Inventory Management and Financial Performance of Small and Medium Enterprises: A case Study of Ferdsult Engneering Services Ltd- Uganda.

Abstract

The study sought to investigate the relationship between inventory management and financial performance of SMEs using Ferdsult Engineering Services Ltd as a case. The study was guided by three objectives namely; to investigate the relationship between purchase plan and financial performance of Ferdsult Engineering Services Ltd, to examine the relationship between stock levels and financial performance of Ferdsult Engineering Services Ltd and to find out the relationship between stock record keeping and financial performance of Ferdsult Engineering Services Ltd. The study used a case study design with qualitative and quantitative approaches. Data were obtained from 64 Ferdsult staff. It were collected using structured questionnaire, documentary review guide and interview guide. The study established that there is a positive, moderate and significant relationship between purchase plan, stock level maintenance and stock record keeping with financial performance of Ferdsult Engineering Services Ltd. The study concluded that purchase plan is important in the financial performance of Ferdsult Engineering Services Ltd. This is attributed to ordering procedures which enhance stability for continuity which improves availability of the services and that inventory minimizes costs and challenges associated with storage as inventory targets appropriate inventory that maintaining safety stock makes and helps SMEs and Ferdsult in particular to break even in financial performance. Safety stock increases sales and knowledge of inventory influences selection of quality products that are on demand. In addition inventory helps the firm to come up with perfect and accurate anticipation inventory and forecast demand which influences positively financial performance. It further concluded that inventory record keeping is crucial in financial performance of the Ferdsult. It minimizes leakage and fosters for proper accountability. Inventory records fosters for management to easily make a follow up for reconciliation of all the goods that are purchased. This influences optimal and full deployment of the resources for organizational profitability. The study recommends that SMEs Managers, Proprietors and Directors should develop and adopt usage of purchase plans in their transactions so as to have coordinated procurement which will eliminate duplication and double purchasing.