Analysis of working capital management in manufacturing firms in Uganda; evidence from Uganda Clays Ltd

Abstract

This research aimed to analyze the working capital management among manufacturing firms in Uganda. Specifically, the study was anchored on three objectives; 1) To analyze the working capital policies employed at Uganda Clays Ltd; 2) To establish challenges faced in managing working capital at Uganda Clays Ltd; 3) To formulate strategies that aim to improve working capital management at Uganda Clays Ltd. The study was conducted at Uganda Clays Ltd. Data were collected using a cross-sectional research design data from 111 respondents out of a sample of 136 employees using a survey questionnaire. The findings indicated that that the company uses conservative working capital policies by extensively using short-term credit, minimally investing in current assets, reducing product lead time and maintaining a healthy cash balance. The study further revealed that the company recognizes the risk in pursuing aggressive policies that are risky and have a lot of uncertainties. In addition, it was revealed that Uganda Clays Ltd aims to speed up debt collections, prolong credit payments, rely on internally generated funds, reduce production lead time and offer early payment discounts. The study recommended that the study recommends employing a moderate working capital policy by finding a balance between short-term and long-term investments. Further, that Uganda Clays Ltd should optimize the cash conversion cycle, the optimal net trade cycle and the optimal operating cycle as more accurate and comprehensive measure of working capital management. Finally, the study recommends implementing a streamlined inventory management system, establishing partnerships with suppliers and customers that allow for longer payment terms as well as utilizing a centralized department to regulate accounts payable, automate processes when possible.