DOI: 10.36347/sjebm.2017.v04i01.006

Pages: 41-46

An in-depth understanding and implementation of an efficient credit management system reduces the amount of capital tied up with debtors and minimizes bad debts. For SMEs, good credit management system is vital to business cash flow and success and ensures effective business operation. This paper unpacks the relationship between trade credit management practices and the performance of SMEs. The author demonstrates that trade credit management practices are one of the major predictors in the SME performance. Anchoring itself on data gathered from the Central Business District of Eldoret, Kenya, the author shows that many SMEs in Kenya have employed stringent credit policies. Consequently, such trade credit management policies have had a positive impact on SME performance. This is necessary in ensuring sustained performance of SMEs. This paper adds to the growing corpus of literature on SMEs and recommends that SMEs need to encourage stringent trade credit management policies that would oversee maximization of profits.