Inventory management practices and the financial performance of SMEs in Bunga-Kawuku Makindye Division Kampala City
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Date
2026-06-05
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Uganda Christian University
Abstract
The study focused on the effect of inventory management practices on the financial performance of Small and Medium Enterprises (SMEs) in Bunga–Kawuku, Makindye Division, Kampala City. The study was driven by the ongoing problems of SMEs such as low stock, overstocking, lack of records, cash flow, and loss of profitability that negatively impact business sustainability and growth. The study specifically aimed to evaluate the inventory management practices adopted by SMEs, problems encountered in implementing effective inventory control practices and strategies used to overcome the problems. Both quantitative and qualitative research design was used in a cross-sectional survey research. The target population included SME owners, managers, local business consultants and employees of financial institutions in Bunga–Kawuku. The sample size was calculated by Taro Yamane formula as 108 respondents and data were collected by questionnaire and interview. Descriptive statistics and regression analysis were used for quantitative data analysis, while thematic analysis was used for qualitative data analysis. The study concluded that SMEs use different inventory management techniques such as Just in Time (JIT), Economic Order Quantity (EOQ), ABC Analysis, periodic review systems and manual stock control techniques. The implementation of good inventory management practices, however, is hindered by lack of financial resources, technical know-how, demand forecasting, record keeping, storage facilities and cash flow problems. The results also showed that SMEs are responding to these challenges by training their employees, implementing cost-effective digital inventory management, strengthening supplier relationships, improving record keeping, adopting better demand forecasting methods, and having access to financial assistance. The study found that good inventory management practices have a significant impact on the financial performance of the organization, as it helps to increase the profitability, liquidity, and efficiency of operations. The study suggests that SME owners should invest in modern inventory management systems, build the capacity of their employees, and create better inventory planning and control systems to ensure business sustainability and profitability.
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Undergraduate