Abstract:
The Small and Medium sized Enterprises (SMEs) have been identified as an
important sector in the overall policy objectives of the Government of Sri Lanka
(GOSL) and it is seen as a driver of change for inclusive economic growth,
regional development, employment generation and poverty reduction. The study
aims to identify the applications of financial management practices among small
and medium sized enterprises in Batticaloa district and also examine the impact of
financial management practices on the performance of SMEs. Financial reporting and
analysis, working capital management and financial planning and controlling have
been used as variables to measure the financial management practices. Perceptions
of owners on the performance were used to measure the SMEs performance. Self administered questionnaires were issued to collect data from 100 SMEs functioning
in Batticaloa district. The sample was selected through stratified random sampling
method from the registered SMEs in Batticaloa District. Cronbach’s Alpha was
used to check the reliability of the data. Results of the study revealed that, there
is a significant differences in the application of financial management practices
among small and medium sized enterprises. Financial management practices in
terms of financial reporting and analysis and working capital management are
highly applied by medium sized enterprises than small sized enterprises. Financial
reporting and analysis and working capital management have significant impact
on SMEs performance. Owners of SMEs may be benefited from the study as they
will able to enhance their business performance by the efficient employment of
financial management practices.
