An Investigation of the Relationship Between Cash Flow Management and Business Survival in Sokoto State
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Background of the Study
Cash flow management is a crucial factor in determining the survival and sustainability of businesses. For small and medium-sized enterprises (SMEs) in Sokoto State, effective management of cash flow is especially vital, as these businesses often lack the financial resilience to absorb shocks such as delayed payments or unforeseen expenses (Umar & Sani, 2023). Cash flow issues are among the leading causes of business failure globally, and Sokoto State is no exception, with many local businesses failing due to poor cash flow practices.
Cash flow management involves tracking incoming and outgoing payments and ensuring that a business maintains adequate liquidity to meet its financial obligations. While many businesses focus on profitability, cash flow management is often overlooked. In Sokoto State, where SMEs make up a significant portion of the economy, proper cash flow management practices can help businesses navigate financial challenges, fund their operations, and invest in growth opportunities (Hassan & Abubakar, 2024). Despite the recognized importance of cash flow, many businesses in Sokoto State still struggle with cash flow mismanagement, leading to liquidity crises and business closures. This study aims to investigate how cash flow management practices affect business survival in Sokoto State.
Statement of the Problem
Many businesses in Sokoto State experience operational difficulties due to inadequate cash flow management, which affects their ability to cover day-to-day expenses, invest in opportunities, and sustain long-term operations. The issue of cash flow mismanagement often leads to liquidity problems, which are one of the most common reasons for business failures. Despite the significant role of cash flow in business sustainability, businesses in Sokoto State continue to face challenges in managing their cash flow effectively, resulting in poor financial health and eventual business failure. This study seeks to examine the relationship between cash flow management and the survival of businesses in Sokoto State, and to provide insights into how better management practices can enhance business longevity.
Objectives of the Study
1. To examine the cash flow management practices employed by businesses in Sokoto State.
2. To assess the impact of effective cash flow management on business survival in Sokoto State.
3. To recommend strategies for improving cash flow management to enhance business sustainability in Sokoto State.
Research Questions
1. What cash flow management practices are commonly used by businesses in Sokoto State?
2. How does effective cash flow management influence business survival in Sokoto State?
3. What strategies can businesses in Sokoto State implement to improve their cash flow management?
Research Hypotheses
1. Effective cash flow management positively influences the survival of businesses in Sokoto State.
2. Poor cash flow management is a significant contributor to business failure in Sokoto State.
3. Businesses that adopt best cash flow management practices are more likely to survive in Sokoto State.
Scope and Limitations of the Study
This study will focus on small and medium-sized enterprises (SMEs) in Sokoto State, specifically examining their cash flow management practices and their relationship to business survival. A limitation of the study is that it may not consider macroeconomic factors such as inflation or government policy changes, which also influence business operations.
Definitions of Terms
• Cash Flow Management: The process of monitoring, analyzing, and optimizing the net amount of cash moving in and out of a business.
• Liquidity: The ability of a business to meet its short-term financial obligations.
• Business Survival: The ability of a business to continue its operations over time, despite financial challenges or market changes.
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