Inhibiting Factors in the Financial Management Decision Making Process: The Case of Small and Medium Enterprises (SMEs) In Addis Ababa city, Ethiopia
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Date
2022-06
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Addis Ababa University
Abstract
The purpose of this article is to uncover the principal obstacles preventing small and medium business owner or hired managers from making sound financial management decisions. These obstacles are generally related to the owner managers’ reluctance to follow accepted theoretical norms (steps) in terms of information search and analysis. This reluctance is attributable to the decision makers’ significant lack of knowledge and experience. Data gathered with a structured questionnaire based on a sample of 200 from total population of 2021 small and medium enterprises registered with Addis Ababa Administration Trade and Industry office. The study identified and studied on three broad principal factors that lead to inefficiencies in financial decisions making process. These broad factors are decision maker (business owner or manager) capacity and behavior, financial management practice, and non financial information consideration of the SMEs. This study adapted purposeful sampling approach and used descriptive qualitative method. Data were collected using survey method and analyzed using descriptive analysis. Data sources were primary and secondary. The results indicated that the three core-factors have significant contribution to influence decision-making process at SMEs in Addis Ababa. These results point to an absence of a proper theoretical framework for gathering and analyzing information necessary for effective decision making. Recommendations were also made to assist small and medium business owner managers to improve on their strategic decision making and resource allocation processes