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SCHOOL OF BUSINESS

Assessing the effect of financial management practices

on financial sustainability of small and Medium- Sized
Enterprises (SMEs) in Mtendere, Lusaka.

• NAME: ANGELA NKOBENI

• STUDENT NO: 22204302
• PROGRAM: BSC ACCOUNTING AND FINANCE
• DATE: 4 SEPTEMBER 2024
 Outline
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• Background of the study

• Purpose of the study
• Statement of the
problem
• Research objectives
• Research questions
• Significance of the
study
• Theoretical or
conceptual framework
• Literature Review
• Methodology
• References
 Background of the study
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 SMEs play an important role in the economic development of many countries.
 They create more employment opportunities, bring more goods and services to
the market place through innovation, create wealth for many people and are the
drivers of national economic prosperity.
 SMEs also contribute to the improvement of the country’s revenue base (Qureshi
and Herani, 2011, Dhliwayo & Radipere, 2014).
 Small and medium-sized enterprises (SMEs) play a pivotal role in the economic
landscape of Lusaka, particularly in the Mtendere area, where they contribute
significantly to local employment and economic activity.
 Despite their importance, SMEs in Mtendere face substantial challenges in
achieving long-term financial sustainability.
 These challenges often stem from inadequate financial management practices,
which can hinder their ability to manage resources efficiently, plan for future
growth, and respond to economic fluctuations.
 Financial management practices such as budgeting, financial planning, cash flow
management, and investment strategies are critical for the sustainability of SMEs.
 Effective financial management can help SMEs navigate financial uncertainties,
optimize their operations, and sustain their business over time.
 However, many SMEs in Mtendere struggle with implementing and maintaining
robust financial management practices due to factors such as limited financial
literacy, resource constraints, and lack of access to financial advisory services.
 Purpose of the study
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 To investigate how the financial management practices
undertaken by a selected proportion of SME’s in
Mtendere, affect their overall business performance as
well as financial sustainability.
 Statement of the problem
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 Despite the critical role of small and medium-sized

enterprises (SMEs) in driving economic growth and job
creation, many of these businesses struggle with achieving
long-term financial sustainability.
 Financial management practices are often cited as a key
determinant of this sustainability, yet there is limited
empirical evidence detailing their specific impact.
 This study aims to assess how various financial
management practices—such as budgeting, financial
planning, cash flow management, and investment
strategies—affect the financial sustainability of SMEs.
 Understanding this relationship can provide insights into
how SMEs can enhance their financial stability and growth
prospects, ultimately contributing to their overall success
and resilience in a competitive market.
 Research objectives
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 To assess how budgeting practices influence the financial

sustainability of SMEs in Mtendere, Lusaka, including their ability
to manage expenses and allocate resources.
 To examine the effect of financial planning on the long-term
viability and growth prospects of SMEs in Mtendere, focusing on
strategic forecasting and goal setting.
 To determine how effective cash flow management practices
contribute to the operational stability and financial resilience of
SMEs in Mtendere.
 To explore the impact of investment strategies on the financial
health and sustainability of SMEs in Mtendere, including decisions
related to capital allocation and risk management.
 To provide recommendations for improving financial
management practices among SMEs in Mtendere based on the
findings, with the aim of enhancing their financial sustainability
and growth potential.
 Research questions
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 How do the budgeting practices, that is their ability to manage

expenses and allocate resources, influence the financial
sustainability of SMEs in Mtendere?
 What effect does financial planning, specifically strategic
forecasting and goal setting, have on the long-term viability
and growth prospects of SMEs in Mtendere?
 How do effective cash flow management practices contribute to
the operational stability and financial resilience of SMEs in
Mtendere?
 What impact do the investment strategies used by SME’s in
Mtendere as well as decisions related to capital allocation and
risk management have on the financial health and
sustainability of their businesses?
 What possible alternative financial management practices can
SME’S in Mtendere implement to enhance their financial
 Significance of the study
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 By understanding how specific financial management practices impact

sustainability, the study can help SME owners and managers in Mtendere
make informed decisions that enhance their financial stability and long-
term viability and thus in turn, improve the financial health of a business.
 Additionally, the findings could inform local policymakers and support
organizations, enabling them to develop targeted interventions and
resources that address the unique challenges faced by SMEs in the
region.
 This, in turn, could contribute to economic growth and job creation within
the community.
 Mastering the basics of financial management is crucial for SMEs seeking
to thrive in a competitive business environment.
 By understanding financial planning, analysis, and wealth management,
SME owners can make informed decisions, allocate resources wisely, and
navigate financial challenges with confidence.
 Embracing strategic financial management practices and leveraging the
benefits of FinTech will empower SMEs to achieve their growth objectives
and secure long-term success.
Theoretical or conceptual framework
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Independent variable
 Cash flow management
 Budgeting
 Good investment decisions
 Literature review
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 According to Boadi et al. (2020), SMEs with robust financial planning are better
positioned to anticipate and mitigate financial risks. Effective forecasting allows
SMEs to align their strategies with market conditions, thus enhancing their
sustainability (Koirala, 2021). However, many SMEs lack sophisticated forecasting
tools, which impairs their ability to plan effectively (Poudel & Duffy, 2022).
 Research by Adeyemi and Olayemi (2021) indicates that SMEs with disciplined cash
flow practices experience fewer liquidity crises and have better financial stability.
Efficient management of receivables, payables, and inventory is essential for
maintaining positive cash flow (Jin & Hsu, 2023). However, SMEs often struggle with
cash flow due to irregular income and delayed payments from clients (Nguyen &
Simkin, 2022).
 Studies such as those by Muriithi and Mwaura (2021) show that SMEs that
implement strict budgeting processes are more likely to control costs effectively
and improve profitability. Budgeting helps SMEs allocate resources efficiently and
avoid overspending (Tanaka et al., 2023). Despite this, many SMEs face challenges
in establishing and adhering to comprehensive budgets due to limited resources
and financial expertise (Johnson & Li, 2022
 As noted by Smith and Miller (2020), SMEs that engage in regular financial reporting
are better equipped to make strategic decisions and attract investors. Financial
analysis tools, such as ratio analysis, help SMEs assess their operational efficiency
and financial stability (Wang & Zhang, 2021). Nonetheless, SMEs often encounter
difficulties in maintaining consistent and detailed financial records (Lee et al., 2022)
 Methodology
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 The study carried out was qualitative
 It included a sample size of 10-15 marketers
 The sampling done was random
 The means of gathering information was done via
interview
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THANK YOU FOR YOUR

ATTENTION

(C ) Angela Nkobeni 2024

 References
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 https://www.oxyzo.in/blogs/financial-management-for-smes-a-comprehensive-guide/66494
 https://www.researchgate.net/publication/
375905844_The_importance_of_financial_management_in_small_and_medium-
sized_enterprises_SMEs_an_analysis_of_challenges_and_best_practices
 Abdullah, M., & Ali, S. (2021). Financial Management Practices and Performance: Evidence from SMEs. Journal of
Business Research, 112, 234-245.
 Adeyemi, A., & Olayemi, A. (2021). The Role of Cash Flow Management in SME Performance. International Journal of
Financial Studies, 9(3), 45-59.
 Boadi, I., Agyemang, M., & Asare, S. (2020). Financial Planning and SMEs: An Empirical Analysis. Finance and
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 Johnson, R., & Li, Q. (2022). Budgeting Challenges in SMEs: A Comparative Study. Journal of Economic Studies, 48(3),
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 Koirala, S. (2021). Financial Forecasting and Its Impact on SME Growth. Economic Journal, 20(2), 102-118.
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 Poudel, R., & Duffy, R. (2022). The Role of Financial Forecasting in SME Success. Journal of Strategic Finance, 14(1), 84-
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