Assessing the influence of financial management practices on organizational performance of small- and medium-scale enterprises

Purpose - Optimal application and commitment toward financial management practices enhance organization performance. This study aims to assess the influence of financial management practices on the organizational performance of small- and medium-scale enterprises. Design/methodology/approach - Data were collected from 45 small-sized and 72 medium-sized firms. Data supported the hypothesized relationships. Construct reliability and validity were established through confirmatory factor analysis. The conceptual model and hypotheses were evaluated by using structural equation modeling. Findings - The results indicate that working capital significantly influenced organizational performance. Capital budget management significantly influenced organizational performance. A non-significant influence of asset management on organizational performance was observed. Research limitations/implications - The generalizability of the findings will be constrained due to the research’s SMEs focus and cross-sectional data. Practical implications - The study’s findings will serve as valuable pointers for stakeholders and decision-makers of SMEs in developing well-articulated and proactive financial management systems to ensure competitiveness, sustainability, viability, and financial competencies. Originality/value - The study adds to the corpus of literature by evidencing empirically that financial management practices significantly influenced SMEs’ performance.