UV Journal of Research 2014

175

Working Capital Management of small and medium

enterprises in Cebu
Dutchque Van E. Dato-on
Ruby P. Monto
Neresita M. Calaylay
Genard B. Villanueva
Jam Kathleen F. Velez
Earl Nathaniel O. Temanel
College of Business Administration
University of the Visayas
dutchquevan@gmail.com

Date submitted: January 5, 2014 Date accepted: June 30, 2014

ABSTRACT

Thispaper
The paperaims
aimsto toassess
assessthe
thenecessity
necessityto have an efficient working capital management
SMEs.and
within Small In reality,
Medium SMEs practically
Enterprises. focus only
In reality, SMEsonpractically
its cash receipts together
focus only on its with
cash
its bank together
receipts account position. Majority
with its bank of SMEs
account lack an
position. established
Majority of SMEsstandard
lack ancredit policy,
established
many of itcredit
standard also have a least
policy. Many concern for also
of them working
havecapital
least and financial
concern position.capital
for working It was
revealed
and that position.
financial various components
It was revealed in working
that variouscapital management
components like cash
in working flow
capital
and accounts like
management receivable management,
cash flow and accountsaccounts payable
receivable and inventory
management, management
accounts payable
greatly
and affect the
inventory liquidity and
management profitability
greatly affect theofliquidity
SMEs. Due andtoprofitability
the mismanagement
of SMEs. Due of its
to
working
the capital, someofSMEs
mismanagement strugglecapital,
its working in order
someto survive in the industry.
SMEs struggle in orderItto
is survive
advisable in
for industry.
the SMEs to Itgive credit on
is advisable forits
SMEsworking
to givecapital
credit on management by conducting
its working capital management and
implementing
by conducting aand customary credit policy
implementing to ensure
a customary better
credit internal
policy control
to ensure and financial
better internal
control
and system.
financial Hence,
control the significance
system. of working of
Hence, the significance capital
working management promotes
capital management
stable, liquid
promotes andliquid
stable, profitable SMEs.
and profitable SMEs.

Keywords: Working
WorkingCapital
CapitalManagement,
Management,SMEs,
SMEs,profitability, liquidity,
profitability, financial
liquidity, financial management
management
practice practice

I. INTRODUCTION opportunities
in in the community.
the community. Hence, theHence,study this study
is about
Business always
always exist
exists
in every
in every
nation.
nation.
This is about determining
determining how small how small and
and medium medium
enterprises
varies
This varies
mainly
mainly
on onwhat
whatkind
kindofof business
business an enterprises
in Cebu managein Cebu
theirmanage
working itscapital.
working capital.
organization forms.
form. People
People practically
practically undergo Cebu is just a small island of the Philippines.
small business that leads to medium enterprise Cebu accounts for more than 55 percent % of theoftotal
the
since starting
it requires
SME (Small
onlyanda Medium
small amount
Enterprise) of total population
population and more
and more than 10 than%10 percent
of the of
exports
investment
requires onlyto start
a small
with the
amount
so called
of SMEs
investment.
(Small the exportsof regardless
regardless of its
its size. It also hassize,. It over
catered also one
has
and
The SMEs
Medium act Enterprises).
as agents andThe as aSMEs
drawing
act asforce
an catered tourists.
million over oneCebu’s
million tourists.
huge Cebu’smeans
population huge
agent
of economic
and a drawing
growth force
and ofdevelopment
economic growth of a population
that it couldmeans that ait good
maintain could number
maintainofa SMEs
good
and
country.
development
They haveofaavital
nation.
roleThey
in thehave
citya for
vital
it number of
(Fajardo, SMEsA(Fajardo,
2010). manager2010).for SMEAofmanager for
Dell Global
role
provide
in the
businessess
city for it and
giveswelfare
businessopportunities
and welfare SME
BV of that
said DellnoGlobal BV said
less than 80 %that not less
of Cebu’s than 80
enterprises
174
176 UV Journal of Research

percenttoofthe
belong Cebu’s
SMEs. enterprises
Papa (2010) belong to the SMEs.
mentioned Cebu but there are other
ineffectiveness of thefactors to consider.
government One of
programs.
Papa (2010)
Business Cebu
Club Business
(CBC) Club (CBC)
President Dondi President
Joseph the factors
There is putting
are also up withtopoor
other factors management
consider. One of
Dondisaid
who Joseph
that said
majority thatofcebuano
Cebuano businesses (Mason,
the factors 2013).
is filingTheupshortage
with poor of management
are family-owned. Food processing, furniture talent, rampant
(Mason, 2013).inThe mostshortage
developing of countries,
management has
making, apparels, GTFAs (gift, toys and fashion significant
talent, rampanteffectinon mostSME’s (Grablowsky,
developing countries, 2000).
has
accessories), house wares and metalworking are
accessories), The lack ofeffect
significan good on management
SME’s (Grablowsky,skills can delimit
2000).
the five mainmain SMEsSMEs in in Cebu.
Cebu. GTFAs, furnitures the SME’s
The lack ofpotential management
good management skillsimprovement
can delimit
and house wares were advertised as Cebu’s on its
the operational
SME’s potential funds (Mason, 2013).The
management improvement status
export champions
championsbecause because of its
of superior export
their superior of company’s
on its operational working funds capital
(Mason, depends2013). on The
the
potential
export and strong
potential, strongbackward
backward conections
connections and difference
status between current
of company’s working assets
capitalanddepends
current
systems
and through
systems subcontracting
through (Losorata,
subcontracting 2013).
(Losorata, liabilities.
on The WCMbetween
the difference is one of current
the mostassetsvital sides
and
2013).SMEs are a part of innovating the culture of the whole
current financial
liabilities The management
WCM is one of methods
the most of
of SMEs enterpreneurship
are a part of the thatinnovating
introduceculture job any business.
vital sides ofThe thesuccess
whole and failuremanagement
financial of a business
opportunities.
of enterpreneurship Most firms, industries and
that introduces job depend on
methods of the
any efficiency
business. Theand success
effectiveness of its
and failure
government aimsMost
opportunities. for profit
firms,maximization.
industries Small and working
of capital management
a business depend on the (Mensah, 2004).and
efficiency
and Mediumaim
government enterprises are exactly known
for profit maximization. Small In assessment
effectiveness of itsof their sizes
working and management
capital complication
globally
and as a major
Medium contributor
Enterprises areand deliverknown
exactly to the of their management,
(Mensah, 2004). most SMEs miss to keep
economicasgrowth
globally majorand development,
contributors. Theycontinuous
deliver exactInarchives
assessment of financial activities
of their sizes which affect
and complication
introduction
to the economic of modern growth technology, the creation
and development, their
of theirworking capital. These
management, most are SMEs deficient
miss to capital,
keep
of generations
continuous of potentialofentrepreneurs
introduction modern technology, also, to flow of
exact management,
archives of financialand activities
control of inventory.
which affect
the competent
and the creation workers for a more industrialized
of generations of potential The lack
their workingof accurate business
capital. These accounts capital,
are deficient makes
development of both
entrepreneurs. All thesenational and international
contribute to the most ofSMEs
flow become and
management, essentially
control of hindered
inventory. in
businesses (Ching
development of both & Chang,
national 2005). Moreover, in
and international supervising
The lack of theiraccurate working capital
business soundly.makes
accounts Most
general the development
businesses (Ching & Chang, of SMEs can accelerate
2005). Moreover, SME inadequately
most SMEs become understood
essentially the hindered
significance in
the achievement
developmentof of a bigger
SMEs economic
can accelerateobjectives,
the of working their
supervising capital management.
working capital soundly.Many SMEs Most
including alleviating
achievement the poverty
of a bigger problem
economic in one’s
objective, are obliged
SME inadequatelyto terminate
understood their the businesses due
significance
country (Cook
including & Nixon,
alleviating the 2000).
povertyThe Philippine
problem of a to failure
of working in meeting
capital their short term
management. debtsSMEs
Many and
government
country (Cook has&initiated
Nixon, the promotion
2000). of SMEs
The Philippine obligations.
are obliged The problem istheir
to terminate not on their lackdue
businesses of
as a primaryhas
government strategy
initiated in the
achieving
promotion a sustained
of SMEs resources,
to failure in but how they
meeting administer
their short term their working
debts and
economic
as a primary progress.
strategy in achieving a sustained capital.
obligations. The problem is not on their lack
Even with
economic these programs, senior program
progress. To advance
of resources, but ontruthful
how they understanding
administer their in
specialist
Even with Rodriguezthese of the International
programs, Rodriguez, business capital.
working world, conducting an examination
Development
Senior Program Research
SpecialistCentre of (IDRC) said that it
the International regarding
To advancemanagement practices
truthful of SMEs is very
understanding in
is still insufficient.
Development He said
Research that even
Centre though
(IDRC) in there
2010 essential in
business dealing
world, with its an
conducting working capital.
examination
are athat
said lot ofthey
SMEare developments related
still insufficient. Heprograms,
said that However, most
regarding SMEs facing
management a lot ofofhindrances
practices SMEs is very to
but itthough
even is not there
effective
are aand lot there
of SMEare no clearer
development growth which
essential includeswith
in dealing accession to finance,
its working skills,
capital.
results after
related its execution.
programs, they are A survey organized
not effective; withby technology
Most SMEsand facemarket,
a lot of that is why by addressing
hindrances to growth
the clear
no GermanresultsDevelopment
after theirInstitute
execution. shown
A surveythat these gaps
which it givesaccession
include them an idea on how to skills,
to finances, make
only one toby
organized twothepercent
German of SMEs in the Philippines
Development Institute an effective and
technologies strategies
markets. and policies these
Examining in order
may
are able tothat
estimated advance,
only one while tothe
tworest stay stagnant
percent of SMEs to make the
address their gaps business
throughmore progressive
effective and
strategies
(Dagooc,
in 2013). are able to advance, while the
the Philippines activepolicies
and in the market place.
that will makeIn this case, provides
the business more
rest The reason why
stay stagnant (Dagooc,the 2013).
small and medium opportunities
progressive and to active
the people
in thewho market are place.
unemployed
In this
enterprises
The reason do not whyprogress
the small or worse
and medium fail, is or willitlessen
case, provides theopportunities
great number of to unemployment.
the people who
not only because
enterprises of the or
do not progress inconsistency
worse fail, is and not Likewise,
are SMEs would
unemployed. develop
Likewise, SMEs their confidence
would develop in
ineffectiveness
only brought about of the by government
the inconsistency programs, and the world
their of business
confidence in thewhere
worldthey meet different
of business where
 Dato-on, D. V. E., Monto, R. P., Calaylay, N. M., Villanueva, G. B., Velez, J. K. F. and Temanel, E. N. O. 175
177

they meet different

competitive competitive companies.
companies. II. CONCEPTUAL
CONCEPTUALFRAMEwORK FRAMEWORK
It is anticipated that the outcome will be This study
The study is is anchored
anchored on on the theory of
helpful not only to small-scale
particularly not only business
to smallin Cebu
scale
Pieterson (2012),
(2012), whichthat enumerates
stated that the the major
but also in
business toCebu
all SMEs all to
but also over the nation.
all SMEs all overThe
the
problems of SMEs nowadays are: inadequate
study
nation.would also guide
This study would owners and managers
also guide owners and of
cash reserves;
reserves, poor inventory management, management;
the business
managers to make
of the and execute
business to makeprograms
and execute on
failure toto adequately
adequately anticipate
anticipate
cash flow;
cash absence
flow,
how to efficiently
programs on howmanage the working
to efficiently manage capital.
the
absence
of properof accounting
proper accounting
records; and records
lack of and
financial
lack
Decisive methodDecisive
working capital. management
methods can efficiently
management of financial management
management skills. Efficient skills.
and effective
It is stated
working
that
enhance their working
can efficiently enhancecapital
their management
WCM. This study . The
throughmanagement
capital efficient and willeffective
lead to the
working
achievement
capital
article aims totodeliver
also yearned delivera valuable information for management
of profitability will
and liquidity
lead to of thetheachievement
enterprise. of
scheming strategies
strategies to impact the steady growth profitability
Differentand nations
liquidityundergo
of the enterprise.
various ways
of small-scale enterprise. The information would of conducting
Different nations
WCM undergo
in SMEs.various SMEs ways
can beof
also support officials of the Small and Medium conducting working
characterized as a firm capital
thatmanagement
made up mostly (WCM)of
Enterprise Development
Development Council (SMEDC) in in SMEs.
small andFirstly,
medium SMEs
enterprises.
can be characterized
It can be operated
as a
framing and articulizing SME development developmentfirm
by thethat
ownermadeas up
a manager
mostly and of small
the area
and ismedium
mainly
guidelines and procedures
procedures thatwhich areare
responsive
responsive to
enterprises.
local when itItcomes
can betooperated
its operation.
by theDiversifying
owner as a
the
to entrepreneur’s
the entrepreneur’sconfined needs. The
confined evidence
needs. Such
manager.
the natureAndof also,
SMEs
the areamayis mainly
contribute
local when
to theit
and data may
evidence and be datauseful
may tobenon-governmental
useful to non- comes to its operation.
management of its workingTo gocapital.
further,Indiversifying
fact, when
organizations who play anwho
governmental organizations important role in
plays a vigorous
the
it comes
nature
to theofprocess
SMEs ormay meanscontribute
of organizing
to the
improving small-scale
role in improving entrepreneurial
small-scale skills and
entrepreneurial
management
firm it is one ofof its
theworking
aspect forcapital.
the success
In fact, of
when
the
development in Cebu andinthe
skills and development Cebuwholeandcountry.
the whole
it comes to the process or means of organizing the
business.
country. firm it is one of the aspect for the success of the
business.
Figure 1. Schematic diagram of Working Capital Management of SMEs

Figure 1. Schematic Diagram of Working Capital Management of SMEs

176
178 UV Journal of Research

The firms
firms task tasktotomanage
manageworkingworking capital
capital is implementing
identified inventory
as cash flow policies
management in theirandbusiness.
stock
estimated
is estimated to be to difficult. Since, Since,
be difficult. it varies it mainly
varies Inventory
control policies
(Dogde, helpsSME’s
2004). SMEsstock to have an idea on
management
to its nature
mainly to itssuch natureas thesuch sizeasofthethesizefirm,offirmsthe how gets
also to manage
benefitstheirfrominventory
standardized like reviewing
systems
policy, firms’
firms, level of its production
policies, level of and the availability
its production and inventory,
and just in time
techniques that purchasing
help improve rawtheir
materials
stock
of resources.
the availability The of efficiency
resources.ofThe working
efficiencycapitalof and drop
levels. shipping one
However, inventory(Bragg,
third of SMEs 2011).depends
management
working capitalis needed
management mainlyis in SMEs mainly
needed rather Another
on the old-styleproblem
methods is failure to adequately
of controlling stocks
than
in in larger
SMEs ratherenterprises
than in larger (Peelenterprises
& Wilson, 2003). (Peel anticipate
and most cash flow.apply
did not Most SMEs internal problems
innovative practices
&This signify
Wilson, that This
2003). an signifies
efficient thatrunning of the
an efficient were identified
(Chittenden & asMichaelis,
cash flow2008). management
In this case,and
business’ofworking
running capital working
the business’ is not only imperative
capital is not stock need
SMEs control (Dogde,
to be 2004). in
more careful This means that
preparing and
for the
only firm for itsfor
imperative survival but itsurvival–it
the firm’s also shows that is the it SMEs needs to
monitoring thefocus
cashalsoflows on managing
in the long its run
stocks.so
is the lifeblood
lifeblood of its of its existence.
existence. So, it is important
It is important to have SME’s
that stock
they willmanagement also gets benefits
not fail in adequately anticipatingfrom
atoprofound
have a profound knowledge knowledge of the functions
of the functions of WCM of standardized
cash flow (Atrill, systems
2006). and techniques which
WCM
in SMEsin SMEs
regardlessregardless of its existence
of its existence to be so able that
to helpsAbsence
to improve of their
proper stockaccounting
levels. However, one
records
we may be
promote able to promote
a developed business a develop
industries. business third
is of SMEs
another depend
issue faced onby theSMEs.
old-styleMost methods
SMEs
industries.
One of the hindrances in the growth of of controlling
do not keep their stocksaccounting
and most records did notduring apply
SMEs Nowadays,
is inadequate SMEs encountered
cash reserves some problems
which can innovative practices
operations. That is why (Chittenden
SMEs face a& problem Michaelis, in
in which
cause it affects
failure. It is their
importantbusinessto giveto grow.
attentionOne 2008). In this case,
differentiating SMEsbetween
clearly needs toworkingbe more capital
careful
of thethis
with hindrances
because it is has
inadequate
something cash to reserves
do with in preparing
and profits. For andthis
monitoring
instance, of cash
workingflowscapital
in the
whichmeeting
the can cause offailure to SMEs. It isobligations
the immediate important long run so that
management they will
focuses not fail in adequately
on maintaining the high
to givecontinuous
and attention with these Insufficient
trading. problems because cash anticipating
range of net cash flow
capital that(Atrill,
gets2006).
the most out of the
it has something
reserves will be to do withfor
difficult theSMEs
meeting of your
to directly Absence
profit of proper
of the business accounting
(Shane, 2000). records is
immediate
catch up with obligations and continueThis
their obligations. trading.
may another
Lastly,issue
is facing
the lackby SMEs. Almostmanagement
of financial SMEs do not
Insufficient
be a result cash reserves
in failing to will be difficult
maintain sufficient for keep their
skill. Mostaccounting
of SMEs recordsfind it during operations.
hard because it
SMEs to directly
liquidity catch up 2004).
(Diacogiannis, their obligations.
It is important There That is why
involves SMEs facethe
managing a problem
stock of in differentiating
the business.
are instances
for the business whichto thegenerate
business fail to meet their
sufficient cash clearly between
Financial workingiscapital
management primarily and concerned
profits. In
obligation
by having because
adequatethey do not
working maintain
capital their
decisions addition,
on SMEs will
the upkeep andcollapse due to of
conception thiseconomic
problem.
sufficient
and liquidity
accounting (Diacogiannis,
information to be 2004).
able That
to face is For this
value. instance,
It gives SMEsworking
an idea capital
on howmanagement
to make
why it is important
immediate obligations for on
thetimebusiness
(Barrow, to generate
2001). focuses decision
proper on maintaining
making the which high range oftheir
maintains net
sufficient cash by having
Poor inventory management adequate is working
another capital which
financial get the SMEs
stability. most out needof theto profit of the
be skillful
capital decisions
problem which and accounting
makes the information
business fail to business
so that they(Shane,will2000).
know how or when to deal
be sustain.
to able to face Withimmediate
poor inventory obligations on time
management, Lastly,decisions
financial is the lacksuch of financial management
as introducing new
(Barrow,
its 2001). would be slow because they
production skill. Mostissuing
product, of SMEsstocksfind itora hard bonds, case because
extending
never Pooradopt inventory
rules ormanagement
policy to giveis attentionanother it involves
credit to managing
customer the and stock of the business.
maintaining cash
problem
to which equipments,
its resources, makes the facilitiesbusiness and cannot
raw Financial management
(Kehinde & Abiola, 2005). is primarilyMoreover, concerned
SMEs
sustain its Moreover,
materials. long termthis survival.
problem Thiswillproblem
increase is on the upkeep
would be aware andofconception
the cost involvedof economic andvalue.
they
so important
the risk of having to solve because it and
late payments willdefaulting
make the It gives
can SMEs ananidea
formulate on howWCM
effective to make proper
system in
companywhich
debtors loss their existence
may affect or ceased
the growth their
of SMEs decisionamaking
having which maintain
well-planned financial their financial
management
business.
(Atrill, If the
2006). business
Working has policies
capital a poor inventory
helps the stability.
and SMEs needs
decisions (Atrill,to2006).
be skillful so that they will
management,
SMEs overcome itsthis
production
problem by would be slow
implementing know on how or
Through when
brief to deal financial
identification of thedecisions
firms
because they
inventory never in
policies adopt
theirrules or policy
business. to give
Inventory such as introducing
problems we may new be product,
able to issuingmanagestocks our
attention helps
policies to inventory
to manage management. Moreover,
when purchasing or bonds,capital
working extending credit to effectively
management customer and
this problem
raw materials will andincrease the risk ofjust
drop shipping having late
in time maintainingIncash
accurately. (Kehinde
the life of SMEs, & working
Abiola, capital
2005).
payments
(Bragg, and defaulting debtors which may affect
2011). Moreover, SMEs
management is ofwould
upmost be important
aware of tool the that
cost
the growth
Most of SMEs (Atrill,
SMEs internal 2006). Working capital
problems were involved
leads them andto they
reactcan quicklyformulate
to the an effective
changes in
policies helps the SMEs overcome this problem by WCM system in having a well-planned financial
 Dato-on, D. V. E., Monto, R. P., Calaylay, N. M., Villanueva, G. B., Velez, J. K. F. and Temanel, E. N. O. 177
179

management
the market place, and decisions
such as(Atrill, an 2006).
advantage of to time,
the but noofbusiness
stability SMEs incan hold to industries.
business run out of
Through
gaining brief identification
a competitive firm (Appuhams, of the2008). firms cash (Merittthe
Therefore, & effects
Media, n.d.).
of WCM So, reflect
if you are unable
on the life
problems we may
Accordingly, the be able to manage
administration ofour working
optimizing to have
span of cash you might suffer a lack of supplies to
the SMEs.
capital
the management
curent assets andeffectively and accurately.
current liabilities is part operate your business or pay your bills that leads
In the
of WCM.life There
of SMEs, is working capital between
a relationship management the II.OBJECTIVES
to end your business. This is the reason why, WCM
is of upmostshort-term
enterprise important tool assets thatand leadsliabilities.
them to greatly affects the
Generally, thestability
objectiveof SMEs of in thebusiness
study
react goal
The quickly of to the changes
working in the
capital market place,
management is industries.
is to evaluate Therefore,
the workingthe effects
capitalofmanagement
WCM reflect
such ascurrent
firms’ an advantage
assets and of gaining
liabilities a competitive
in a way to the life span
practices of of
the your
SMEs SMEsin in the field
Cebu. of business.
Specifically, the
firm (Appuhams,
uphold reasonable level 2008).
of WCM Accordingly,
in the business the study wanted to: examine the working capital
administration
(Khan & Jain, of optimizing
2007). Another the goal
curent of assets
WCM Objectives and strategies of the SMEs with
management
andtocurrent
is encourage liabilities
firms’ is part of WCM.processes
continuous There is Generally,
respect to their thecashobjective of this accounts
management; study is
a relationship
and adequate cash involveflowbetween
to satisfy thetheenterprise
growing to evaluatemanagement,
receivable the workinginventory capital management
management
short-term assets
short-term and liabilities.
liabilities and inward Dueoperational
to this, the practices
and of thepayable
accounts SMEs inmanagement;
Cebu. Specifically, this
and find
goal of working
expenses. It is capital
helpfulmanagement
also to recognizewould bethe by study
out thewanted to: examine
bookkeeping practicesthe ofworking
SMEs, and capital
the
borrowing firms’
regulations, current assets
alteration and liabilities
and control of the in managementsource
short-term and strategies
of funds ofofSMEs. the SMEs with
a way to uphold
equilibrium reasonable
of current assetslevel of WCM2007).
(Osisioma, in the respect to their cash management, accounts
business (Khan the
Coherently, & Jain,
goal2007).
is not onlyAnotherto view goaltheof III. RESEARCH
receivable DESIGN AND
management, METHOD
inventory management
WCM is toas
business encourage
a profitable firms’one.
continuous processes
The significance and Theaccounts
study payable management,Itfind
is quantitative. hasout the
three
and adequate
upon establishing cash flow to satisfylike
a business the SMEs
growing is bookkeepingaspects;
important practices theof idea
SMEs,of and the the short-
problem;
short-term
to maintainliabilities and the inward
its profitability and focus operational
on its termgathering
the source of funds
of data; of SMEs.
and the output of the
expenses. to
liquidity It avoid
is helpful also toand
illiquidity recognize
insolvency. the study.Research Design and Method
The conceptualization stage was based
regulations, in
Engagement alteration
the various and variables
control ofof WCM the This assumptions
on some phase presents the description
that revolve on effect of
equilibrium
may lead to of thecurrent assets (Osisioma,
identification 2007).
of the importance research
the working design,
capitaltools, locale, respondents,
management of SMEs. The and
Coherently,
of WCM in SMEs. theProviding
goal is notanonly to view and
organized the methods. comes next that relates to the tools
gathering
business as WCM
manageable a profitable
sustainone. The significance
the gaps of SMEs in Design.
result. At theThis
end, study
we mayisbe quantitative.
able to determine It has
uponcompetitive
the establishingworld a business like SMEs
of business. Inisspite
that toof threeresult
the important
as well aspects; the idea of an
as to formulate theoutput
problem, of
maintain
all itsthe
the risk, profitability
SMEs confront and itthesefocus businesses
also on its the gathering
study by of data, and the output
tabulating information of the study.
being
liquidity
are widely tointroduced
avoid illiquidity and insolvency. To
and practiced. The conceptualization stage was based on some
gathered.
engage
To in the more
give various variables of
emphasis, WCMmust
there may leads
be a assumptions that revolve
The self-made on effect
tools used by the of researchers
the working
to the identification
connection between of the importance
liquidity of WCM
and profitability capital
for management
the study were theof SMEs. The gathering
questionnaires designed
in SMEs.profitability
since In connectiondiffers with these, providing
inversely an
with comes
by next which
the authors relatesdata
to collect to the
neededtoolstoresult.
address At
organized and
liquidity. manageable
Moreover, WCM sustain
profitability is the gaps
directly the end,
how we may
SMEs be abletheir
manage to determine
workingthecapital result
of SMEs in the
proportional with competitive
risk. Riskworld of business.
and return goes as well
in as to formulate
managing an output
their business in ofCebuthe study
City. byIt
In spite
hand in of all the
hand, therisk, the SMEs
greater the risk confront these
the greater tabulating the
underwent a information
test of reliabilitybeing gathered.
and validity by
businesses
its return.are widelymanagement
Proper introduced andofpracticed. working the Tools.
research Theadviser
self-made and tools
industry usedpartners
by the
To give
capital needs more to emphasis
be implementedto this, there to be must be
able researchers
to for the study were
ensure cohesiveness the questionnaires
of gathered data. The
collaboration
to handle risk between
that SMEsliquiditymightandencounter
profitability. in designed by the have
questionnaires authors threeto collect
variables: data (a)neededthe
For future.
the the reasonAfter that,
all, profitability
countless ofdiffers businesses inversely
can to address
system how SMEs
of debt payments; manage (b) their working
the working
with liquidity.
sustain to lose Moreover,
money from profitability
time to time, is directly
but no capital in
capital managing their
management thatbusiness
will motivatein CebuSMEs;City.
proportional
business canwithholdrisk.
to runThen,out risk
of and
cashreturn
(Merittgoes & It underwent
and (c) the usea of test of reliability
short-term sources and ofvalidity
funds
hand inn.d.).
Media, hand,So, theifgreater
you arethe risk the
unable to greater
have cash its by the research
which compriseadviser and industry
an indicator partners
that contains
return.
you Proper
might suffermanagement
lack of supplies of working
to operate capital
the to ensurequestions
relevant cohesiveness regardingof data
howgathered.
WCM in sales The
starts up or
business to pay
be able to handle
the bills that lead risk to that
theSMEs
end questionnaires
places a vital rolehave tothree variablesand
the industry andeconomic
these are
might
of encounter
business. That in is
thewhyfuture.
WCM After all, countless
greatly affects the system of debt payments, the working capital
growth.
of businesses can sustain to lose money from time management that will motivate SMEs and to use
178
180 UV Journal of Research

The respondents
short-term sources of fundsof theinstudy
which include those
it comprises the coming
current year. Working
liabilities capital
compromise management
all liabilities that
people who are
an indicator thatparticularly knowledgeable
contains relevant questions to can be must
the firm divided
meetinto four
or pay sections:
within the coming (a) year.
the
the operations
regarding how WCM and in manning
sales placeof the business,
a vital role to cash
Workingmanagement; (b) accounts
capital management receivable
can be divided into
specifically,
the industry and the economic
owner orgrowth. managers of SMEs management;
four sections; (c)the inventory management;
cash management, and
accounts
Respondents. The respondents
in order for the researchers to arrive atofa very this (d) accounts payable management.
receivable management, inventory management
realistic
study conclusion.
include those people who are particularly and accounts payable management.
The study towas
knowledgeable conductedand
the operations within
manning Cebu of
province
the business, particularly
specifically, the in owner
the city where
or managers Section A: Cash Management
SMEs
of SMEsare congested.
in order These are toSMEs
for the researchers arrivewhoat a
practically
very realisticallowed
conclusion. us to conduct survey in Table 1.1. Initial sources of funds
theirLocation.
establishment.
This study was conducted within Source Frequency Percentage
CebuThe study particularly
province exercises inthetheconveniencecity where
sampling method of
SMEs are congested. These are SMEs research. This method
who Self-financing 155 77.5
is likewiseallowed
practically known us as tosurvey
conduct research.
survey On this
in their By borrowing from
method, only the questionnaires are used 22 11
establishment. Bank
Methods. theThis
in gathering needed data since
study exercisesthey arethe By borrowing from
the easiest and most applicable
convenience sampling method of research. This technique 17 8.5
colleagues
under the
method given situation.
is likewise known as surveyIn theresearch.
study, 200 On
Purchasing on credit 4 2
questionnaires
this method, only were distributed only
the questionnaires aretoused
those in
SMEs within
gathering the the Cebudata
needed areasince
thatithad managers
is the easiest Others 2 1
or owners
and who had the
most applicable luxury ofunder
technique time the
to fill out
given
the questionnaires.
situation. In the study, 200 questionnaires were Total 200 100
distributed only to those SMEs within the Cebu
IV. RESULTS
area that hadAND DISCUSSIONS
managers or owners who had the The businesses are said to be ready in
The proponents were able to gather data
luxury of time to fill in the questionnaires. setting
Theup its business
businesses operations
are said to be ready if itin invests
setting
regarding the nature of SMEs in the market through self-financing
up its business operations(Pieterson, 2012). self-
if it invest through The
Results
industry.and Discussions
Specifically, 200 respondents from study proved
financing that 155
(Pieterson, (77.5
2012). The%) invest
study provedvia
different places in were
The proponents Cebuableprovince
to gatherfavorsdata self-financing
that 155(77.5%) which
investmeans most of SMEs
via self-financing are
which
mostly in sole proprietorship
regarding the nature of SMEs in the market 142 (71 %), in ready
means inmost attaining
of SMEs their
are readygoalsin in settingtheir
attaining up
partnership
industry. 53 (26.5 200
Specifically, %) and corporation
respondents from 5 business operations.
goals in setting The rest operations.
up business were financed The
(2.5 %). When
different places itincomes to the type
Cebu province of business,
favors mostly in by
restborrowing from bank
were financed 22 (11 %), from
by borrowing borrowingbank
foodproprietorship
sole eatery is most142 likely
(71%),used. In relation 53
in partnership to from colleague
22(11%), 17 (8.5
borrowing %) colleague
from and purchasing
17(8.5%) on
its location the result shows that
(26.5%) and corporation 5 (2.5%). When it comes 153 (76.5 %) credit 4 (2 %). Out
and purchasing of 2004(2%).
on credit respondents,
Out of 2200 (1
of the
to SMEs typeareoflocated
business, infood
Cebueatery
City, is 21most
(10.5 %)
likely %) used lending
respondents, 2(1%) in uses
setting up their
lending business
in setting up
in Mandaue
used. City,to
In relation 22its(11 %) in Lapu-
location Lapu
the result City,
shows which is one of
their business the factors
which is one of whythesome
factorsSMEs why
and 153
that 4 (2 (76.5%)
%) in Talisay
of SMEs City.
are located in Cebu City, ceased
some SMEs their ceased
business. Lending
their is notLending
business. advisable is
21 (10.5%) in Mandaue City 22 (11%) in Lapu- in
notsetting up business
advisable in setting operation
up business because of the
operation
Working
Lapu Capital
City and 4 (2%) in Talisay City. time granted
because of theto thegranted
time debtors. to Unlike to theUnlike
the debtors. bank
The firm’s working capital is made up of and
to thecolleagues which they
bank and colleagues which canthey
extend their
can extend
working
its current Capital
assets and current liabilities. The period of time
their period of depending
time depending on the oncontract
the contract they
current assets comprisecapital
The firm’s working all assets that up
is made theoffirm
its have. Pieterson
they have. That’s(2011) advised advised
why Pieterson SMEs toSMEs use
expects to convert
current assets into cash
and current within The
liabilities. the coming
current self-financing in setting upinbusiness
better to use self-financing setting upoperation
business
year.
assetsWhile
comprise current liabilities
all assets that thecompromise
firm expectsall to so that there
operation will there
so that be nowilldifficulties in running
be no difficulties in
liabilities
convert into that the within
cash firm must the meet
coming or year.
pay within
While their
runningbusiness.
their business.
 Dato-on, D. V. E., Monto, R. P., Calaylay, N. M., Villanueva, G. B., Velez, J. K. F. and Temanel, E. N. O. 179
181

Table 1.2. Cash Budget proceeds (Pieterson,

proceeds (Pieterson,2012).
2012).However,
However,6363(31.5%)
(31.5 %)
choose toto deposit
chooses deposit their
their generated
generated profits
profits in
Answer Frequency Percentage the bank to ensure the safety of their money.
Yes 60 30
These methods were not applicable by other
investor because
investors becausebanks
banksare
arenot
not in
in service every
No 140 70 follows holidays.
day and it follows holidays. Investors
Investor sayssay that
Total 200 100 when they do depositing every day, there will be
mismanagement of cash because the procedure
mismanagement procedure
they prepared will not be followed. As a result,
Preparation of cash budget is very important the study
studyproved
provedthat
thatSMEs
SMEsprepared
prepared toto
choose
choosein
in the life of SMEs. Out of 200 respondents, there placing
in their
placing proceeds
their insideinside
proceeds the vault
the first
vaultbefore
first
are 140 (70%)
(70 %)who
whodoes not prepare cash budget
did not having having
before or actingoraacting
wise decision-making.
a wise decision-making.
and only 60 60 (30
(30%)
%) who
who prepared
prepared cash budget.
The preparation of cash budget will help SMEs Table 1.4. Techniques by which surplus cash is invested
to plan
plan influxes
influxes andand discharges
discharges of cash.
of cash. It used
It is is used
to by entrepreneurs
to approximate its short-term
approximate its short-term cash cash requirements
Methods Frequency Percentage
particularly in planning for surplus cash and for
cash shortage (Gitman, 2011).The study shows Bank deposit 156 78
that SMEs were not aware of the importance of In long-term deposit 12 6
preparation of cash budget. SMEs are advised to Debt or equity
12 6
prepare a cash budget so that they will be guided securities
in handling their cash rather than continuing Others 20 10
operation without any awareness to their cash. Total 200 100
The study also
also prevails
prevailsthat
that4747(78.33%)
(78.33 %) of
do not
the enterprises did not spend
spend within their budget. The surplus cash which that SMEs SMEsgenerate
generated is
It means that SMEs do not follow the prepared advisably be deposited
will be advisable to deposit in inbank
bank (Pieterson,
cash budget. As a result, SMEs were encouraged to 2012). The study proved that out of 200 investors, investors,
prepare cash budget and spend within the budget 156 (78 %)
156(78%) of them
prepared are prepared
to deposit to deposit
their surplus cash
so that the flow of cash will be handled properly. their surplus cash in bank. Their
in bank. The reason is that they want to meetreason is that
they
their want to meet
immediate their immediate
obligation obligations
or the unexpected
Table 1.3. Methods of managing cash generated on a daily or the unexpected
expenses and unforeseen expenses and unforeseen
opportunities of their
basis
opportunities of theirThus,
business operation. business
the operation. Thus,
result is highly
Methods Frequency Percentage the result is highly favorable as to
favorable as to what stated. Long –term deposit what stated.
Long-term
and debt ordeposit
equity and debt or
securities equity
that securities
generated the
Placed inside the
118 59 that
same generated
percentage theof same
6 will percentage
not be of 6
applicable will
in
office vault
not
SMEsbebecause
applicable
thesein twoSMEs because
strategies theselarge
required two
Deposit in the bank 63 31.5
strategies
capital andrequired
SMEs haslarge only capital
short-term and funds.
SMEs Also,
have
Others 19 9.5 only short-term
they were more on funds. Also, theyand
expenditure were more on
progression
expenditure and progression
for their business operationsfor and their business
if they will
Total 200 100
operations and if strategies,
engage in those they engage in those
they strategies,
will experience
they will experience
difficulties in meeting difficulties in meeting As
their obligations. theira
The above table shows that 118(59%) of the
The above table shows that 118 (59 %) of obligations.
result, SMEsAswere a result, SMEs were
encouraged encouraged
to deposit their
SMEs
the SMEsplace their
place cash
their cashinside
insidetheir
theiroffice
office vault.
vault. to deposit
surplus their
cash surplus
in the cash inengaging
bank before the banktobefore
other
This method
This method isis advisable
advisable because
because they
they have
have set
set engaging to otherinfield
field particularly particularly
long-term in a long-term
investment.
time on
time on when
when they
they should
should spend
spend or deposit their
or deposit their investment.
180
182 UV Journal of Research

Section B: Accounts Receivable Management respondents said that they were paid in one
The accounts receivable management is a month, 22 (14.86(14.86%) %) were
were paid
paid inin 21 days, only
critical field of the business because of its impacts 8(5.41%)
8 (5.41 %)said saidthatthatthey
theywere
werepaidpaidinin 77 days
on the
thefirm’s
firm’sand riskand
risk and profitability.
profitability. However,
However,and 14 14(9.46%)
(9.46 %)saidsaidthat
thatthe
the days
days oror period the
sales on credit are unavoidable in every business customers pay their debt varies. Rahemen (2011)
present today (Vuorikari, 2012). Nevertheless, 52 said that if the the firm
firm takes
takes aa longer
longer duration
duration in
(26%)
(26 %) out
out of
of 200
200 respondents
respondents did did not sell their collecting receivables, the profitability of the firm
merchandises on credit for forthe
thereason
reasonthat
thatthey
theydid
do
decreases. He added that if it takes for customers
not want to take risk. If a supplier needs to place to pay their bills in a lesser time, then the more
a bigger order from a firm, that supplier may not cash are available to replenish inventory. Hence,
sources of
have the sources of funds
funds to
to pay
payforforit.
it That
all inorder
case.
the shorter
higher the theperiod
sales ofobtained
collectionwhich
the higher
leads the
to
That go
will order will go company
to another to anotherunless
company your unless
small
higherobtained
sales profitability
which ofleads
the firm,
to higher
so theprofitability.
shorter the
your small
business business
extends extends
credit credit
(Peavler, (Peavler, n.d).
n.d). periodTheofstandard
collectionway of the
before
receivable
granting thecredit
better.to a
customer
The standard
is checking waytheir
before
credit
granting
ratingcredit
or having
to a
Table 2.1. Time durations given to the customers to settle a
customer
formal credit
is checking
investigation
their credit
to avoid
ratingbador having
debts.
their debts a formal
Sadly, outcredit
of 148investigation
entrepreneurs
to avoidwhobad credited
debts.
Sadly,goods,
their out ofonly148 38entrepreneurs
(25.68 %) undertakeswho credited
formal
Durations Frequency Percentage
their goods,
credit investigations
only 38 (25.68%)
before granting
undertake credit
formalto
Fifteen days 58 39.19 credit customers.
their investigations Thus,before
110 granting
(74.32 %) credit
never
to
One month 46 31.08 their customers.
undertakes such investigations
Thus, 110 because(74.32%) theynever
said
Twenty-one days 22 14.86 undertake
that it is time
suchconsuming.
investigations
The 38because
SME operators
they said
Seven days 8 5.41 that it is time
employed credit
consuming.
investigation
The 38 process
SME operators
to assess
Others 14 9.46 employed
the credit credit
worthinessinvestigation
of their process
customers. to assess
These
Total 148 100 the credit worthiness
procedures included conducting
of their customers.
investigations
These
procedures
on customers included
past records
conducting
from other
investigations
business
Based
Based on thethe information
gathered information
gathered, gathered,
table 2.1 firms,
on customers
checkingpasttheirrecords
past financial
from otherdealings
business
with
table
shows2.1 shows
that of thethat
148ofinterviewers
the 148 interviewers who their
who operated firms,industries,
checking theirchecking
past financial
their bank dealings
references
with
operated their business
their business on credit,
on credit, 58 (39.19
58(39.19%) %)their
said said and
their other
industries,
measures.
checking Withtheir
regardbanktoreferences
the first
their
debtorsdebtors
paidpaid
themtheminin1515 days,
days, 46 (31.08 %) procedure
46(31.08%) and other only measures.
8 (21.05 With
%) of
regard
the 38 to operators
the first

Table 2.2. Kinds of formal credit investigation methods applied by the SME respondents

Yes No Total
Procedure
Frequency Percent Frequency Percent Frequency Percent

Investigate customers
past records from 8 21.05 30 78.95 38 100
other business firms
Check customers past
financial dealings with 35 92.11 3 7.89 38 100
the enterprise
Check customers bank
8 21.05 30 78.95 38 100
reference
Other measures 28 73.68 10 26.32 38 100
 Dato-on, D. V. E., Monto, R. P., Calaylay, N. M., Villanueva, G. B., Velez, J. K. F. and Temanel, E. N. O. 181
183

checked their
procedure only
customers
8 (21.05) pastofrecords
the 38from operators
other evidence
good evidence
of customer’s
of customer’s indebtedness.
indebtedness.
They
checked their
business firms.
customers
However,past 30 records
(78.95 from%) ofother
the They contain
both both contain
considerable
considerable
information information
as a proofas
business firms.
operators did notHowever,
apply this30 method
(78.95%)of of credit
the a proof
of the debt
of the
of the
debtcustomers.
of the customers.
The usualThe segment
usual
operators didOn
investigation. not
theapply
second this
procedure,
method the of entire
credit segment
of a charge of invoice
a charge includes:
invoice date,includes:
customers’
date,
investigation.
38 (100 %) respondents
On the second whoprocedure
undertook theformal
entire names and customers
suppliers’ addresses,
and suppliers’ contact
addresses,
names,
38 (100%)
credit investigation
respondent saidwhothatundertake
they examined
formal contact names,
description of description
items purchased, of itemsproducts
purchased, or
creditcustomer’s
their investigation
pastsaid
financial
that theytransactions
examined their
with either products
services, and the termor services
of payment and (Murray,
the termn.d). of
customer’s
their industries.
past financial
On the thirdtransactions
procedurewith 8 (21.05
their payment (Murray,
Promissory note onn.d).the Promissory
other hand note contains
on theall
industries.
%) said that
On the
theythird
check
procedure
their customers
8 (21.05%)banksaid other
the terms
handpertaining
contains all to the
the indebtedness
terms pertaining by theto
that they check
reference and 30their
(78.95customers
%) of the bank
respondents
reference the indebtedness
issuer or maker tobythe thenote’s
issuer payee,
or maker
such as
to the
and 30
said they
(78.95%)
did not take
of thesuch
respondents
measure. Twenty-eight
said they did note’s payee,
amount, interest
suchrate,
as the maturity
amount, date,
interest
date rate,
and
not take%)
(73.68 such
of measure.
the operators
Twenty-eight
said that (73.68%)
they tookof maturity
place of issuance,
date, dateand andissuer’s
place of signature.
issuance, Forty-
and
the operators
other measuressaidbefore
that they
granting
take other
creditmeasures
to their issuer’s
one (27.70signature.
%) of theForty-one
respondents (27.70%)
only listed
of the
before granting
customers and 10credit
(26.32to their
%) ofcustomers
the operatorsanddid
10 respondents,
names of theirhowever
debtor, theonlydate
list and
the names
the amount
of their
of
(26.32%)
not apply other
of the measures.
operators The did not
analysis
applied
suggests
other debtor,
their debt
the on
date a and
notebook
the amount
to acknowledge
of their debt that
on a
measures.
that most SME
The investors
analysis suggests
did not havethatgood
mostcredit
SME notebook
debt exists.toThis
acknowledges
kind of method that ais debt
notexists.
preferable
This
investors did not
investigation. Brookhave(2011)
good credit
statedinvestigation.
that a good kind
if your
of business
method isisnot growing
preferable
becauseif your
it can
business
cause
Brook (2011)
credit investigation
said thatshould
a good contain
credit investigation
all the three is growing
many errorsbecause
and there
it caniscause
a big many
chance errors
that and
the
should contain
procedure mentioned
all theabove.
three procedure mention there is a big
notebook willchance
be lost.that the notebook will be lost.
above.

Table 2.3. Evidences to suggest customers’ indebtedness Table 2.4. Offer cash discount for early payments

Form Frequency Percentage

Answer Frequency Percentage
Charge invoice 60 40.54
Yes 95 64.19
Promissory Note 47 31.76
List on notebook 41 27.70 No 53 35.81
Total 148 100 Total 148 100

In granting
grantingcredit
credittotocustomers,
customers, there
there must
must be
be an evidence
an evidence to advocate
to advocate their their indebtedness.
indebtedness. Sixty Cash discount is an incentive that a seller
Sixty
(40.54%) (40.54
out %) out respondents
of 148 of 148 respondents said
said that they proposes to a buyer in return for paying a bill
that they use
use charge charge
invoice as aninvoice
evidence as of
anindebtedness
evidence of owed before the scheduled due date. The seller
indebtedness of their
of their customers. customers.
Charge invoice Charge invoice
is a bill is
sent by will normally lessen the amount owed by the
a supplier
bill sent of
byaaproduct
supplierorofservice
a productto theorpurchaser.
service to buyer by aasmall
smallfraction
fractionorora aset
setdollar
dollar amount.
amount. If
the
Thepurchaser. The invoice
invoice launches launches an
an obligation onobligation
the part If used properly, cash discounts would
used properly, cash discounts improve the days- improve
on
of the part of the purchaser
purchaser to pay, an
to pay, creating creating an
account the days- sales- outstanding
sales-outstanding aspect ofaspect of a business’s
a business’s cash
account
receivable receivable
(Murray, (Murray,
n.d). Then.d). The 47 (31.76
47 (31.76%) of the cash conversion
conversion cycle. Providing
cycle. Providing a small
a small cash cash
discount
%) of the operators
operators said thatsaidtheythatuse
they use promissory
promissory note discount
would bewould be beneficial
beneficial for the sellerfor the
as seller
it wouldas
note
as a as a proof
proof of of indebtedness
indebtedness ofoftheir
theirdebtor.
debtor. A it would permit him to have contact to
permit him to have contact to the cash sooner. the cash
promissory note note isisaafinancial
financialtool
toolthat
thatcontains
containsa sooner. Thea earlier
The earlier a sellerthe
seller receives receives
cash, thetheearlier
cash,
printed
a printed promise
promise by one party
by one to pay
party toanother party
pay another the earlier
he can put he
thecan put back
money the money
into the back into the
business to
aparty
definite sum ofsum
a definite money either on
of money demand
either or at a
on demand business
buy moretosupplies
buy moreand/or
suppliesgrowand/or
the grow
company the
specified future date
or at a specified future(Investopedia, n.d.). Charge
date (Investopedia, n.d). company further (Investopedia,
further (Investopedia, n.d). However,n.d.).out
However,
of 148
invoice and promissory
Charge invoice and promissorynote are notebothare good
both out of 148 enterprises
enterprises whothey
who said that said sell
thattheir
they sell their
goods in
182
184 UV Journal of Research

goods
creditsinonly
credits only 95 (64.19
95 (64.19%) applied%)cash
applied cash
discount benefit toofthe
operation theoperation
business such
of theas having
business reliable
such
discount to their customers.
to their customers. Hence, 53Hence, 53 (35.81
(35.81%) %)
do not records
as havingthereliable
companyrecords
abletotothe plan,
company
strategize to
did not apply
applied cash discount.
cash discount. The reason
The reason whydon’t
why they they andable
be stay to
within
plan,itsstrategize
budget. On andthestay
contrary,
withinnot its
did notcash
apply apply cash discount
discount is thatthat
is they think perceive it would
it will lessen keeping records
budget. On the contrary,
may lead not to failure
keeping in tracking
records
lessen their profit.
their profit. inventories
may lead tothat
failure
will lessen
in tracking
the chance
inventories
of business
that
to customer’s
will lessen thedemands.
chance ofConsequently,
business to customer’s
practicing
Section C: Inventory Management inventory control
demands. Consequently,
mechanism practicing
is a technique
inventory of
The firm’s inventory management is the protecting
control mechanism
SMEs in going
is a technique
on over stockof protecting
or under
most serious component of working capital, since stock (Clodfelter,
SMEs in going on 2003).
over Asstock
a matter
or under
of factstock
152
it is the least liquid and consequently tends to (76%) of the
(Clodfelter, 2003).entrepreneurs
As a matter of did fact 152
undertook
(76 %)
be a cash trap. When funds have been spent on physical
of the entrepreneurs
counting this method
did undertake
is also known
physical as
inventory the period of time needed to convert it click sheet.
counting this
Physical
method, counting
otherwiseor manual
known as click
control
back into cash can be quite long, so it is wise to sheet.
of inventory
Physical
is not
counting
desirable ortomanual
use since control
it seems of
invest in minimum possible amount of inventory to be tedious,
inventory is nottime
desirable
consuming
to use since
and prone
it seems to
(Bragg, 2010). Part of inventory management is to human
to be tedious,
error. While
time48consuming
(24%) did and not undertake
prone to
control stocks in the warehouse. The study shows such method
human error. While
instead 48a(24
software
%) utilized
systema software
is used
136 (68 %) of the
(68%) the200
200SMEs
SMEsoperators
operatorsexperienced
experience even if itsince
system is costly
it provides
it contribute
a more an accurate
accurate and
small pile up of inventories which is quite timely data. As aa result
timely result appropriate
appropriate inventory
inventory
advantageous for the enterprise.
in the enterprise. This specifies control management
control management minimized
can minimize wastage
wastageof rawof
that lesser inventories
inventories are
arebetter
bettergiven
givenwhen
that the raw materials.
materials.
cash is not tied up in its inventories. Nonetheless,
64 (32 %) of
(32%) of which
which says
says they meet large pile up Table 3.2. Time durations of physical counting undertaken
of inventories because this will guarantee that by entrepreneurs
all orders could be occupied quickly, eliminating Durations Frequency Percentage
the need for backorders due to stock outs. In Daily 73 48.02
this case, an opportunity
case an opportunity cost
cost is high. Therefore, Weekly 20 13.16
careful decision
decisionand
and control
control are required
is required to secureto Monthly 44 28.95
secure a successful
a successful operation
operation of of inventoriesinin the
inventories Semi-annually 4 2.63
business. Yearly 8 5.26
Table 3.1. Keep all inventory records Others 3 1.97
Total 152 100
Answer Frequency Percentage
In monitoring
monitoring inventories,
inventories physical
basicallycounting
physical
Yes 62 31
is the easiest
counting is the way. Other
easiest firm exploited
way. Other firm uses this
No 138 69 manual
kind of tabulation
tabulating of datafor
data forititisis cheaper
cheaper than
Total 200 100 using software.
software. Table 3.2 illustrates
illustrates that there
were respondents
respondents attending their their inventories
inventories
Based on table 3.1, the results revealed by physical
physical counting
countinginindaily
daily basis
basis 73 73 (48.02
(48.02%),
that Based on tableof3.1,
138 (69%) the results reveal
respondents that 138
disregard the %), weekly
weekly 20 (13.16monthly
20 (13.16%), %), monthly 44 (28.95
44 (28.95%), %),
some
(69 %) of respondents disregard the significance
significance of keeping records because they some were semi-annually
were semi-annually 4 (2.63%),4 (2.63
yearly %),8 yearly
(5.26%) 8
of keeping
simply misplacedrecords because
it or not they simply
doing anything at all. (5.26 %) and
and others others
when the when the need
need arises arises 3While
3 (1.97%). (1.97
misplaced it. Practically, 62 (31
Practically, 62 (31%) said they patiently%) said they
kept %).
the While the remaining
remaining 8 respondents8 respondents did not
did not undergo
patiently
records ofkept
theirrecords of their
inventories inventories
for tracking for
supplies undergo
inventoryinventory for thethat
for the reason reason
theythat onlythey did
ignore
tracking supplies and safekeeping purposes.
and safekeeping purposes. It is advisable to keep not recognize itsThe
its importance. importance.
earlier it Early
seemstabulation of
to tabulate
It is advisable
records given thatto keep records.
it provides It provides
benefit to the data through
through inventories
inventories are preferred
is better thanbecause
longer
 Dato-on, D. V. E., Monto, R. P., Calaylay, N. M., Villanueva, G. B., Velez, J. K. F. and Temanel, E. N. O. 183
185

it is necessary
period because itfor is significant
the enterprisefor thetoenterprise
dispatch debtor settles their debts to their creditors. To
debtor settles their debts to their creditors. To
to dispatch
these stocks these
in the
stocks
market
in thetomarket
convert to to
convert
cash the creditors if the buyers pay their bills before
the creditors if the buyers pay their bills before
it inutility
for cash in resulting
order totobelow usedopportunity
in the firmcosts.
thus or within 7 days (24.66 %) or in accordance to
or within 7 days (24.66%) or in accordance to its
opportunitymanaging
Therefore, costs is low.the inventories
Therefore, managing
provides its credit terms that is likely favorable to the
credit terms it is likely favorable to the creditors
the inventories
information neededprovides
by theinformation
business especially
needed creditors side. Whereas for the debtors, the
side. Whereas to the debtors the longer it takes
by marketing
in the businessstrategy
especially since
in marketing
it can be strategy
used to longer it takes for the buyers to pay its obligations
for the buyers to pay its obligations 14 days
since it can
identify slow-selling
be used as merchandise
to identify slow-selling
and allows 14 days (29.45 %) is satisfactory since their cash
(29.45%) is satisfactory for the buyers since
merchandise
business to reduce
and allows
its price
business
if possible
to reducebefore
its can be temporarily utilized as a source of funds in
their cash can be temporarily use as a source of
price if possible
consumer’s demandsbeforecompletely
consumer’s disappear
demands operating the firm. Aside from the aforementioned
funds in operating the firm. Aside from that the
completely disappear
(Clodfelter, 2003). Hence,(Clodfelter,
SMEs are2003).
less Hence,
aware data, they do not only shows its earlier payments
aforementioned data above does not only shows
SMEs
to theare
significance
of less aware of inventory
to the significance
management of but also its longer period: like 15 days (8.90 %),
its earlier payments but also its longer period just
inventory For
practices. management
those knowledgeable,
practices albeit the several
ability 21 days (10.96 %) 1 year (2.74 %). Moreover, it
like 15 days (8.90%), 21 days (10.96%) until it
areapply
to knowledgeable
these practices
enough in real
theirtransactions
ability to apply
are is not advisable to settle debts for a longer period
reach for probably 1 year (2.74%). Moreover, it is
theselimited.
very practices in real transactions are very since the necessary payments to suppliers is only
not advisable to settle debts for a lengthier period
limited. one month. This may result to misunderstanding
of time since mostly the necessary payments
Section D: Accounts Payable Management between supplier and the clients unless there
to suppliers is only one month this may result
Section
The D:researchers
Accounts Payablegathered Management
data on how was negotiation. Thus, stretching the accounts
to misunderstanding between supplier and the
the The
SMEsresearchers
manage itsgathered
accountsdata payable.
on how Since,
the payable is a strategy used by a firm to delay the
clients unless they negotiate to their creditors.
SMEs manage
external sources
its accounts
of fundpayable.
arisingSince,
mainlyexternal
from payments of its obligations without necessarily
Thus, stretching the accounts payable is a strategy
sources operations
normal of fund arising
of the business
mainly which
from include
normal changing its credit reputation. This strategy
used by a firm wherein it delays the payments of
operations
accounts payable.
of the business that include accounts reduces the cost of giving up cash discounts
its obligations without necessarily changing its
payable. (Laman, 2008).
credit reputation. This strategy reduces the cost
of giving up cash discounts (Laman, 2008).
Table 4.1. Time durations that the debtors settle their
obligations to their creditors
Table 4.2. Negotiate with their creditors to extend credit
Durations Frequency Percentage terms
7 days 36 24.66
14 days 43 29.45 Answers Frequency Percentage

15 days 13 8.90 Yes 132 66

21 days 16 10.96
No 68 34
1 month 26 17.81
1 year 4 2.74 Total 200 100
Others 8 5.48
Total 146 100 As far as4.2
Table the surveys
illustratesresult table132
that 4.2 illustrates
(66 %)
that 132 (66%)negotiate
entrepreneurs entrepreneurs negotiate
with their with
creditors
Based on the the collected information,
information collected it shows their creditors
(favorable to plus
the itdebtors)
is favorable to the debtors
compared to 68
that SMEs
SMEstransact
transact business
business withwith theofuse
the use of
credit. compared to 68 (34%)
(34 %) remaining (notremaining
be able to were not be
negotiate
credit. Interestingly,
Interestingly, there are146
146(73 %) of
(73%) of respondents able totheir
with negotiate with their
creditors creditors in
in extending extending
their credit
exploited
undertake purchasing
purchasing goods
goods onon credit
credit rather their credit
period). period. be
It should It should
advisablebe to advisable to
negotiate
than 54 (27 %)purchasing
54(27%) purchasinggoods
goods in
in cash because negotiate
with with creditors
creditors becausebecause it is really
it is really helpful
helpful in
they can use cash on hand in their short term in extending credit terms. Critically
extending credit terms. Critically maintained maintained
transactions
transactions like employees salary and other credit lines (late payments)
payments) may result in the
expenses for
for the
the business
businesstotooperate
operatedaily.
daily. company being a ‘blacklisted’
‘blacklisted’ by credit bureaus
Table 4.1 shows period of payments that a making it more problematic or expensive to
186 UV Journal of Research

secure
184
186 financing in the future (Investopedia,
UV Journal ofpurchases,
Research sales, receipts and payments.
n.d.). Superior supplier relationships provide
a win-win situation for the company as well as Table 5.1. Record all cash transaction
the supplier.
secure Suppliers
financing
financing in the
in willfuture
the bring (Investopedia,
future in good deals
(Investopedia, and payments
purchases, byreceipts
sales, an individual or organization.
and payments.
Answer Frequency Percentage
for the company
n.d.). Superior and
Superior supplier will advocate
supplierrelationships excellent
relationships anda
provide
provide The bookkeeper who performed the recording
high quality
win-win products
situation fortothe company. Therefore, Yes 5.1. Record all cash transaction
Table 57 28.5
a win-win
186 situation for thecompany
company UV as well
well as
asJournal ofis responsible for ensuring daybooks. It consists
Research
good supplierSuppliers
the supplier.
supplier. or company
Suppliers relationships
will bring
will bring in good mean
deals ofNo
purchases, sales, 143 71.5
receipts and payments.
Answer Frequency Percentage
increased company
for the company efficiency
and will advocate
advocateso it must
excellent be
and Total 200 100
cultivated.
secure financing in
high quality products to the the future
thecompany. (Investopedia,
company. Therefore,
Therefore, Yes
purchases, 57
sales, receipts and payments. 28.5
n.d.). Superior orsupplier
good supplier company
company relationships
relationshipsprovide
relationships mean No The table shows 143if the SME’s record 71.5 the cash
aTable 4.3. Use short-term funds for long-term investments
win-win
increased
increased situation
company for
company the company
efficiency
efficiency so it asmust
so well be
as Table
Total
5.1. Record all cash transaction
transactions of their200 business. Results 100 shows that
the supplier.
cultivated.
cultivated. Suppliers will bring in good deals only 57 respondents record their cash transactions
Answers Answer Frequency Percentage
for the companyFrequency
and will advocate Percentage
excellent and through
The bookkeeping
table shows ifand the143 SME’s respondents
record thedon’t cash
Table
high 4.3. Use short-term funds for long-term investments
Yes quality products
108 to the company. 54 Therefore, Yes
record the cash
transactions of their 57 business.ofResults
transactions their 28.5
business
shows that at
good
No supplier or
92 company relationships
46 mean all.
No Majority
only 57 respondents of the 143 respondents
record their cash answered
71.5
transactions“No”
Answers company Frequency Percentage because
increased
Total 200
efficiency so
100
it must be Total they
through said 200
bookkeeping theyand are 143not knowledgeable
respondents
100 on
don’t
cultivated.
Yes 108 54 proper recording of cash transactions
record the cash transactions of their business at and also
No Short-term 92financing is a 46 foundation of most of table
The the 143
all. Majority ofshows
therespondents
if the SME’s
respondents that don’tthe
record
answered record
cash
“No”
Table 4.3. Use short-term funds for long-term investments cash transactions
transactionstheyof
Results
because showtheir
said are
theythat businesses
business.
areonly 57 which
notResults shows
respondents
knowledgeable do that
not
on
‘quick’
Total liquidity for
200 the business, 100in particular
SMEs, who do Frequency
not have large pool of standby require
only
record
proper books
theirof account.
57 respondents
recording ofrecord
cash cash Intheir
the other
transactions
transactions hand
cash transactions thealso
through
and 57
Answers Percentage respondents
through that are able to record transactions
funds for emergency
Short-term uses (Laman,
financing 2008). Hence,
is a foundation of most of bookkeeping
bookkeeping the 143 and 143and respondents
respondents 143 respondents
that don’t did don’t
record
not
Yes Short-term108
short-term financefinancingprovides 54
is a almostfoundation instant of are
cashmuch
record
record the favored
the cash
transactions to businesses
cashtransactions
are recordofof
transactions cash
their transactions
business
which
their do not
business. at
‘quick’ liquidity for the business, in particular
No to
‘quick’
funds liquidity
such 92 for have
the business, 46in of particular because
all. Majority
require it
books is ofrequired
of the
account. in
respondents
Majority of the respondents answered “No” Intheir
the state
otheransweredor
hand field
“No”
the of
57
SMEs, who do challenging
not situations
large pool that could
standby
otherwise impact the continual concern of SMEs. business.
because
respondents they thatsaid are theyable are tonotrecord
knowledgeable
transactions on
SMEs,
funds
Total forwho do 200
emergencynot have uses large
(Laman, pool
100 of standby
2008). Hence, because they said they are not knowledgeable
Table 4.3 proper
are Of
muchthe 200 respondents,
recording
favored oftocashrecord the
transactions
cash analysis and in also
transactions this
short-term
funds forshows that out
finance
emergency of
provides
uses200(Laman,
respondents
almost instant 2008).the on proper recording of cash transactions
108 (54%) entrepreneurs compared to 92 (46%) table
most
because portrays
of the
it is143 further
required that
respondents 28.5%
in their that are
state businesses
don’t record
or field of
funds Short-term
to such financing
challenging
Hence, short-term finance provides almost is a
situations foundation
that couldof and they are not required to have books of
uses short-term funds of the business for long- that
cash requires
transactions
business. recording of cash transactions
are businesses which do and not
‘quick’
otherwise liquidity
impact for
the the business,
continual
instant funds to such challenging situations concernin particular
of SMEs. account. Onnot the otherit In hand, those that are
term 71.5% Of does
require books
the 200ofrequire
account.
respondents, in their
thethe line
other of business.
hand
analysis thethis
in 57
Tableinvestments.
SMEs,
that who
4.3
could do
shows not Since
that
otherwise outwhen
have large
of 200
impact there
pool isof
acontinual
respondents
the decrease
standby the able to record transactions do it because they
in cash This meant
respondents that
that there
are businesses
able to
table portrays further that 28.5% are businesses record that are earning
transactions
funds
108 foritemergency
(54%) reduces
entrepreneurs firm’s capability
uses (Laman,
compared to92acquire
2008).
to Hence,
(46%)
concern of SMEs. Table 4.3 shows that out of are
that required.
only
are enough
much
requires for the
favored
recording to business
record
of cashcash to survive.
transactions
transactions This
and
its
usesfinancial
short-term
short-term obligations,
finance ofmore
fundsprovides risk.
the business almost Thatforinstant
islong-
why
200 respondents the 108 (54 %) entrepreneurs This
indicates
because
71.5% does would
itthat
isnotmost probably
required of theit
require inSME’s indicate
intheir
their westatehave
line that
of these
surveyed
orbusiness.
field of
entrepreneurs
funds alsoSince
to such challenging
term investments. takewhen risks in investing
situations
there is that their
could
a decrease
compared to 92 (46 %) uses short-term funds most
don’t
business.
This meantSMEs
have thatdon’t
enough have
ability
there enough
to expand
businesses thatthe ability
are business
earning to
funds
in cashin itlong-term
otherwise impact
reduces investment
thefirm’s
continual since to
concern
capability when
ofacquirethe
SMEs.
of
time the
comesbusiness
that for
the firm long-term
may investments. or
onlyeven
expand thehire
Ofenough
the 200 personnel
respondents,
business
for ortoeven
the business record
theto hire transactions.
analysis in This
personnel
survive. this
Table 4.3 shows
its financial that
obligations, out more
of 200face difficulties
respondents
risk. That is why in
the
Decrease
their businessinentrepreneurs
cash
they reduces
can the
getrisks
funds firm’s capability to Thus,
table
to
indicatesthethat
portrays
record analysisfurther
transactions.
most implied
of that
the SME’sthatwe
28.5%
Only majority
are
few
have of the
businesses
have
surveyed
108 (54%)
entrepreneurs also take compared intoinvesting
be toable totheir
92 (46%) use
acquire respondents
that
don’trequires
have enough
capability toearn
recording only
hireability enough
of
personneltocash while
transactions
expand to the abusiness
record fewand
andof
in
usespaying
funds inits
short-termfinancial
their
long-term funds obligations
obligations. of the business
investment with more
since for long-
when risk.
the
Entrepreneurs also take risks in investing their these
71.5%
or SME’s
even does
hire have
not
keep cash transactions. the
require
personnel capability
it in
to their
recordto hire
line ofpersonnel
business.
transactions.
term investments. Since when
time comes that the firm may face difficulties in there is a decrease
Bookkeeping
funds in ita long-term investment. to record
This
Thus, theand
meant thatkeep
analysis there cash
implied transactions.
businesses that that are earning
majority of the
in
theircash
business reduces
they can firm’s capability
get funds toThis
be to provides
able acquire
to use
its Bookkeeping
financial is very
obligations, more important
risk. That in is whythe only enough earn
respondents for the onlybusiness
enough towhile survive.
a few Thisof
them
in paying fundstheir toobligations.
utilize for their obligations in
operation
entrepreneurs of business
also takebecause
risks itinis the process
investing of
their indicates
Table 5.2.that
these SME’s most
have
Keep the
and ofmaintain
the SME’s
capability the we havepersonnel
torequired
hire surveyed
books of
times of difficulties in business.
recording
funds in of all
long-term financial transactions
investment since a business
when the don’t
accountshaveand
to record enough
keep ability to expand the business
cash transactions.
Bookkeeping
organization
time comes thatmade. theisfirm Transaction
mayimportant
face difficultiesincludes in orAnswer
even hire personnel Frequency
to recordPercentage
transactions.
Bookkeeping
Bookkeeping very in the
purchases,
their business sales,
they receipts
can get and
funds payment
to be able by
to an
use Thus, the Keep
Table 5.2. analysis and implied
maintain that majoritybooks
the required of the of
operation of business because
Bookkeeping is very important in the it is the process of Yes 63 68.5
individual
in paying their orallobligations.
organization. The bookkeeper respondents
accounts earn only enough while a few of
recording of financial transactions
operation of business because it is the process a business No SME’s have the137 31.5 personnel
who performedmade. the recording is responsible these capability to hire
organization Transaction includes Answer Frequency Percentage
of recording all financial transactions made. toTotal
record and keep cash 200transactions. 100
Bookkeeping
for ensuringsales,
purchases, day book.
receipts Theand daybookspayment consistby an of Yes 63 68.5
Transaction includes purchases, sales, receipts
Bookkeeping
individual is very important
or organization. The bookkeeper in the
No 5.2. Keep and maintain
Table 137 31.5 books of
the required
operation
who performed of business the because
recording it isistheresponsible
process of
accounts
Total 200 100
recording of all financial transactions
for ensuring day book. The daybooks consist a business of
organization made. Transaction includes Answer Frequency Percentage
purchases, sales, receipts and payment by an Yes 63 68.5
individual or organization. The bookkeeper
No 137 31.5
who performed the recording is responsible
Total 200 100
for ensuring day book. The daybooks consist of
 Dato-on, D. V. E., Monto, R. P., Calaylay, N. M., Villanueva, G. B., Velez, J. K. F. and Temanel, E. N. O. 185
187

Dato-on, D. V. E., Monto, R. P., Calaylay, N. M., Villanueva, G. B., Velez, J. K. F. and Temanel, E. N. O. 187
The tableshow
Results 5.2 further presents
that 68.5 % ofonrespondents
whether the that have been developed to meet
been developed to meet the needs of companiesthe needs of
business
does notkeep
keepand ormaintain
maintain thebooks
required books of
of account companies
who’s havingwho aretime
a hard having a hard
keeping andtime keeping
maintaining
The
account. table
Results5.2 further
show presents
that 68.5%
of their business, while 31.5 % of respondents on
of whether
respondents the been
and developed
maintaining
its books toitsmeet
of account. books theofneeds
However, of companies
account.
it adds However,
another
business
does notkeep keep and maintain thebooks
required of books of who’s
it addshaving a hard
another costtime
It iskeeping
for the and maintaining
company. It that
is more
answered “Yes”.or The maintain
results still imply account
on the cost for the company. more favorable the
account.
of their of Results
business, show
whilethat 68.5%
31.5% and of respondents
of respondents its books
favorable of account.
that the However,
business it adds
would
business would use the computerized method for another
use the
status business earning capability
does
answered not “Yes”.
keep The or maintain
results still books of account
implies on how cost for the
computerized
this has beencompany.
method
proven It is
to bemore
for favorable
thismost
the has been that the
proven
effective and
of hiring someone to keep the businesses’
of
much their
doesbusiness, while earn
the business 31.5% or itof isrespondents
capable on business
to would
be a system.
reliable use the
more effective computerized
Nevertheless and majority method
reliable (74.6%) for
system.
records.
answered Tracking
“Yes”. The its earnings,
results profit or on loss,
hiring someone to keep the still implies
businesses’ how
records. this
has has been proven
Nevertheless,
adopted majority
with to new
the be thesystem
(74.6 most effective
%) haveandadoptedand
should
recording
much does its
the business
business data,
earn orandit keeping
is capable the
on reliable
with the system.
new Nevertheless
system and shouldmajority
expect (74.6%)
efficient
As to how will the business know if it is earning expect efficient results on keeping their records.
financial
hiring records
someone to of
keep the
the organization
businesses’
profit or loss, recording its business data and are
records. has adopted
results with the
on keeping theirnew system and should
records.
just toas important torecords
earning Table efficient
5.4. Academic
results qualifications of records.
accounting
As
keeping howthewill the business
financial of profit.
know it isThe 137
theif organization
earning expect on keeping their
respondents
profit that dotonot itskeep and maintain personnel
is just oras loss, recording
important earning business
profit. data and
The 137
Table 5.4. Academic qualifications of accounting
keeping
its the financial records of
respondents that do not keep and maintainsay
books of account cannot the organization
confidently its personnel
Qualification Frequency Percentage
is
thatjust
books as important
their
of businesscannot
account to earning
is earning profit. for
profit
confidently The 137
saythere
that
respondents
their
is data tothat
no business do notOnprofit
is earning
support. keep
the and maintain
for the
other business
hand, its
the Accounting graduate 27 42.8
Qualification Frequency Percentage
books
63 of account
can’trespondents
support cannot
it andwhothey did confidently
have no written
record say
kept that
or data
and
their business
basis. On the other is earning
hand the profit for the business CPA
Accounting graduate 18 28.6
maintained its books of 63 respondents
account have thatthe 27 42.8
can’t
do support
record keep it and
and maintain
they haveitsnobooks writtenof or data
account
privilege on making the right decisions on the CPA 18 28.6
basis.
have the On privilege
the otheron hand the 63
making therespondents
right decisionsthat Degree in Business
business. Administration 18 28.6
do record
on the keep and maintain its books of account
business. (e.g Bookkeeper)
have the privilege on making the right decisions Degree in Business
Administration 18 28.6
Table
on the5.3.
business.
Methods use on keeping and maintaining books (e.g
TotalBookkeeper) 63 100
of account
Table 5.3. Methods use on keeping and maintaining books Total 63 100
Answer
of account Frequency Percentage Table 5.4 shows on what are the academic
qualification do the business require to the
Computerized
Answer (MS Frequency Percentage Results
Table 5.4 show
shows thaton out
what of are
63 the
respondents
academic
47 74.6 personnel who keeps their records. This is still
Excel)
who
linkeddidonkeep
qualification dobooks
Question the 1&2of account;
business
on the 27
require (42.8 %)
to the
Bookkeeping
Computerized (MS
Manual/Tradition
Excel)
47
16 74.6
25.4 businesses
personnel whohiredkeeps accounting
their records.
section. Results show that out of 63 respondentsgraduates,
This is 18
still
(28.6
linked %)onbusinesses
Question hired
1&2 CPAs
on
that do keep books of account; 27 (42.8%) and
the 18 (28.6
Bookkeeping %)
Total
Manual/Tradition 63
16 100
25.4 establishments
section.
businessesResults
hired hired
show business
that out of 63
accounting administration
respondents
graduates, 18
Results revealed that graduates.
that do keep
(28.6%) books of
businesses account;
hired CPAs 27and (42.8%)
also
The table
Total 63 out
5.3 presents of the
on what 63 (31.5
method
100 on
%) respondents
keeping who answered
the businesses’ books of“Yes”, onlydoes
account 16 18 Analysis
businesses
(28.6%)hiredimplies that thesehired
accounting
establishments businesses
graduates,
business do
18
The tableuse.
respondents
the business 5.3 Results
said presents
they still on use
implies what method
the
that outmanualon
of the need
(28.6%) personnels
businesses that are
hired knowledgeable
CPAs
administration graduates as their qualifications and and
also
keeping
or
63 the businesses’
traditional
(31.5%) way or method
respondents books
that of of account does
keeping“Yes”
answered the have
18 the capabilities
(28.6%)
on dealing to be ofreliable
withestablishments
the keeping books onaccount.
hiredof keeping
business
the business
businesses’
there use.
books
are only Results implies
of account
16 respondents thatthat
while 47out
said out
theyof the
ofstill
63 their books. Itimplies
administration
Analysis isgraduates
highlythatfavored
asthesethat
their business can
qualifications
businesses do
63 (31.5%)
respondents
use the manual respondents
are now that
practicingway
or traditional answered
the computerized “Yes”
or method of function
on dealingeffectively
with the with
keeping thisofkind
books
need personnel that are knowledgeable and has of practice
of account. for
there
(MS arethe
only
office
keeping 16 respondents
Excel) method
businesses’ that
of keeping
books said books
of account theywhile
still
of they are able toimplies
the Analysis
capabilities forecast
to be that and look
these
reliable onback on previous
businesses
keeping do
their
use the manual
account.
47 out or traditionalare
of 63 respondents way nowor method
practicingof transactions.
need personnel Majority
that of
are the respondents
knowledgeable
books. Well, it his highly favored that business can though
and has
keeping
the This the businesses’
further indicates
computerized books
(MS office that of account
theremethod
Excel) while
are some of (42.8
function%)effectively
preferto more
the capabilities be
with on kind
reliable
this hiring
on of accounting
keeping
practice their
for
47 out of
businesses
keeping 63 respondents
(25.4
books of %) that are
account. are notnowyetpracticing
capable graduates
books. Well,which
it his we
highly think can
favored pay
that
they are able to forecast and look back on previous less
businesssalary
can
thehave
or computerized
This not (MS
comeindicates
further office
up with theExcel)
that theremethod
technology of
that
are some than a CPA
function
transactions.butMajority
still can
effectively withofdeliver.
the While
this respondents
kind CPA and
of practice
thoughBA
for
keeping
most
businessesbooks
companies of account.
(25.4%) arethat
usingareonnot
keeping books or
yet capable of graduates
they are have
able to an equal
forecast andresult
look
(42.8%) prefer more on hiring accounting of
back28.6
on % each,
previous
Thiscome
account
haven’t further
today. indicates
upAlthough
with that there
there
the technology are some
are programs
that most this implies
transactions.
graduates that
which wethere
Majority ofare
think the
theystill
canbusinesses
respondents that
pay lessthough
salary
businesses (25.4%) that are not yet
companies are using on keeping books of account capable or (42.8%) prefer more on hiring
than a CPA but still can be competitive on their accounting
haven’t come up there
today. Although with theare technology
programs that that most
have graduates which
field of work. we think
While CPA and theyBA cangraduates
pay less salary
have
companies are using on keeping books of account than a CPA but still can be competitive on their
today. Although there are programs that have field of work. While CPA and BA graduates have
 188 UV Journal of Research

186
188 UV Journal of Research
an equal result of (28.6%) each, this implies that businesses that can’t support its short-term funds
there are still businesses that favor this kind of by their own is not efficient enough to survive. It
qualifications,
an equal
favor kind still
thisresult can beeach,
of (28.6%) competitive
qualifications, this and
sinceimplies
it is be
that
much all depends
businesses
Resultsthat on how
revealedcan’tyou that handle
support 180 its (90your%)on
short-termhandfunds
respondents cash
reliable.
there are still businesses that favor this kind of
cheaper. and your
by their
said that the current
own kind ofliabilities.
is not financing
efficientthey enough followtoissurvive.
favorable It
qualifications, still can be competitive and be alltheir
to dependsbusinesson how while you 19handle
(9.5 %)your respondents
on hand cash said
Short-term
reliable. sources of funds Table
and
it is not 6.2.
your and The
current kind
1 (0.5 of said
financing
liabilities.
%) it all the entrepreneur
depends. Thereis are it
Short-term sources of funds are the money favorable
many advantages and disadvantages on different
Short-term
desired sources
for fiscal of funds
activities carried out for less Table of
kinds 6.2. The kind of it financing the entrepreneur is it
Answerfinancing butFrequency really all depends
Percentageon what
thanShort-term
one year. These funds
sources of are normally
funds are theused for
money favorable
line of business you are in and the financing culture
day to day Yes 180 90
desired for operations such carried
fiscal activities as stocks
outordering,
for less involved.
Answer There is a need Frequency to determine or forecast
Percentage
advertisement expenses
than one year. These andare
funds payment
normallyof wages.
used for theNoshort-term funds.19This is necessary 9.5 to operate
day to day operations such as stocks ordering, Yes flexibility when 180
with 90that financial
Others 1the time comes0.5
Table 6.1. Short-term source of funds
advertisement expenses and payment of wages. No
resources are needed.19 9.5
Total 200 100
Self-financing
Others is 1 truly favorable 0.5because this
Source
Table Frequency
6.1. Short-term source of funds Percentage does not apply interest on the money the business
Total 200 100 financing
Self-financing 120 60 uses.Table Unlike 6.2 shows
in banks, whether lending the kind
firmsofand other
Source Frequency Percentage the
sources business
they apply usesinterest
is favorable and maturity or not.date Results
to be
Bank 45 22.5
show that6.2
Table
followed. outshows of 200 whetherrespondents;
the kind of 180 (90%)
financing
Self-financing 120 60
Colleagues 18 9 respondents
the businesssaid usesthat is the kind oforfinancing
favorable not. Results they
Bank 45 22.5 follow is favorable to respondents;
their business180 while 19
Lending 13 6.5 show
V. that
CONCLUSION out of 200 (90%)
Colleagues 18 9 (9.5%)
respondents respondents
said that said
the it
kind
Reliable working capital management practices isn’tof and 1
financing (0.5%)
they
Suppliers 4 2
Lending 13 6.5 said
follow
can it all
boost depends.
is favorable
profitability There
to of their
theareSMEs.manyEntrepreneur
business advantages
while 19
Total 200 100 on
(9.5%) different
respondentskinds of financing also 1a (0.5%)
lot of
Suppliers 4 2 must ensure that they said utilizeit adequate
isn’t andWMC since
disadvantages
asaid it all capital
working butmay
depends. itThere
really
affect are all depends
the on
many advantages
operation what
of SMEs
There
The
Total are6.1
table 18shows
respondents
200on where who theidentified
100 business line
on of business
different kindsyou ofare in
financing
which deter them from its capability to compete and the
also culture
a lot on
of
obtains its short-term funds whenever itcan
sources of short-term funds the business is financing that is involved. You have to be able
disadvantages but it really
effectively. It was affirmed that there is meager all depends on what
get or
needed. borrow
The There
table arefrom,
6.1 most butlikely
shows there are
18
on where only
the5business
sources sources
of short- to
linedetermine
liquidityof business
in small or forecast
you
business are yourindue and short-term
to the culture
excess funds
current on
that
term
obtainsstood
fundsitsout.
the Forty-
business
short-term fivecan respondents
fundsget or borrow
whenever borrowed
from,
it is needed
financing for the
that business
is involved. to
liabilities from current assets that lead to shortagebe
You flexible
have towhen
be the
able
it
but from the
thereThere
needed. bank,
are only 18 from
5 sources
are most their
likely that colleagues,
stood out
18 sources 13
from
of short- time
to fund.
of comes
Smallyou
determine orneed
firms forecast
becomethe money.your
insolvent short-term
since it isfunds
hard
borrow
the
term from
18funds
sources. lending
the45 firms,
respondents
business 4
can get from
borrow its
or borrow supplier,
it from the
from, needed Analysis
for the portrays
business that
for them to gain access to financial assistance to bemajority
flexible (90%)
whenfrom of
the
and there
bank,
but 120
18 from
from self-financing.
are onlytheir colleagues,
5 sources that13 respondents
stood out from the business
time comes
financial find it favorable
you need Financial
institutions. the money. and advantageous
institutions usually
borrow
the 18 When fromthelending
sources. business is able
firms,
45 respondents to self-financially
4 borrow
from itsit from
supplier
the to their line
Analysis of business
portrays
ask for requirements which small on
that the kindfirms
majority of (90%)
financing
cannot of
support
and
bank, 120
18 its immediate
respondents
from their and funds it just
self-financing.
colleagues, 13 shows the
Results
respondents
ournal of Research they
the follow.
business Based
find iton table
favorable 6.2,and majority (60%)
advantageous
efficiency
show
borrow that
fromof
outtheof business
lendingthe 200
firms, on4using
from its
respondents its earnings
we have
supplier provide.
of the
to their
SMEs respondents
line weak are
of business
have on
financialpersonally
theposition
kind of capable to on
financing
due its
and 120
and current
surveyed, 120assets. This
get immediate
respondents doesfundsnot necessarily
and self-financing. from their
Results
lies that businesses that can’t getting
dependence immediate
they follow. Based from credit funds
on table for
facility the
6.2, to business.
majority
finance(60%) This
their
mean
own.
show thatthat others
out of thesupport
cannot200support its short-term
respondents wefunds
its short-term have is
of truly favorable because this does not
kind of by
fundstheirbyown
Analysis
surveyed, their
120 is not
own.
onget efficient
It all
thisimmediate enough
depends
table implies funds toon
that survive.
how
majority
from It
the
their
the respondents
operation. Approximately, are personally
credit facility at apply
capable times on
and be all depends on how you handle your on hand cash interest
getting on the
immediate money fundsthe
comes from accounts payable. However, it revealedbusiness
for the uses. Unlike
business. Thisin
SMEs
of
own. handle their on hand cash
the business (60%) are obtaining their funds and current
and your current liabilities. banks,
is truly lending
favorable firms and
because
also that an insufficient record keeping systemother thissources
does they
not imply
apply
liabilities.
whenever
Analysis it is
onneeded
this tableby implies
getting it thatfrom them
majority interest
lessen the and maturity
onability
the money
of the date
thefirm toto becontrol
business followed.
uses.andUnlike
assess in
directly while (22.5%)
of the business (60%) are borrow fromtheir
obtaining the funds
bank,
Table 6.2. The kind of financing the entrepreneur is it banks, lending firms and other
the proper flow of its working capital. The SMEs also sources they imply
(9%) from ittheir
whenever colleagues,
is needed (6.5%) itfrom
by getting fromlending
them Conclusion
money favorable interest
have and maturity
deficient resourcesdate to be followed.
to manage their receivables
firms
directlyand (2%)(22.5%)
while from its suppliers.
borrow from When the
the bank, Based on the information gathered after it was
for less business
fromistheir
Answer
(9%) ablecolleagues,
toFrequency
self-financially support
(6.5%)Percentage
from its
lending and no credible credit policy for their enterprises.
used for Conclusion
interpreted and analyzed as supported mainly
immediate
firms funds it 180
Yes and (2%) from
justits
shows the90efficiency
suppliers. When the of with the classified, computedgathered and tabulated
rdering, Based
VI. RECOMMENDATION on the information after itdata,
was
the business
business on using
is able its earnings and
to self-financially current
support its it is then concluded that a reliable working capital
wages. No 19 mean though 9.5 that other interpreted and analyzed
On the basis of the findings and conclusion as supported mainly
assets.
immediate Thisfunds
doesn’t
it just shows the efficiency of management practices can and boost profitability
withthe
of the study,
classified, the computed
following tabulated
recommendations data,
Others
the business on using 1 its earnings 0.5and current
it is then
are spelled concluded
out to addressthat a reliable working for
the concerns capitalthe
assets.
Total This doesn’t 200mean though 100that other management practices can boost profitability
development purposes of the working capital
ntage
Table 6.2 shows whether the kind of financing
the business uses is favorable or not. Results
show that out of 200 respondents; 180 (90%)
respondents said that the kind of financing they
 Dato-on, D. V. E., Monto, R. P., Calaylay, N. M., Villanueva, G. B., Velez, J. K. F. and Temanel, E. N. O. 187
189

management
of the SMEs. of SMEs:
Henceforth, the entrepreneur must •• In
Thethelength of the
collection credit
policy of period
the firm’sshould not
past due
Place
ensure that inside
they utilizethe adequate
office vault working thecapital
cash be too long
account there and not too
should be ashort.
balance Customers
between
generated
management onsince
dailya basis.
working SMEs mustmay
capital place its
affect normally prefer
toughness longer
and laxity. credit periods,
Firmness should be so
surplus cash inside
the operation of SMEs thewhich
office detervault them
to ensurefromthe its augmenting the period will
present, but excessive pressure can also arouse sales.
safety of itstomoney
capability compete before having or
effectively. acting
It was a wise
affirmed However,
lead long credit
good customers periods
to take extends
their business
decision-making.
that there is meager liquidity in small business the cash conversion cycle, hence ties
elsewhere.
due Prepare
to excess a cash budget
current quarterly
liabilities or annually.
from current up more capital in receivables, and that
Managers
assets thator owners
leads must prepare
to shortage of fund.a cash
Smallbudget
firms Attend is tocostly.
seminarsAlso, the andlonger a receivable
trainings. Owners is
to determine
become their future
insolvent and failability
sinceto pay debts
often as well
it is hard for outstanding, the higher
or managers of SMEs should avail themselves the probability
as expenses.
them to gainThis accesswill to
also show how
financial cash flows
assistance from in with thethat the customer
various training will programsdefaultorganized
and the
and out ofinstitutions
financial their business foroperation
the reason andthat
can there
be used is accountand
by government results
other as abodies
bad debt. like Small and
in planningan
somehow their short- of
absence term credit needs.
necessary requirements Medium • Enterprise
The cash discountDevelopment thatCouncil
the firm offers
(SMEDC)
Formulate
needed an effective
by the financial institutions. credit policy. In for paying early should
to refine their knowledge in financial management not be too large.
crafting credit
It was plain policy
that criteria
SMEs have this should include:
weak financial and other Offering
relateddiscounts has two benefits.
topics in management. ThisFirst,
will
credit
positionperiod,
by the cash discounts,
reason that credit standards,
it depend and
on credit the discount
help advance amounts
their trading to a price reduction
activities.
collection
facility to procedures
finance their offered.
operation, approximately and lower pricesofstimulate
Implementation technology sales. Second,
based
credit• facility
The length of the credit
at times comesperiod fromshould
accountsnot discounts will cause
inventory control practices. Encourage some customersthe to
payable. beHowever,
too long and not too short.
it revealed alsoCustomers
that an pay earlier
entrepreneurs to adopt than they otherwise
technology would,
in conducting
normally
insufficient record prefer longersystem
keeping credit lessen
periods,the so inventorieswhich likewill shortensystem.
computer the cash Theconversion
relevance
ability ofaugmenting
the firm to controlthe period will arouse
and assess sales.
the proper of modern cycle. However,technology
information discounts management
mean lower
However,
flow of its workinglong credit
capital. The periods
SMEs also extends
have prices, hence lower
could be very effective in improving revenues unless the
deficientthe cash conversion
resources to manage cycle, hence ties
their receivables inventory quantity
activities soldwhileincreases
avoiding bythe enough
risks toof
up more
and no credible capital
credit in receivables,
policy and that
for their enterprises. offset theinprice
mismanagement reduction. The benefits
inventories.
is costly. Also, the longer a receivable is Createanda costs
re-orderof discounts must be
policy. Creation of balanced
re- order
Recommendation
outstanding, the higher the probability that if a rational decision about
policy for the institutions will stretch the capacity them is to be
the basis
On the customer of the willfindings
default and and the account
conclusion to appealmade.
supply of modest and high quality stocks.
results as
of the study, thea bad debt. recommendations
following • In formulating
An institution of such policy a creditpavesstandard
the way the for
• Theout
are spelled cash to discount
address the thatconcerns
the firmfor offers
the firm should look at the five
businesses to classify and recognize the best sellers C’s of credit:
for paying
development early of
purposes shouldthe not be toocapital
working large. of their character,
wanted stocks capacity,
in the capital,
market at conditions
peculiar
managementOfferingof SMEs:discounts has two benefits: seasons. and collateral.
Place inside
first, the office
the discount vault tothea price
amounts cash • In the
Assist collection policy
entrepreneurs to ofnegotiate
the firm’s with past
generated on dailyand
reduction basis.lower SMEs prices
must stimulate
place its due account there should
their creditors. A trusted debtor means a lot to be balance
sales,inside
surplus cash and second,
the officediscounts will cause
vault to ensure the between
the creditors. An toughness
on time payments and laxity. of Firmness
liabilities
safety ofsome
its moneycustomers
beforetohaving pay earlier
or actingthan they
a wise should be
and negotiating present,
credit termsbut excessive to
is advisable pressure
have a
otherwise would, which will shorten the
decision-making. can also lead
healthy relationship between gooddebtors
customers to take
and creditors.
Prepare a cash cycle.
cash conversion budget quarterly
However, discounts or Recordtheircash business elsewhere.
transactions and keep books
annually. mean lower prices,
Managers or ownershence lowermust revenues
prepare of account. A well maintained bookkeeping
unless to
a cash budget thedetermine
quantity their sold future
increases by
ability Attend
system willtoenable
seminars the and trainings.
business Owners
for balanced
enough
to pay debts as to offset
well the price reduction.
as expenses. This will also The or managers
budgeting or offinancial
SMEs should planning availasthemselves
a means
show how benefits
cash flows and in costs
andofout discounts must be
of their business with
of the various
working trainingtheprograms
to quantify company’s organized
vision,
operation balanced
and canifbea used rational decision their
in planning aboutshort-
them by government and other bodies
mission, goals and objectives. Proper bookkeeping like Small
is toneeds.
term credit be made. and provide
will MediumtheEnterprise Development
owners or managers Council
to formulate
• In formulating
Formulate an effective a credit credit policy. the
standard In (SMEDC)
the rights to refine their
objectives knowledge
and strategies to in financial
achieve the
firm should
crafting credit policylookcriteriaat thethisfive C’s ofinclude:
should credit: management
company’s goals. and other related topics in
character,
credit period, cash capacity,
discounts, capital, conditions
credit standards,and management. This will help
Convert to the computerized (MS Officeadvance their trading
collateral.
and collection procedures offered. activities
Excel) as poor
method managerial
of keeping books competencies
of account. This and
188
190 UV Journal of Research

method
skills have removes
commonlymany been of therelated
paper “books”
with SME’s that Chittenden,
the business F.,have
Pontziouris, P., &
the ability of Michaelis, N. (2008).
being independent
are used to record the financial transactions of an Financial management and working capital
failure. when it comes to day-to-day expenses. This could
practices in UK SMEs. Manchester Business
entity. Instead, relational database
Implementation of technology based takes place, but also indicate
School.that the business is earning and
still typicallycontrol
inventory enforce the double entry
practices. bookkeeping
Encourage the capable
Clodfelter,toR.survive. However
(2003). Retail buyingthere are still
from basics some
to fashion
system when you
entrepreneurs to are
adopt stilltechnology
practicing the manual or
in conducting remedies(2nd anded). USA:sources
other Fairchildof
Books.
short-term funds
traditional
inventoriesway likeofcomputer
keeping the booksThe
system. of account
relevance as Cook.the
that P., business
& Nixon, canF. (2000).
borrowFinance
from. Itand
all small
dependsand
this has been proven to be the most effective and medium-sized enterprise development. England,
of modern information technology management on how well you manage your short-term finances.
UK: Prentice Hall Europe.
reliable
could system.
be very effective in improving the Dagooc, E. (2013, November 9). Lack of support programs
Properly
inventory managing
activities while theavoiding
business’the short-term
risks of dampens growth of SMEs. The Freeman,
originality index: 89 %
of funds. The business
mismanagement in inventories. should be able to somehow p.14. Diacogiannis, G. (2004). Financial
self-finance
Create itself. This willpolicy.
a re-order imply that the business
Creation of re- similarity index:
management: 11 % approach using
A modeling
has
orderthe ability
policy for of
thebeing independent
institutions whenthe
will stretch it paper id: spreadsheets. McGraw-Hall. 467667128
Dodge, J. (2004). Individualism, collectivism, and
comes
capacitytotoday-to-day
appeal supply expenses. This could
of modest and highalso Grammarly: checked
entrepreneurship: A framework for international
indicate that the
quality stocks. Anbusiness
institution is earning and capable
of such policy paves comparative research. Journal of Business
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