Analyzing Working Capital Management Approaches for Small Businesses

The present project is a qualitative research study that aims to provide an effective approach for gaining deep understanding about the selected topic. The researcher has properly made use of research techniques and conducted exploratory research design to identify factors like effective financial planning that enable small businesses to manage their day-to-day operations.

QUALITATIVE
RESEARCH

TABLE OF CONTENTS
INTRODUCTION ..........................................................................................................................3
Project .............................................................................................................................................3
The full citations ........................................................................................................................3
The philosophy and Theoretical perspective being employed ...................................................3
The data collection method used ................................................................................................5
Critique of the methods used.......................................................................................................6
Conclusion ......................................................................................................................................9
REFERENCES .............................................................................................................................10

INTRODUCTION
The primary focus of any firm is to gain maximum profit and this could be possible
when firm is able to meet the need and requirements of customers (Blumberg, Cooper and
Schindler, 2014). The Present report explains the philosophy and theoretical perspective
being employed in the selected study. In addition this, data collection method is used in the
study have been defined and critical analysis of selected methods also have been done. The
main purpose of this study is to examine the actions owner-managers of small businesses
undertake in managing working capital.
Study Background
The small business ventures are growing at a faster rate and it is required to put efforts for
managing their working capital. Study conducted by Orobia and et.al. (2013) who identify the
ways that could be used by business owners for managing their working capital in effective
manner. Moreover, the study has examined the actions undertaken by small business owners
for managing their working capital.
Rational of this study
The rational for conducting this study is that the small businesses are contribute effectively
towards economic grow. However, there are issues faced by these small firm to carry out
their daily operation. By focusing this area will enable to determine the steps that should be
considered so that small business are able to attain their set goals and so focus is made on
management of working capital. More specifically, Central Business District of Kampala,
Uganda is taken into consideration for this research as it is the commercial heartland where
most business activities take place.
Project
The full citations
Article selected: “How do small business owners manage working capital in an emerging
economy? A qualitative inquiry”
Reference of the article:
Orobia, L.A., Byabashaija, W., Munene, J.C., Sejjaaka, S.K. and Musinguzi, D., 2013. How
do small business owners manage working capital in an emerging economy? A qualitative
inquiry. Qualitative Research in Accounting & Management. 10(2). Pp.127-143.
The philosophy and Theoretical perspective being employed
This article is focused on to examine the actions that are taken by owners and
managers of the small business with the goal to manage their working capital. It is being

identified that small businesses highly contribute towards economic development of a
country. The globalisation has rendered an innovative platform for business organisations to
launch their business successfully in new market areas and so firm start with small scale, then
slowly increase their areas. There are many benefits that small businesses provide to the
society. In this context, it includes reduction in poverty, generates income and creates job
opportunities. To carry out the research in effective manner, there are research approach,
philosophy, data collection method, data analysis, etc. used. More specifically, the research
has made use of Interpretivism and this research is used as enables to assist researcher
interpret the elements of the study. This philosophy assisted in representing different aspects
of the phenomenon that is being studied. There are two different type of research
philosophies, which are positivism and interpretivism. Positivism is considered to be a type
of research that limits the role of investigator to collection of data and it’s their interpretation.
Apart from this, it also assist investigator in concentrating on facts. On the other hand,
interpretivism avoid rigid structure framework when compared with positivist research. It
make use of flexible and personal research structure. In-depth findings is done in which it
includes the issues that are faced by owners and managers in order to manage working
capital. This philosophy enables to provide theoretical knowledge regarding the research
topic. Apart from this, it is also focused on specific problem that are being faced by scholar
during research. Further, the research has made use of inductive approach that enables to
present the information from specific to general. There are two type of research approaches,
these are inductive and deductive. Inductive are those approach in which the investigator
focus on covering specific aspects and then general information in relation with research
topic is covered. On the other hand, deductive is a type of research in which the research
focus on covering general aspects initially and then specific details are included. Among
these two, the researcher has made use of inductive approach. This has helped the
investigators to present specific data and eliminate general information. By making use of
selective coding various components for each of the subcategory were specified. Apart from
this, in this study qualitative research methods have been employed for examining and
evaluating the working capital management process.
Theoretical perspectives are defined as set of various assumptions that are used for
answering the questions that are used in the research study. This perspective can also be used
as the frame in which some specific assumptions are mentioned with the objective to
complete the entire study. The entire study has been completed on the assumption that small
business owners are managing their working capital in the economy. Small business working

across nations are playing very important role in ensuring long term growth and success of
the nations. As per empirical study, it is identified that use of financial reports were done in
order to set the activities that can be completed for each day (Barbour, 2013). It is important
that proper planning of finance is done in order to make sure that business operations are
carried out in effective manner.
Emerging economic powers such as Uganda plays a very important role in global
economy and it contributes significantly in ensuring long term economic growth and success
of the country. There are various issues faced in Uganda due to which it has become essential
for business owners to take significant steps for ensuring the management of their working
capital (Smith, 2015). The assumption which is used in the study is that principles of general
capital management are applied to small business owners also.
The economic climate in Uganda is facing various fluctuations and thus due to this
some issues that have raised includes rising cost of capital and necessary raw material that is
required for manufacturing process. It is important that proper planning is made in order to
complete the set activities as per the cost decided. As a small business, it requires to have
appropriate support from the side of owners in planning so that each of the tasks set can be
completed within speculated time period (Glaser, 2017). In addition to this, major
philosophical perspective behind this is that small business owners find it difficult for
managing their working capital in proper way. Major reasons behind this can be stated as
poor planning of cash management, lower debt collection of business and increasing
competition in market.
It is vital for small businesses to properly manage their cash positions so that risk for
inability towards meeting their financial obligations could be met. Small ventures does not
have any separation of ownership and management. Due to this, they face challenges in
proper management their working capital. The study conducted by Orobia and et.al. (2013)
examines various types of actions taken by small business owners for effectively managing
their working capital and it is being identified that all the employees within the business
should have effective knowledge about the roles that they should play. Further, the objectives
set by the business should also be conveyed in order to reduce the wastage. The paper is
divided into three sections and all the three sections gives brief reviews of small business that
are working in Uganda. The paper covers regarding theoretical framework which is used in
the research paper and with this methodology which is used in the study is also described.
This study has adopted the official definition provided by the Uganda government and the
predominant typology used in this country is Small business. Small scale ventures are

providing opportunities for employment and they are contributing towards 20 % of the
national GDP growth rate. In addition to that small scale business are supporting towards
economic development of nation and
The data collection method used
The study has used semi-interview method for collecting the response from the
participants. The interviewer has invited participants from UMA (Uganda Manufacturers
associations). Further, the criteria which is used by the interviewer for selecting the
participants was that it is essential for respondents to be owner of any small business firm.
The major objective behind this is that to make findings authentic and reliable. This way, it
become essential for researcher to gather reliable information from participants.
It was also made essential that the business should not be six years old and it should
employ at least 5 to 49 workers. In the interview process, use of purposive sampling was
done in order to select the participants. In this method interview of the participants have been
taken so that their involvement could be taken in the entire study and on the basis of that
response can be generated. The topic of this discussion is a sensitive issue as it is linked with
the monetary terms and due to this it has created enthusiasm in the participants.
Comprehensive review of the literature was performed by the researcher and for
developing the interview guide (Seitz, 2016). Different aspects have been covered during
preparing the questionnaire for the interview process covers different aspects and it consists
of planning the inventory, monitoring the inventory and controlling the inventory. Questions
are also linked with the topic such as accounts receivable, accounts payable and cash
available. Prior permission was taken by the interviewer for recording the audio of the
respondents and memos were written with objective to record and summarize all the
information that were collected during the interview process. Data collection was performed
by interviewing 10 small scale venture owners and it helped recording all the information and
details in respect with the research. This method is relatively cheap and its reliability is high
as compared to other methods that are generally used in the study.
Critique of the methods used
The study conducted by Orobia and et.al. (2013) has examined and explored various
strategies and actions taken by small business managers for managing their working capital.
Different methods have been used in the study for gaining required outcomes of the study in
successful manner. The research has set objective to examine the actions that are taken by
small business owners for managing their working capital. Scholar has used exploratory
research design for completing this study.

Research design is a type of blueprint and framework that is used by researchers for
accomplishing the objective of the study in effective manner (Mackey and Gass, 2015). This
research design supports in assessing the research problem and carrying out the investigation
in detailed manner. Major goals behind making use of exploratory research design is to get
familiar with the research topic and to provide detailed picture of situations and on the basis
of that meaningful insight detailed understanding can be gained about the selected topic.
Research design also helps in determining the feasibility of the research design in the future.
Issues highlighted in the study can be refined in clearer manner and systematic
investigation could be performed through this. Exploratory research study also provides clear
directions for carrying out the future research study and gaining more meaningful information
about the selected topic (Finfgeld-Connett, 2014). In the current study making use of
exploratory research design has helped for gaining the background information for the chosen
topic. Major actions that are taken by small business owners have been identified and on the
basis of that entire study has been performed. This research study is flexible and it address
various types of research questions that have been asked by the scholars.
It has also provided the researcher with the opportunity to generate formal hypothesis.
It has aided for developing and designing more specific research problem in effective
manner. Exploratory research design has used in the study which has supported for
establishing the research priorities on this basis answers for the research questions could be
gained. Practical implication of the research has also been enhanced and through this
importance of the research study has also improved. Exploratory research design which is
used by the scholar in the study has helped for exploring the perspective for the working
capital management in effectual manner. There are different methods with the help of which
information could be gathered. In this context, it includes primary and secondary methods. As
per this research, the investigator has made use of both these methods. Secondary data is
gathered by making use of books, journals, online sources, etc. On the other hand, primary is
collected with the help of semi-structured interview.
Scholars have used qualitative research methods in which examination of working
capital management process from the context of respondents have been mentioned (O’Brien,
Reed and Cook, 2014). There are many researches that are conducted on similar topic and
these are effective enough to provide in depth knowledge regarding the research topic. More
specifically, it is being identified that small business used financial report in order to plan for
finance and in setting up their working capital. The approach which is used by scholar is
widely accepted approach and it is applied in the small business contexts. Making use of this

technique has supported for evaluating various processes used by the business and through
this areas have been identified. Uganda region has been chosen by the scholar as it is the
commercial space for carrying out the business activities. In this region it is easier for finding
out the small business ventures that are easily available.
Researchers have made use of purposive sampling and this method has supported for
selection of the participants in successful manner. The criteria which has been used for
selection of the participants is that they should be owner of any small business venture so that
they could provide better ways and answers for the ways that are used by them for managing
their capital. This sampling method provides various advantages to the scholar and it has
helped for gaining required outcomes of the research study in the successful manner. In this
sampling method selection of the participants is done by judgement taken by the interviewer.
This sampling method aid for selection of the participants on the basis of the characteristics
of the selected population (Blumberg, Cooper and Schindler, 2014). The sampling method
which is used by the researcher helps for reaching to a target population in quick and easy
manner and participants for the research study are selected on the basis of that. Semi
structured interview was taken and in this detailed questions are asked from the participants
about the capital management systems that are used by them for managing their wealth.
The duration of the interview lasted for 45 minutes and prior permission was taken
from the research participants for recording the audio and summarizing the information that
has been gathered from the participants of the research study. Data analysis process that is
used in the study is Content analysis technique and in this method a series of steps have been
used for completing the study in timely and effective manner.
This data analysis techniques is very useful and helps for analysing the data and
information in the qualitative studies in effective manner. Series of steps that are used in the
process and initially the coding was deductive. Further, a scheme was developed which has
represented the aspects of working capital management (Mackey and Gass, 2015). After this
operational process was used for facilitating the coding process and further the predetermined
categories were coded in the tree nodes. All the transcripts that were received were further
analysed and then they were carefully reviewed. In addition to that subcategory codes were
formed and it has helped for managing the data and information in effective manner.
Selective coding is used in the study and components of each category have been
specified. The method that is used by the researcher has helped for recording the own words
of the respondents. It has also supported for enhancing the representation of the participants
in the research study (Barbour, 2013). The data which is collected during the data collection

process is further explored with objective to identify the relationship that exist within the data
by making use of search options. It has enabled for gaining in depth understanding about the
each code statement that is used in the entire study.
There are various benefits that have been gleaned by the scholar by making use of this
technique. However there are some negative aspects of this technique and it requires long
time for completing the entire process. It is required that scholar should allocate necessary
time so that required activities could be completed on due time. There are high probability of
occurrence of error in this project and due to this challenges are faced in successfully
completing the project in effective manner. Moreover, this method is inherently reductive and
particularly fails in producing required results in case of complex texts that are used in the
research study (Smith, 2015). On the other hand there are some positive aspects also which
are gained by making use of this method and making use of content analysis technique. Small
business ventures are contributing towards the development of the nation. Income generation
opportunities are provided by small business ventures and they also helps towards wealth
reduction initiatives taken by the firm. In addition to that there are some negative aspects due
to which small business owners are facing issues and poor capital management is one major
challenge which is faced by small ventures in properly managing their working capital.
In this method interpretation of collected text could be done in more effective way
and it provides an unobtrusive way for analysing interaction in effective manner. This method
is also relatively cheap and its reliability is high as compared to other methods that are used
in the study. Still there are some negative aspects of this method and in this initial coding of
text is important. Findings of the study reflects about different methods which are used by
business owners for managing the capital of the business in successful manner.
All the methods used in this study proves effective for examining various types of
methods that are used by small scale venture owners for their working capital management.
Adopting qualitative research methods have supported for gaining the required outcomes of
the research project in successful and effective manner (Glaser, 2017). Outcomes of the study
suggest that owners and managers of the company need not pay more attention towards
record keeping. Rather they need to make more efforts for considering the needs and
requirement of business so that they can ensure proper management of their working capital.
Findings of the article reflects that in the absence of systems, procedures and structures small
business owners intuitively Monitor, plan and control the working capital. Different types of
activities which are included under the process of working capital management includes

reliance on oral agreements and memory. Small business owners generally rely on their
memory.
In addition to that informal planning methods are also used by the small business
owners. They also assume inventory limits and unconventional record keeping methods are
used for managing the working capital of the business. Cash flow based information
management method is also adopted by business owners for properly managing their working
capital (Orobia and et.al. 2013). Findings which have been received from the study will prove
beneficial for owners of small medium enterprises. It has been identified from the outcomes
of the research that managers requires to have same degree of sophistication for planning,
monitoring and controlling their working capital in effective manner. Soft skills have been
identified as one of the most significant attribute of managers and small business owners. All
the methods and techniques which have been used by the scholar has supported for
completing all the objectives of the research in effective way and gaining the required
outcomes.
Strengths and limitations
Strengths of the research is that, it make use of interpretivism which is effective
enough to formulate the problem that are being determined by the researcher. Further, the
study also examines process of working capital management. This is considered to be an
aspect that is not being adequately highlighted in any other studies.
In accordance with the limitations, there are certain areas in which research needs to
be focused out. More specifically, all the activities included like gathering of information,
analysis, etc. consumes time and so it becomes research limitation when proper completion of
activities are not done. Further, the research is focused on a particular region and so there are
many other countries where similar research can be conducted. Apart from this, it is also
required to test the effects of personal characteristic's on working capital management
process.
Conclusion
Summing up the present project it can be stated that qualitative research study
provides an effective approach for gaining deep understanding about the selected topic in an
effective manner. In the present article scholar has properly made use of research techniques
which have supported for completing the entire study in appropriate manner. Proper
monitoring of growth and performance level should be done so that growth of the business

can be determined. Further, all the owners should be able to plan for strategies so that issues
in relation finance can be solved. Use of exploratory research design has helped for gaining
meaningful and deeper understanding about the selected study. Making use of interpretivism
philosophy and inductive approach is used that has helped the research to identify factors like
effective financial planning that enable them to manage their day to day business operations.
Data has been analysed by making use of content analysis techniques. The major purpose of
the study was to analyse and examine the approaches used by small business managers for
managing their working capital.

REFERENCES
Books and journals
Barbour, R., 2013. Introducing qualitative research: a student's guide. Sage.
Blumberg, B.F., Cooper, D.R. and Schindler, P.S., 2014. Business research methods.
McGraw-hill education.
Finfgeld-Connett, D., 2014. Use of content analysis to conduct knowledge-building and
theory-generating qualitative systematic reviews. Qualitative Research. 14(3). Pp.341-
352.
Glaser, B., 2017. Discovery of grounded theory: Strategies for qualitative research.
Routledge.
Mackey, A. and Gass, S. M., 2015. Second language research: Methodology and design.
Routledge.
O’Brien, B.C., Reed, D.A. and Cook, D.A., 2014. Standards for reporting qualitative
research: a synthesis of recommendations. Academic Medicine. 89(9). Pp.1245-1251.
Orobia, L.A., Byabashaija, W., Munene, J.C., Sejjaaka, S.K. and Musinguzi, D., 2013. How
do small business owners manage working capital in an emerging economy? A
qualitative inquiry. Qualitative Research in Accounting & Management. 10(2). Pp.127-
143.
Seitz, S., 2016. Pixilated partnerships, overcoming obstacles in qualitative interviews via
Skype: A research note. Qualitative Research, 16(2), pp.229-235.
Smith, J.A. ed., 2015. Qualitative psychology: A practical guide to research methods. Sage.