Financial Management Practices And Profitability of Small Scale Enterprises Uganda, A Case of Kabale Municipality


 The purpose of the study was to examine how financial Management Practices affect profitability amongst small scale enterprises. The study adopted descriptive and correlational research designs. The study used a multi regression analysis that determined the linear effect of financial management practices on profitability. A multi regression model also provided a basis for hypothesis testing. The findings established a significant influence of financial management practices on profitability. Evidence showed that working capital and cash management practices had strong associations with profitability. This study also established a triad-factor that limits profitability, characterizing operational costs, microeconomic, and personal characteristics. This study provided empirical evidence on the contribution of the innovation theory and managerial efficiency theory of profits to management of operational and production costs in business. The study recommends that Small business firms should ensure sound financial management practices in order to experience positive changes in their profitability levels. Small scale enterprise owners must pay a lot of attention to their working capital dynamics, cash management which highly affect their profitability levels. Small scale entrepreneurs should hire professionals and experts in financial management.


Introduction
The business environment continues to experience constant evolution, which needs better business strategies to transform the business enterprises into those that can survive today's competitive market environments. This therefore, warrants reviving the nancial management practices to meet the pressure that businesses are faced with. However, many businesses struggle to secure adequate cash ows, and working capital that are pro table (Siaw, 2014).Small scale enterprises are seen as the driving force behind the growth of most economies world over (Derbie and Kassahun, 2013).Financial Management Practices (FMP) such as Budget control, Working capital management, cash management, nancial forecasting and analysis and nancial decisions greatly affect the nancial performances of small scale enterprises (Mbawuni, et al…, 2014).With that said, ineffective nancial management practices has been the major cause of business failures, resulting in to shortage of funds due to mismanagement, inadequate budget allocation and high operational cost. The primary objective of setting up any business is to maximize pro t. In order to attract others in your business enterprise or as a precondition for long term survival, business pro tability is a major determinant (Prijadi and Desiana, 2017). Business enterprises should be in a position to know or project the pro tability level of the rm in a speci c period.
Pro tability would always remain as a measure of success in any business and without pro t making no business can continue existing (Popa and Ciobanu, 2014). The global market trends have seen changes in the way businesses operate and these has made rms to adopt e cient FMP in order to remain competitive in the global market in abide to increase its productivity and remain pro table (Yunis et al…, 2018). Regardless of the rm's size, a good and effective nancial management practice would spur the enterprise growth. Financial management practice is signi cant in helping the diversi cation of services and product lines, market penetration and planning on growth.
Small scale enterprises play an important role in the growth and progress of an economy as they aggressively keep on seeking technological changes that are major in the transformation on an economy (OECD, 2017). However, Small scale enterprises are faced with di culties in raising nances both internally and externally either through debt or equity and this is due to the challenges that small scale enterprises the encounter in their working capital management resulting from the nature of the cash ows and these has a huge effect on pro tability (Mazzarol, et al… 2015). Small scale enterprises have also failed to nd a reliable type of nancing to support their businesses which would remain pro table for a longer period of time therefore resulting in to changing their business strategies to meet the customers demand (Getahun, 2016).These could result from cost of capital where they are charged higher interest on the loans acquired and credit rationing as a result of collateral shortage. The adoption of careless nancial management practices are some of the causes of small scale business failures and this would arise in a fall in pro t (Agyei-Mensah, 2011). The success or failures of small scale business rms is associated with nancial stability or viability. A poor nancial management practice greatly affects the pro tability of the rms which re ects on its performance (Getahun, 2016).
The effectiveness and e ciency of any nancial management practice is based on the foundation which is focused on the goals of the business enterprise which are compared and evaluated upon.(Oladipo and Okafor, 2013) opine that most organizations are adopting new nancial management systems in order to improve on the organizations performances; however, there are still cases of weak nancial systems and procedures which reduces pro tability and small business enterprises in Kabale municipality are not exceptional. The expectations of better returns, business owners and rms continue to involve in huge investments while a good number of these businesses continues to make losses annually (Ndayanale, 2013). Improper nancial management practices and structures over a considerable time have cost most rms which consequently affects pro tability. (Nikolic et al…,2019) posits that concerned stakeholders ought to improve on the conditions which Small scale enterprises operate thereby removing the factors that hinder the growth of small scale entrepreneurs by developing a supportive system to operate their businesses. The purpose of the study was to examine how nancial Management Practices affect pro tability amongst small scale enterprises. The study was motivated by the following objectives: to establish the factors affecting pro tability of small scale enterprises in Kabale municipality, to determine the effects of nancial management practices on pro tability amongst the small scale enterprises in Kabale Municipality and to assess the relationships between nancial management practices and pro tability amongst business rms in Kabale Municipality Hypothesis 1. E cient nancial management practices does not affect pro ts in small business enterprises.
2. An effective working capital management practice does affect pro ts of small business enterprises.
3. There is no signi cant relationship between cash management and pro tability of small business enterprise.

Literature Review
Theoretical framework The study was build on Managerial E ciency Theory of Pro ts, which assumes that rms that e ciently manage productive operations successfully meet their customers' needs. Firms that demonstrate high managerial skills and production e ciency are compensated with above-normal pro ts (Sanyal, 2019). When management opts to change her operations, such as those that reduce the cost of operating business, product development, pricing structure, market models, they will undoubtedly enhance their pro ts.

Theoretical framework
The study builds on the innovation theory, which was propagated by Joseph Schumpeter in 1934. The theory assumes that innovation is the reason behind growth and uctuations in business investments (Megha, 2016). Schumpeter uses the concept of 'innovation' to connote policy measures that reduce costs of production or increase demand for products (Sanyal, 2019). Therefore, economic pro ts come as a reward to the entrepreneur for his innovations that result in cost falls or increased sales at a better price (Knowledgiate Team, 2017). Cantwell (2001) adds some light on Schumpeter's view of innovation. Innovation does not mean the temporary pro ts enjoyed in monopolistic markets by rst movers but the ability of a rm to experiment with new technologies to solve problems that may associate to increased costs of production or affect sales volume. The point addressed here is that entrepreneurs should remain innovative since other players in the market are likely to copy the same innovations to their advantages, which affects the pro ts of the original innovator. Knowledgiate Team (2017) criticizes the theory on two grounds: the theory concentrates on innovations for occuring pro ts, which ignores several other factors that in uence pro ts, such as nancial management practices. The same criticism was raised by (Kaya, 2015) who posits that innovation is a multiplicity of actors, economic and non-economic in a society. Therefore, the entrepreneur ought to be dynamic in all economic development endeavors. The theory views the entrepreneur as merely an innovator yet he is responsible for other functions of the organizations such as nancial management. To this, (Sweezy, 1943) adds that the entrepreneur must overcome the pyschological and social resistances that come by when attempting to do new things. In esssence, the author suggests that whether the entrepreneur is the innovator or not, he must exercise leadership potentials towards economic channels. The current study uses the innovation theory to link nancial management practices to pro tability in small and medium enterprises. Financial management practices are actions of innovation, aimed at reducing the costs of producing goods and services while increasing demand for these good and services.
Financial Management practices (Kilonzo and Ouma, 2015) de nes nancial management practices (FMP) as management of funds and how these funds are put to use in achieving organizational objectives and maximization of share holders value. FMP is signi cant in supporting the diversi cation of service and product lines and these helps in planning for the growth of the business. Financial management shows the right direction for the future growth of the business by determining how to increase the market value of products and services which results to the economic growth of a country.FMP may include working capital management, capital structure, nancial reporting mechanisms, capital budgeting and others.(Lavia-lopez and Hiebl , 2014) states that e cient nancial reporting systems are signi cant in determining the growth and survival of small scale enterprises. (Musah, 2017) establishes that working capital management (WCM) is signi cant in making rightful decisions related to nancial management which has a critical impact on the nancial performance of a business enterprise. Capital structure represents the right capital mix of either debt or equity which enables nancing business operations (Mazzarol et al… 2015).Companies should adopt optimal nancial decisions aimed at increasing the nancial performance of their rms and also adopt nancial management practices that support the growth of their rms in expanding market share and pro ts (Muguchia, 2018). Similarly, (Marus Eton et al…, 2020) posits that there is need for business rms to align their business operations to the best nancial management practices and train their staff on the internal control activities that ensure adherence to the principles of accounting and nancial records. Cash management is an important practice as it embodies all payments and incomes during a particular period which are highlighted (Bobitan and Mioc , 2011). Optimum cash management is ideal in the sense that having too much cash may turn to be costly especially when one is paying interest on cash. (Mbroh, 2012) argues that e cient cash management system prevents bankruptcy while it increases business sustainability and pro tability. Cash ows management is signi cant especially where accessibility of cash is seen to be exorbitant and di cult. These may be in a period where the economy could have slipped into recession and most businesses would be facing risk as most customers are facing nancial di culties in meeting their obligations. (Eton et al.., 2019) argue that there is need for business owners to consider hiring business experts who could use different statistical models to forecast business performance.
Pro tability (Tauringana and Afrifa, 2013) de nes pro tability as an organizations ability to earn nancial pro t and gain. (Oladipupo and Okfor, 2013) posit that a rm's net pro t is determined by difference between revenue gained during a particular nancial period and the enterprise operating expenses during a period of business operations. Pro tability is the determinant of the growth, success and sustainability of any business venture (Onwumere et al.., 2012).Pro t is a major objective of nancial management which is wealth maximization (Malik et al.., 2011). Business enterprises that are not pro table do not survive for long in a highly competitive market. A business enterprise that is not generating revenue or pro ts does not survive in a hostile market (Eton et al., 2017).Firms should have businesses that are pro table and can sustain themselves in the market even under hostile conditions, (Adebayo and Onyeiwu,2018). In understanding the development and effective growth strategy of a rm and its position in the market is determined through its pro tability (Al-Mwalla, 2012). Pro t making is fundamental in survival of a business where as growth is seen as a key to long-term success and pro tability in a business (Abuzayed, 2012).The growth and success of any business enterprise is determined on the ability of the business enterprise to always be making pro t even if it's facing any nancial di culties the a particular period. (Oladipupo and Okafor, 2013) establishes that it's imperative for the business enterprise to assess the drivers that may enhance the business pro tability if the rm expects to achieve the pro tability goal of the business enterprise. (Moore et al.., 2010) argue that small business enterprises assume that higher revenues may result into higher pro t margins and fail in realizing that if physical cash isn't obtained from those revenues, business enterprises would end up with insu cient cash to meet its expenses and thus face challenges in managing its liquidity.
The adoption of various cost control methods such as cash ow management, standard costing and proper budget management system controls higher costs that business enterprises may likely incur at the same level of income where expenses are lower may result in increase of pro tability (Kumar and Shafabi, 2011). Cash ow management in a business enterprise is signi cant in planning for the unforeseen, pro tability and business sustainability which all business strives for (Patel, 2010). Most businesses argue that credit sales, increase in cash and inventory may lead to increased business pro tability. (Syafri, 2012) urges that the composition of assets and the quality of loans that a business enterprise acquire would de nitely affect the business pro tability. Pro tability of a business enterprise indicates how a business rms is in a position to generate income for a period of time from stock, assets and sales return. (Farah and Nina, 2016) establishes that productivity level and rms size are very strong determinant of pro tability. It's important to note that in conducting any business, nance managers ought to develop an effective pro t strategy for their businesses (Gitman and Zutter, 2012).Pro tability may be considered an important precursor to enterprise success and that most successful businesses do not suffer from the tradeoffs implied theory (Aron and Andrew, 2015).
Firm's pro tability may be grossly affected by inadequate funds that meet the operating costs and capital expenditure, mismanagement of fund and poor management of funds can greatly affect pro tability (Pais and Gama, 2015).Inadequate capital, poor nancial planning at your disposal, inadequate ability to match with the expected growth of the business enterprise and poor business forecast are some of the reasons affecting pro tability which leads to businesses failure (Salazar, 2012). Pro tability of any business enterprise is affected mostly as a result of liquidity and returns on assets invested by a business rm (Mmbaya, 2013).A study to determine the nancial factors that affect pro tability of SMEs by (Popa & Ciobanu, 2014) found managerial decision on investment to be key, in in uencing pro tability. The study established that managerial decisions on investment during in ation, unemployment, economic crises and changes in GDP are very important.(Asare & Angmor ,2015) used short-term loan, long-term loan and trade credit to measure the effect of debt nance on pro tability. The ndings indicate that short-term loan has a signi cant negative relationship between return on assets and pro t margin ratio. Firms would always need thorough training and skills acquisition to better utilize their loans. New loans tend to constrain pro tability among start-ups than older Loans (Banarjee, 2014). While this study suggests a link between nancial constraints and growth, it lacks quantitative data on rm activity. Small Scale Enterprises that encounter multiple effects against their pro tability are expected to have retarded growth levels. However, (Fitzsimmons, Steffens, & Douglas, 2005)found no evidence between growth and pro tability. The authors established that growth rates are volatile over time and therefore, exhibiting a non-linear relationship. Examining the factors affecting pro tability, (Margaretha & Supartika, 2016) found productivity and industry a liation to positively in uence pro tability. Much as the authors recommend rm managers to design business strategies that focus on productivity, they do not show how these two variables affect pro tability. In line with industrial a liation, rms that involve in foreign trading enjoy higher pro tability (Prijadi & Desiana, 2017). However, particular drive to pro tability is evident among rms with optimal working capital. Small Scale Enterprises with liquidity show higher pro tability than large wholesale and retail companies (Mijic, Nuseva, & Jaksic, 2018). (Nyambane and Ouma, 2017) posit that enterprises ought to establish liquidity management policies which would reduce risk for business failure and thus increase pro tability. This policy procedure may uphold low cash conversion cycle.
Financial Management Practices and Pro tability (Zubair and Muhammad, 2013) argues that working capital management (WCM) is one of the determinants of pro tability. It's therefore signi cant to note that WCM plays an important role in improving business pro tability. WCM practices ensure that rms are in position to continuously operate with adequate cash ows to meet the short term debts and operational expenses that may fall due. WCM especially trade credit management and cash management has a positive relationship with pro tability of small scale enterprises (Norah et al.., 2015).The owners of small scale enterprises should pay a lot of attention on the nancial management practices due to the positive effects it has on the pro tability of their business enterprises (Yensu et al.., 2016). WCM is a signi cant instrument of pro tability and when done through effective control it will measure a rm performance (Chowdhury et al…., 2018).E cient WCM sets the base to providing enough liquidity for daily operations of the rm as the fall due to leading generation of pro ts (Wingaroja and O'Neil, 2018). Finance managers ought to have good working capital management techniques in order to create value for their share holders and these would enhance good relationships between pro tability and working capital measures in a hostile business environment. (Muhozi and Mulyungi, 2018) notes that having a comprehensive nancial plan would improve on the organizations pro tability, these would be as a result of proper management of nancial transactions by the quali ed nancial managers in the company. Companies that manage its nancial management practices well have constantly reported an improved nancial performance. Ine ciency in the nancial management practices of the organization may cause damages in business growth and would adversely affect the rm. However, e cient management of nances would steer the business to achieve its growth where as wrong nancial decisions are always very costly to a rm and managers should try to avoid such. In order to ensure long term survival of a business enterprise, business managers ought to have e cient and timely nancial reporting, up to date accounting information system and adequate working capital so as to gain pro ts in the sector, (Yohanes et al.., 2018). Financial management practices are very crucial for the well being of business enterprises, survival and pro tability (Lakew and Rao, 2014). FMP's are majorly focused on pro tability, liquidity, market values of the business and investment.
The harmonization of cash management practices such as cash payment and cash receipts are key for the enhancement of pro tability in an organization (Uwuigbe et al…, 2012).Many business managers do not put much emphasis in cash ow which is a mistake as these managers confuse pro ts made from the business with the cash ows of the business (All Africa.com, 2013). The adoption of a liberal and a exible credit policy by business enterprises would most likely increase sales and results into pro t increase, but it may also lead to a risk of bad debt (Vijayakumar, 2011), however using a credit policy which is strict may result into increase in liquidity and security that reduces pro tability (Akoto et al….., 2013). The ability to manage credit sales effectively may lead to building trust between the business enterprise and suppliers that leads into a long term business relationship and pro t increase (Mbawuni et al.., 2014). The signi cance of effective and e cient credit management is based on a business operations methodology (Enow and Kamala, 2016).Pro tability is noted to be positively in uenced by credit management, cash management and debtor management (Nzitunga, 2019).Small scale entrepreneurs ought to adopt optimal WCM at which pro tability is at its maximum (Afrifa and Padachi , 2016).  (Bismark et al…, 2018). The ability of having the right nances injected into business and plan it effectively can support the rm's growth and pro tability. (Nyambane and Ouma , 2017) posits that while the business enterprises strives to meet its current obligations, the usage of cash balances would be ideal while investing the surplus cash in a better way that increases their levels of income.

Methodology
The study adopted a descriptive and correlational research designs. Descriptive research design is adopted when the study aims at portraying particular characteristics and nature of a given phenomenon. The descriptive design clearly brought out the limiting factors affecting pro tability of Small Scale Enterprises in Kabale municipality. Descriptive statistics supports the description of data in a simplest way, organize the data very well and summarizes it well (Cooper and Schindler, 2014). The study used correlation design to test the relationships between working capital and pro tability, and cash management and pro tability. The study used both quantitative and qualitative approaches. The study was conducted in Kabale Municipality and targeted 390 small scale business units, which was estimated from approximately 15,600 small scale businesses (UNBS, 2018).The study adopted various sampling techniques like purposive, simple random sampling and strati ed sampling amongst the sectors considered which included trade, service, urban agriculture, construction and horticulture. Strati ed sampling techniques were used in selecting trade and service sector, dividing the study population into strata indicates a proportionate representation of the sample (Saunders et al.., 2016). In determining the sample size for construction sector the study used purposive sampling while urban agriculture and horticulture sector simple random sampling technique was used in choosing the small business enterprises within Kabale municipality.
The sample size was determined using Yamane (1967) Where n= Sample size required for the study N= Total Population e= Level of precision Primary and secondary data collection methods were used. The questionnaire was used as a primary method of data collection and it was a structured questionnaire with close-ended questions. The usage of questionnaire helps the researcher to save time and supports the collection of larger amount of information (Christensen et al.., 2014). The items in this instrument were gleaned from literature review. The instrument had four sections: background, nancial management practices, pro tability, and factors affecting pro tability. Items in the background section were constructed on nominal and ordinal scales while items on basic sections were constructed on interval scale, particularly a ve-point likert scale. This method of data collection was used to make the project feasible but also reduce time and costs of data management and analysis. The study collected quantitative data to realize the set objectives (Stoudat, 2014;Creswell, 2014). The study used multiple regression analysis to determine the linear effect of nancial management practices on pro tability. (Creswell, 2012) argues that adopting multiple regression techniques provides estimates of the relationship between a single dependent variable and several independent predictor variable and the study adopted the multiple regression model in order to determine the parameter estimate to attain a tted multiple regression model which may provide a basis for hypothesis testing. The pretest of the instrument was conducted among isolated small scale businesses on the outskirts of Kabale municipality. The instrument indicated Cronbach's alpha coe cients of above 0.7, for all the variables. (Warrens, 2014) argues that Cronbach's alpha is taken as the most common coe cient in approximating reliability test scores for a structured questionnaire and determining consistency internally.
This suggests that the instrument used in this study was internally stable and the results are adequate for conclusion and generalizability.

Background characteristics
In terms of participants' background characteristics, there weren't signi cant differences observed in participation according to gender since 52.8% were male and 47.2% were female. The existence of many women in business is proactive movement by the government of Ugandan to socially and economically empower women. a greater percentage of the business owners who took part in the study were adults (52.8%) followed by the youths (36.2%). Least participation among the adults was due to unwillingness to take part in the study. Otherwise, there a many businesses in Kabale operated by adult entrepreneurs. The distribution according to the highest education level, 88.3% did not have university education. This might raise questions on their ability to implement nancial management practices. Despite the low education of most of the participants, 81.0% had operated their businesses for less than 10 years, and were surviving, mostly of whom are in service businesses (33.1%) and horticulture (26.4%).

Factors affecting pro tability
The researcher raised a number of factors assumed to affect pro tability of businesses in Kabale municipality. Figure 1 presents the summary.
Our results reveal a three categories of the factors affecting businesses in Kabale. The rst category relates operational costs. These appeared to be the key among the factors affecting pro tability, where 36.2% indicated level of xed costs, and 23.9% indicated costs of production. The second category relates to microeconomic factors, such as price discrimination (13.5%), level of economic growth (9.8%) and number of substitutes (8.0%). The third category relates to personal characteristics of the business, such as marketing strategies (2.5%) and managerial competencies (1.8%). Overall the research observed that operational costs exert the greatest in uence on pro tability levels among small scale businesses in Kabale municipality.

Financial management practices and pro tability
The researcher used multiple regression to establish the effect of nancial management practices on pro tability. Multiple regression model is used when the independent variable is a set of predictors, and there is need to determine the effect of each independent variable on the dependent. In this study, nancial management practices constituted working capital and cash management. These were tested against pro tability. According to (R Square = .604), the study observed that nancial management practices account for about 60.4% of the variations in pro tability. Assuming the sample to be representative enough, nancial management signi cantly affects pro tability of SMEs in Kabale municipality Individual effect of nancial management practices were presented by beta coe cients. Precisely, (B = .830; sig = .000 <.05) shows that a variation in working capital by one-unit is likely to account for 83.0% variations in pro tability. The signi cant value, which is less than 0.05 imply that working capital management has a signi cant effect on pro tability. Similarly, (B = .100; sig. =.254 >.05) shows that a variation in cash management by one-unit is likely to vary pro tability by 25.4%. However, the signi cant value, which above 0.05 shows that cash management is not statistically signi cant in accounting for the variations in pro tability. The regression of sum of squares (49.944) which are greater than the residual sum of square (32.713), which implies that pro tability has a good role in explaining variations in pro tability in Kabale municipality.
To test for the relationships between nancial management practices and pro tability, the study adopted correlation tests. Correlation measures use the correlation coe cient, which ranges from 0.0 to 1.0 to measure the strength between two numerical variables. The direction of the relationship can be positive or negative. Positive relationships suggest a variation in the same direction for both variables while a negative relationship suggests a variation in opposite direction for the two variables. between working capital management and pro tability. This implies that a variation in working capital is associated to a positive and strong variation in pro tability. Similarly, the study observed a strong relationship (r = .562; p-value =.000) between cash management and pro tability. This implies that a variation in cash management is associated to a positive and moderate variation in pro tability.

Hypothesis testing
The study used chi-square statistics to test hypotheses. Chi-square is the statistical test that helps in ascertaining whether there is an association between two variables. The study used chi-square statistics under the cross tabulation procedure. For purposes of interpretation, if the (asymptotic signi cance < . 5) there is an association otherwise there is no association. The study set HO: = Null hypothesis, and HA: = Alternative hypothesis. HO: E cient nancial management practices does not affect pro ts in small business enterprises; HA: E cient nancial management practices affects pro ts in small business enterprises.
The study found (asymp. Sig. < .05). Therefore the researcher rejected the null hypothesis, accepting the alternative hypothesis that e cient nancial management practices affects pro ts in small business enterprises. The study established (asymp. Sig. < .05). Therefore the researcher rejected the null hypothesis, and accepted the alternative hypothesis that an e cient working capital management practice affects pro ts in small business enterprises. The study set HO 2 = Null hypothesis; HA 2 = Alterative hypothesis. HO 2 :There is no signi cant relationship between cash management and pro tability of small business enterprise. HA 2 : there is a signi cant relationship between cash management and pro tability of small business enterprises.
The study observed that (asymp. Sig. < .05). Therefore the researcher rejected the null hypothesis, and accepted the alternative hypothesis that there is a signi cant relationship between cash management and pro tability of small business enterprises.

Discussion
The study established the factors that affect pro tability of small enterprises in Kabale Municipality.
Evidence shows triad of factors affecting small enterprises: operational costs, microeconomic, and managerial factors. Operational costs pointed mostly to xed and production costs. In the context of operational costs, the ndings are in agreement with (Kumar and Shafabi, 2011) who posited that rms that implement cost control strategies like cash management, standard costing, and budget implementation systems lower their expenses while increasing their pro ts. In this view, rms in Kabale that implement some form of cost control are likely to register inverse relationships between operational costs and pro t levels. (Pais and Gama, 2015) also posited that rms that do not have adequate funds to meet their operational costs experience gross effects in their pro tability. The consistency of these studies with the current ndings add relevancy to the practice of pro tability of small enterprises.
The study determined the effect of nancial management practices on pro tability of business enterprises. Evidence shows a signi cant effect of nancial management practices on pro tability. Assuming our sample to be representative of all small business enterprises in Kabale municipality, 60.4% of the rms are likely to register increasing pro tability due to prudent nancial management practices.
The ndings agree with (Muhozi and Mulyungi, 2018; Yohanes et al..,, 2018) who noted that rms with comprehensive nancial plans and judicious nancial management practices improve their pro tability.
They contend that nancial plans promote proper management of nancial transactions, but should performed by competent nancial managers. Importantly however, the very nature of most of the small business enterprises in Kabale municipality may not allow them to employ professional nancial managers. This view agrees with (Africa.com) which reports that most managers of small business enterprises confuse pro ts and cash ow. The report con rms that many business managers least emphasize cash ow. They fail to harmonize exible credit policy with pro tability thereby increasing risks of bad debts.
The study assessed the relationships between nancial management practices and pro tability. Actually, the ndings, which showed a signi cant strong relationship between nancial practices and pro tability support (Prijadi & Desiana, 2017) who established a relationship between involvement in foreign trade and pro tability. Similar results by (Mijic, Nuseva, & Jaksic, 2018) show a positive relationship between liquidity and pro tability. The ndings, which revealed that nancial management practices are positively related to pro tability disagree with Asare & Angmor (2015) who established a negative relationship between return on assets and pro t margin ratio. The results of this study also disagree with (Fitzsimmons, Steffens, & Douglas, 2005) who found no evidence between growth and pro tability of small business enterprises. They argued it from the view point that growth rates of rms vary with time, and therefore exhibit a non-linear relationship.

Theoretical And Practical Implications
This study assumed a representative sample of the small business enterprises in Kabale municipality. Therefore, small business rms should ensure sound nancial management practices in order to experience positive changes in their pro tability levels. Particularly however, small business owners must pay a lot of attention to their working capital dynamics, which highly affect their pro tability levels.
Similarly, small business owners should observe proper cash management as this also in uences positive changes in their pro tability levels. Small business owners should endeavor to hire professional nancial managers to provide technical prediction of their nancial performance, and pro tability in particular. Financial management practices such as budget control, working capital management, cash management, nancial forecasting and analysis require professionals to provide expert decision and judgment, which most small businesses lack. To the researchers, this study provides empirical evidence on the contribution of the innovation theory and managerial e ciency theory of pro ts to management of operational and production costs in business. The theory can be applied to understand the operations of small business enterprises in developing economies like Uganda.

Conclusion
The study examined nancial management practices and pro tability of small scale enterprises in Kabale municipality Uganda. The study established a signi cant in uence of nancial management practices on pro tability. Evidence shows some seasoned nancial management practices, especially working capital and cash management practices, all of which indicate strong associations with pro tability. However, the impediments to increased pro tability roam beyond nancial management practices. This study established a triad-factor that limits pro tability, characterizing operational costs, microeconomic, and personal characteristics. Notably to the researchers is the gulf, which operational costs expose to business pro tability. As business owners work to introduce more nancial management practices in their businesses ( nancial forecasting, budget controls, and analysis), they should consider cost-cutting practices to balance pro tability and operational costs. It can be concluded that efforts to strengthen personnel characteristics might be of lesser value to increasing pro tability as compared to management of operation costs. Therefore, hiring professionals and experts in nancial management is highly recommended, though the scale of engaging them at small scale level in Kabale municipality, and Uganda as a whole is still low.

Areas For Future Research
There should be a comprehensive study on cost management and pro tability, moderated by managerial competencies among Small Scale Enterprises in Uganda.