Effects of Accounts Receivable Financing Practices on Growth of SMEs in Kakamega County, Kenya

Accounts receivable financing practice is the act of exchanging Accounts Receivables with money, and is defined as any type of financing which distinctly relies on AR, either as collateral or as eligibility requirement. Financing firm operations through Accounts receivables is gaining prominence world over which enables firms access finances easily. The objective of the study was to evaluate the effect of Accounts receivable financing practice on growth of SMEs in Kenya. Descriptive survey design and purposive random sampling were used. A sample size of 359 out of 5401 was used. Secondary data was obtained from Kakamega County Revenue Department, for the period under study. The assumptions which form a basis for use of the regression model were tested using homoscedasticity and autocorrelation. Ordinary Least Square method was used to determine the cause effect relationship between variables while hypothesis was tested at 5% significance level. The overall model was found to be significant with F=31.692 and p-value (0.00 less than 0.05). The findings revealed that Accounts receivable financing practice when adopted by SMEs lead to growth. The study recommended that owners and managers should be enlightened on the importance of the various methods and practices of financing accounts receivables in order to enhance growth. The findings would form a basis for government and policy makers to formulate strategies and policies that would help reduce the levels of tied up capital in form of accounts receivable. The study also forms a basis for further research and adds to the existing body of knowledge.