Effect of Entrepreneurship Skills On Financial Performance of Small and Medium Enterprises; A Case of Industrial Division, Mbale Municipality

ABSTRACT The purpose of the study was to investigate the effect of entrepreneurship skills on the financial performance of SMEs in industrial division Mbale municipality. The objectives of the study were the effect of management skills on the financial performance of SMEs. The second objective was to examine the effect of communication skills on the financial performance of SMEs. Last objective examined the effect of technical financial management and financial performance of SMEs. The study used a case study design to conduct the study in industrial division Mbale municipality. Simple random sampling technique was used to select 86 SMEs into the study. The findings from the study show that there is a significant relationship between management skills and financial performance of SMEs. (R0...689) shows a positive correlation between management skills measured in terms of business following a business plan in implementation and increase in equity in business. Management skills positively affect financial performance of SMEs. The finding from the regression analysis shows that there is a moderate positive relationship between communication skills and financial performance of SMEs. An (R0.557) gives us evidence of a significant relationship between close contact with business customers and increase in equity in business. The finding from regression analysis shows that there is strong positive relationship between technical financial management and financial performance of SMEs. (R=O.765) gives us evidence that is a strong positive correlation between technical financial management in terms of hiring qualified personnel in financial advice and increase in equity in business. SMEs follow a specific business plan when implementing its activities; customers are treated with a high esteem and cnhance the relationship of the business and customer. Management capacity building enhances the skills of the employees in SMEs and refresher courses enable the employees to be efficient when carrying tasks. Most of the SMEs are well versed with accounting techniques; they also undertake their employees in formal book keeping training and also employ an expert in financial analysis. Financial accounting systems have made accounting easy and this has improved the financial performance of SMEs because of reduced errors in preparing the financial statements. SMEs in industrial division in Mbale municipality experience increment on equity and returns on various assets. Good investment policy reduce risks in the business and most of the SMEs are financially stable since their net margin profits are above average The government must increase on educating the public masses on various management skills and increase on the funding in public universities thus creating more management courses in various universities. This will enable the public be equipped with management skills in business and hence leading to the growth of SMEs country wide. SMEs should embark on getting various models that may enhance communication skills for example having an employee who understands all the languages. This will be another step in realizing mores sales and revenue among SMEs. Increment on courses under financial management in universities across the country will increase on the number of people with expertise in financial analysis and this will help SMEs to get skilled personnel in the area of financial management which will enhance their performance in industrial division Mbale municipality