IMPACT OF FINANCIAL ADMINISTRATION AND MANAGEMENT ON SMALL SCALE BUSINESS IN NIGERIA

CHAPTER ONE

1.0 GENERAL INTRODUCTIONS

Small and medium enterprises (SMES) are considered the backbone of economic growth of all countries (Rajesh, Suresh, and Deshmukh 2008). Small and medium enterprises play a very pivotal role in Nigerians economic growth, as they constitute 97.2% of companies in Nigeria.(federal ministry of trade and investment 2011). It is also pertinent to say that SMEs have fallen short of the expectations laid on them .the country is still characterized by high rate of unemployment, poverty and other vices. Small businesses have truly not written their names in the pages of history as most small business die shortly after it was established and the few that survive die following the aging or physical incapacitation or death of the owner. And according to (Adelekun2008: Ebiringe2011) the failure rate of small businesses in Africa is 50percent.

Financial administration and management play a vital role in any SMEs, a reasonable and logical financial administration and management will not only guaranty survival but also growth and profitability, while mismanagement of finance will led to liquidity and ultimate wind-up of the business.

Kwame (2010) observed careless financial administration practice among small businesses in Nigeria as the reason for their failure to

 achieve their full potentials. Regardless of whether the owner or hired manager, if financial decisions are wrong, growth of the company will be adversely affected. Consequently, a business growth could be damaged because of ineffective and efficient financial management practices. Moreover, the uncertainty of the business environment causes business enterprises to rely excessively on equity and maintain high liquidity and these financial characteristics affect the business. Financial administration and management in small business is notice by many researchers. However, in many previous studies about financial management and administration still have some limitations and more so little or no research work have been carried out on financial management practice of small business especially in developing countries like Nigeria.

Against this background this research work will seek to study the relationship between financial administration and management and business growth and also proffer solutions to the identified problems, using the Bajabure Industrial company(BIC) as case study.

 1.2 BACKGROUND OF THE STUDY

Bajabure industrial company is a privately owned company; operating in the private sector of the Nigerian economy. Bajabure industrial company is a manufacturing company involved in the processing, production and marketing of foams and other related activities. The company is managed by a board of directors headed by an executive chairman is divided into various departments headed by managers who are answerable to the managing director and the managing director answerable to the board of directors. Some of the departments existing in the company are

? Administrative department.

? Quality assurance department.

? Human resource department.

? Financial and accounting department.

? Operations department.

? Marketing and distribution department.

Their roles and functions of the various department are briefly explain here

? Administrative department- this department is concern with the running of the day to day activities of the company. Business

 decisions are made and implemented from the administrative department to other department.

? Quality assurance department this department is concerned with standards; making sure that goods produced adhere to standards set by regulating government agencies and that the customers have value for their money.

? Human resource department- this department is responsible for the recruitment and selection of personnel to be employed into the company. They are also involved in the training of staffs.

? Finance and accounting department.this department is charged with the responsibility of keeping financial records, maintaining accounting records and also preparing of financial report at the end of the financial year.

? Operations department- this department is mandated to maintain and manage the machineries used in the company. They also carry out repair and replacement of worn out machines parts.

? Marketing and distribution department. --- This department is mandated to publicize the product of the company and also to perform delivery services when the need arises.

  It is also important to note that the company was established in 1986 in Yola with branches spread over Nigeria. The company have a staff strength of seventy-six persons (76) both fulltime and part-time workers, with annual profit of close to a million. Similarly, the company is the producer of the famous Nima mattress foams and other things. Some of the company activities include

? Manufacturing of foams.

? Marketing of foam.

? Manufacturing of bed sheets. And

? Productions of Polythene bags.

1.3 STATEMENT OF THE PROBLEM

Assessment of financial administration and management on small scale enterprises. This research work will seek to research on the effect of financial administration on small scale enterprises.

First, looking into the issue of capital sourcing and the risk and cost involved in the choice of capital sourced by the entrepreneur.

 Secondly, problems of financial management among small-scale enterprises and also to recommend solutions to the problems identified during the research.

1.4 OBJECTIVE OF THIS STUDY

The main objective of this study is the Assessment of financial administration and management on small-scale enterprises case study of Bajabure industrial company yola. Other specific objective of the study include-

1 To assess the effect of financial management on small-scale enterprises.

2 To examine the various sources of funds adopted by the small-scale enterprises.

3 To determine whether or not small-scale enterprise do consider risk and cost of capital involved in the various sources of funds.

4 To examine if small-scale enterprise do commit funds wisely into business opportunities.

 1.5 RESEARCH QUESTIONS

i.What is the impact of financial administration on small-scale enterprise?

ii. What are the various sources of funds adopted by small-scale enterprises?

iii. Do small-scale enterprises manage and administer the capital wisely into better business opportunities?

iv. Do small-scale enterprises assess the risk and cost of capital in the various sources adopted in raising funds?

1.6 RESEARCH HYPOTHESIS

The following hypothesis state in null form would be tested In this research work:

HO1. Financial management administration does not have any effect on small-scale enterprise.

HO2. The source of funds adopted does not affect the business.

HO3. Wise administration of capital does not affect the profitability and growth of enterprise.

HO4 there is no risk or cost attached to the choice of finance all are the same

 1.7 SIGNIFICANCE OF THE STUDY

Financial administration is the life-wire of any successful. Bearing this in mind this research work will seek to bring to light the need for proper financial management and administration practices among small-scale enterprises.

Secondly, to highlight how small-scale enterprise can commit their funds into more profitable businesses.

Thirdly, to enlighten the small-scale enterprises of the effect of financial administration and management on businesses especially Nigeria.

Finally, to serve as a reference guide for future works both to students and teachers who may led a work on a similar topic assessment of financial administration and management on small-scale enterprise

1.8 SCOPE AND LIMITATION OF THE STUDY

This research work is limited to Bajabure industrial company Jemita Yola Adamawa state. It will seek to assess their financial management administration practices and it will be limited to the company alone.

Though, some of the information provided can be applicable to other small-scale businesses in the state and Nigeria at large.

 1.8. PLAN OF WORK

This work will be organized into five(5) chapters. Chapter one will deal with the introduction of the research; chapter two will discuss the review of relevant literature to the study; chapter three will focus on the research methodology to be adopted; chapter four of the study will be dedicated to presentation and analysis of data; and finally chapter five presenting the summary, conclusion and recommendation.

1.9 DEFINATION OF TERMS/ CONCEPT

i. Assess- the process of evaluating or estimating the nature ,ability or quality of something or someone (oxford dictionary)

ii. Administration- the process or activity of running a business, organization. It is also the action of dispensening, giving or the application of something.

iii. Financing- the sourcing of funds or means of sourcing in order to meet the demand or achieve a set goal or objective.

iv. Management- this is the controlling and making of decisions or the utilization of both human and material resources in the most effective and efficient manner.

 v. Small-scale- is a small unit of business organization where business activities are carried out and it is a place were the

owner is capable of recognizing his employees without any waste of time.

vi. Enterprise- this is a business environment were business activities are carried out.

vii. Liquidity these are current assets or things of value that can be converted into cash or money.

viii. Dividend  this is the portion of profit or retained earning that is shared to those that own shares in the company.