Credit Management Practices and Financial Performance of Small and Medium Enterprises in Kisii County

The study sought to find out the effect of credit management practices on financial performance of SMEs in Kisii County. This study adopted a descriptive survey research design. In this study the target population comprised of 1500 SMEs. According to the Kisii County Government Revenue office the SMEs operating were 1500. For this study a 10% sample size was used. Random stratified sampling was used to sample the SMEs. The study sample size was 150 respondents. The study collected primary data through the aid of questionnaires. Piloting was done on SMEs operating at Nyamira Town. The data obtained during pre-testing was analyzed and the results were used to develop dummy tables. The data was presented in form of tables and figures to increase the accuracy of the results. The results indicated that collection policy had positive and significant effect (p-value of 0.000) on financial performance. Credit terms had a p-value of 0.000 which meant it had a positive and significant effect on financial performance. Credit policy had a p-value of 0.000 which implied it had a positive and significant effect on performance. Credit appraisal techniques had a p-value of 0.000 which implied it had a positive and significant effect on performance. On the other hand, the regression analysis revealed that the credit management practices explained up to 69.8% change in financial performance of small and medium enterprises in Kisii County. The study concluded that credit management practices significantly influence financial performance of small and medium enterprises in Kisii County. For improved financial performance, SMEs should develop and implement comprehensive credit policies that assess customer creditworthiness, set appropriate credit limits, and consider market conditions when offering credit terms. SMEs are recommended to consider incentivizing faster repayments through early payment discounts and negotiate repayment schedules that accommodate customer cash flow needs while ensuring timely collections. SMEs should develop and implement proactive collection measures, including clear communication with customers regarding outstanding balances. Key Words: credit policy, credit terms, collection policy, credit appraisal techniques, SMEs CITATION: Osoro, E. M., Miroga, J., Juma, D. (2024). Credit management practices and financial performance of small and medium enterprises in Kisii County. The Strategic Journal of Business & Change Management, 11 (2), 498 – 519. http://dx.doi.org/10.61426/sjbcm.v11i2.2926