredith 2006). Financial management is the management of finance of a business Mc-Mahon (2008) defines financial management based on mobilizing and using sources funds needed to finance the enterprise(s) assets and activities the allocation of these scare funds between competing uses, and with ensuring that the funds are used effectively and efficiently in achieving the enterprises(s) goals.
Financial management as used in this study is composed of three constructs and these include; working capital management, financial and financial reporting and analysis. Roos (2009) indicated three kinds of decision. The financial manager of a film must make in business these include the financially decision and decision involving short-term finance and concerned with the next working capital investment and financial reporting.
Similarly, Ang (2007) indicated three main financial decisions including the investment decisions, financial decisions and dividend management is concerned with all areas of management which involves finance not only the source, and uses of finance in the enterprises by also the financial implications of investment, production, marketing or personal decisions and the total performance of the enterprise.
1.2 Statement of the Problem
Financial management is a feature which governs the whole process of organizational management. The problems of financing all business may include; high cost of capital, since the acquisition of capital by small business usually attract high financial interest rates which exposes them to risks and the unsatisfactory profits; and it is another phenomenon which hinder small business from playing back. Deficiencies in financial management is another problem encountered by small business as managers or owners lack experience in financial management.
Other problems include the inability of small business to save, plough back and obtain loans due to collateral securities. Due to the a fore mentioned problems it has been observed that small business organizations in Abak Local Government Area has no access to funds from the government and financial institution. It has also been observed that poor control management of funds and innovative ideas from small business organization have also contributed to the poor growth of small business organizations.
Through small business organization are making positive contributions to economic growth and development in Nigeria, the rate of failure is high. According to National Bureau of Standard (2007), the small business organizations generate 469,000 new jobs in 2006-2007 financial years which was an increase of 5.7% from the previous year. Despite their significance, past statistics indicate that three out of fare business fail within the first few months of operation (National Bureau of Statistics 2007).
Through other factors may be responsible for poor growth of small business organization, this study specifically examines the influence of financial management techniques on the growth of small business organization in Abak Local Government Area.
Financial Management Techniques and the Growth of Small Business Organization
1.3 Purpose of the Study
The main purpose of the study is to investigate the influence of management techniques on the growth of small business organization. Specifically; the study seeks the following:
(i) to investigate the influence of working capital management on the growth of small business organization.
(i) to investigate the influence of financing on the growth of small business organization.
(iii) to investigate the influence of financial reporting and analysis on the growth of small business organization.
