The Effect of Delayed Payments from Customers on SME Cash Flow: A Study of Sokoto State
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Background of the Study
Cash flow management is critical for the sustainability of Small and Medium Enterprises (SMEs). Delayed payments from customers pose a significant challenge, as they disrupt operational efficiency, hinder business growth, and sometimes lead to insolvency (Abubakar & Hassan, 2024). In Sokoto State, where SMEs are integral to the local economy, delayed payments remain a pressing issue affecting their financial health.
SMEs often operate with limited financial buffers, making them highly vulnerable to cash flow disruptions. Addressing the impact of delayed payments and exploring potential solutions can help mitigate these challenges, enabling SMEs to thrive in a competitive market (Aliyu & Musa, 2023).
Statement of the Problem
Delayed payments from customers have become a persistent issue for SMEs in Sokoto State, often leading to cash flow constraints, inability to meet operational expenses, and reduced profitability. This situation creates a ripple effect on the broader economy, as SMEs are unable to contribute effectively to job creation and economic growth. Understanding the extent of these challenges is essential to propose effective solutions (Bello & Yusuf, 2024).
Objectives of the Study
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To examine the effect of delayed payments on SME cash flow in Sokoto State.
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To identify the causes of delayed payments from customers.
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To recommend strategies for mitigating the impact of delayed payments on SMEs.
Research Questions
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What is the effect of delayed payments on SME cash flow in Sokoto State?
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What are the primary causes of delayed payments from customers?
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What strategies can mitigate the impact of delayed payments on SMEs?
Research Hypotheses
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Delayed payments from customers do not significantly affect SME cash flow in Sokoto State.
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The causes of delayed payments do not significantly contribute to cash flow challenges.
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Proposed strategies do not significantly improve SME cash flow management.
Scope and Limitations of the Study
The study focuses on SMEs in Sokoto State, analyzing the effects of delayed payments from customers. Limitations include variations in SME sizes and cash flow management practices.
Definitions of Terms
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Delayed Payments: Payments not made within the agreed timeframe.
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Cash Flow: The movement of money in and out of a business.
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SMEs: Small and Medium Enterprises, defined by their size, revenue, and workforce.
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