The working capital terms relate to gross and net working capital. the part of total current assets is call as gross working capital and part of balance after diduct current libalities from current assets call net working capital.

regarding SMEs groos working capital can manaaged because of Stock, Debrors, and cash related with cash items are include in it. but second side when SMEs wants to managed Net Working capital than required the Current Assets-Current Liabilites and manly should manage the timing to collect from Debtors mean Debetors turn over ration will be higher than payment to Creditors mean creditor turn over ration than he can managed working capital.

SME should be managed his liquid assets and control on Debetors turn over ration and try that deborts and credit sale should be zero eually controll on creditros too.

Micro, small and medium enterprises (SMEs) play a vital role in the economy

Europe. They are a source of entrepreneurial skills, innovation and

jobs. The European Union extended to 25 countries, about 23

million SMEs provide around 75 million jobs and represent

99% of all enterprises.

However, they are often confronted with market imperfections. SMEs

often difficulties in obtaining capital or credit, especially in the start-up phase.

Their limited resources may also reduce access to new technologies or innovation.

Many SMEs involve entrepreneurs that are first time employers. They may have a great idea to implement. But they often do not have enough resources to finance the working capital. They may also not good in recovering the debts quickly. this situation leads to the need for higher capital. They may not have enough assets to pledge or hypothecate. Thus, their limited resources restrict them from having access to new technology. 

Asymmetric information often means that SMEs have limited access to capital markets .  Hence cash flow volatility due to things like seasonal sales for example, can cause working capital challenges.

Hi there, I have a few articles on critical success factors of SMEs. Pls feel free to download.

Thank you 

Thank you Prof. Yusniza. The link to your article on critical success factors of SMEs is unfortunately opening another article on hotel industry.

Dear Bhawana

There are a number of studies in different industries and disciplines highlighting the problems faced by the Small and Medium Sized enterprises (SMEs). Using the construction industry as an example, access to finance is one of the problems, whereas ‘resourcing’ and ‘having the technical knowhow’ is another. However, given the lack of pointers and the broadness of the question posed, some common denominators to the ‘problems’ faced are nested within their inherent differences from large organisations, as well as the unique nature of SMEs in comparison to large enterprises. With regards to ‘managing working capital’, assuming the issue is around how to manage the capital obtained, then ‘resourcing might come into play’. On the other hand (again using construction as a premier example, if the ‘managing’ relates to ‘accessing funding’ for investment and growth, then the context (developing or developed countries) might need to be taken into consideration when answering your question as due to the prevailing different economic environments and opportunities that might be provided for the SMEs. I have listed the following general articles without due considerations of the context (Country, Industry, and discipline) as the general background to your questions. I have taken the liberty of including the actual ‘purpose’ of the highlighted studies so that you could decide whether to follow up with the reference or not.

Irwin, D. and Scott, J.M. (2010) "Barriers faced by SMEs in raising bank finance", International Journal of Entrepreneurial Behaviour & Research, Vol. 16, Iss: 3, pp.245 – 259.

Purpose – The purpose of this paper is to use univariate statistical analysis to investigate barriers to raising bank finance faced by UK small and medium‐sized enterprises (SMEs), specifically the impact of personal characteristics (ethnicity, gender and education).

Tauringana, V. and Afrifa, G.A. (2013) "The relative importance of working capital management and its components to SMEs' profitability", Journal of Small Business and Enterprise Development, Vol. 20 Iss: 3, pp.453 - 469

Purpose – This paper aims to report the results of an investigation of the relative importance of working capital management, measured by the cash conversion cycle (CCC), and its components (inventory, accounts receivable and accounts payable) to the profitability of SMEs.

Just in case in your research is ‘construction industry’ specific, and focussed on developing countries, the following reference might also provide some excellent reading and background information:

Shakantu, W.M. (2012), ‘Contractor development’, In: Ofori, G. (Ed), Ne Perspectives on Construction in Developing Countries, Spoon Press, Taylor & Francis, 253-281.

Among the prerequisites for success in small contractor development that Shakantu (2012) cites includes: 1) need for entrepreneurship; 2) Need for expertise; 3) Access to finance etc...

Good luck with your research

Nicholas

Generally SMEs are synonymous with sole proprietorship and as a result has the characteristics of sole proprietorship.  two of the characteristics are inseparability of ownership from the business. Secondly SMEs are founded by entrepreneurs who most cases are not managers themselves but they try to manage because they are the founders.  Since ownership is inseparable from the business, the finances also become inseparable from personal cash and business cash (working capital).  Some study shows that most entrepreneurs, especially the male entrepreneurs cannon separate between profits and capital. They spend both the profits and the capital.

Most SMEs, especially in Uganda, rely more on mental records and therefore cannot prepare proper or up to date financial statements that can be used as source documents to show the profits and losses as well as statement of assets and liabilities (of which working capital is part). This problem is even made worse where the entrepreneur, as the founder, manages without the required managerial skills.

The issue raised is just a part of the bigger problems that many SMEs are facing which is the inefficiency in enterprise financial management. One of the main findings of my research discover that majority of them have mixed  up with the business and personal financial transactions and records, especially those running family-owned business. In fact not few are not having a proper or formal accounts keeping, and what more is the working capital management.

Many SMEs are first time entrepreneurs, and do not have sufficient bandwidth in all the functional areas. They are not able to estimate their own short term and long term financial needs accurately given all the uncertainties they face. Financial agencies and banks however require clarity in financial projections, documentation, current and fixed assets to be able to decide quantum of working capital requirements vis-a-vis long term loan requirements of the SME.

The problem presents several angles. On the one hand, small businesses do not know well their needs for short-term financial resources. On the other hand, when there is growth, there is a situation with the necessary injection of resources, prior to generating business. That last sentence I could see through a software (actually, a business game, used in a lot of situations in the last 15 years) that dramatically shows how companies need the best performing resource injection in the first 18 months before, so for their own profits are sufficient to generate cash.

I will recommend the below links

http://www.google.com.pk/url?sa=t&rct=j&q=&esrc=s&source=web&cd=3&cad=rja&uact=8&ved=0CC8QFjAC&url=http%3A%2F%2Fwww.kln.ac.lk%2Fuokr%2FARS2008%2F6.13.pdf&ei=nAhwVaz9C5SOuASHnIO4Ag&usg=AFQjCNGc9EBaBkYJywnYk6PsNP2I0Yxb7g&bvm=bv.94911696,d.c2E

SMEs are the most dynamic and yet the most vulnerable businesses in the global economy.They face challenges as: inadequate financing, inadequate working capital, insufficient equity, difficulty of credit finding, size constraining investment and expensive credit cost

The main challenge is overcoming the start up hurdles such as access to funding and resources, lack of experience and managerial skills and then for the most part, discouragement.

Though your question is focused on problems faced by SMEs in managing their finance or working capital, I'm sharing link of my work on general problems of SMEs including financial problems. Hope it may help you. you can directly refer to chapter 5 on this link https://shodhganga.inflibnet.ac.in/handle/10603/52833

In reality, SMEs practically focus only on their cash receipts together with their bank account position. The majority of SMEs lack an established standard credit policy. Many of them also have the least concern for working capital and financial position. It was revealed that various components in working capital management like cash flow and accounts receivable management, accounts payable and inventory management greatly affect the liquidity and profitability of SMEs. Due to the mismanagement of its working capital, some SMEs struggle in order to survive in the industry. It is advisable for SMEs to give credit on their working capital management by conducting and implementing a customary credit policy to ensure a better internal and financial control system. Hence, the significance of working capital management promotes stable, liquid and profitable SMEs.

https://core.ac.uk/download/pdf/230830353.pdf