Working capital management practices at freshcuts Uganda limited

Abstract

This study sought to assess working capital management practices at Freshcuts Uganda Limited. Despite the fact that Freshcuts has tried to ensure it has sufficient cashflows to manage daily expenses and that extra cash is invested in long-term financial instruments, the company continually faces challenges related to low working capital management. The study objectives were: to explore the nature of working capital management practices at Freshcuts Uganda Limited, to investigate the challenges of working capital management at Freshcuts Uganda Limited and to find out the strategies for managing the challenges of working capital management at Freshcuts Uganda Limited. This study employed a descriptive research design which was cross sectional in nature. The population comprised of 60 staff at the company and the sample size was 52 employees in the finance department as well as at mid and senior level management positions. A questionnaire was used to collect data. It was found that there is indeed poor working capital management at Fresh Cuts Limited, despite the widely accepted recognition of the importance of working capital management to firm performance, hence bringing us to the conclusion that the poor management of working capital has contributed significantly to poor realization of the organization goals such as liquidity for its data expansion efforts. Working capital management is a big challenge for Fresh Cuts as it presents several questions regarding weighing between costs and benefits, and whereby it is not easy to determine an optimum position on working capital to be held by the company, yet it has ambitious growth prospects and performance goals. Fresh Cuts Limited has a conservative approach or strategy for handling the challenges of working capital management and this is why its problems of continued poor liquidity persist due to the cautious, if not disinterested, approach by the managers in handling the problem. On that basis it was recommended that the firm needs a separate policy on all the components of working capital like cash policies, inventory policies, credit policies, payable policies etc., management of the company should conduct regular refresher training for all staff in the finance and management positions. The management of Fresh Cuts should address challenges related to working capital management by creating up a dedicated position for monitoring working capital management. The company can consider hiring an expert consultant on a periodic basis to advise on its optimal position. It was also recommended that the company should consider the aid of technology in managing this challenge.