Overtrading as a major determining factor in the decline of SME's in Mafikeng
Phumo, Disebo Nofanele
MetadataShow full item record
SMEs play a major role in South Africa 's economy as they decrease unemployment rate, which in turn promotes job creation and reduces poverty. Business owners need to address factors which cause their businesses to fail, and by doing so, run their companies effectively and efficiently which ultimately results in longevity and growth. The major problem is that there has been an increase in the number of SMEs which fail Mafikeng, despite the fact that government has been trying to assist in this regard. Studies have speculated that the majority of SMEs fail due to cash flow problems. This study sets out to find out whether or not overtrading is the major determining factor in the decline of SMEs. The main objective of this study is to determine if overtrading is a major determining factor in the decline among SMEs in Mafikeng. A quantitative research method was used in this study. A questionnaire was administered among 100 business owners in the Mafikeng area. Findings show that the majority of SMEs relied on overdraft facilities for financial assistance, which resulted in an increase in liability on a monthly basis. Findings also revealed that the SMEs have a low debt recovery and most of the time; they paid their suppliers late, which resulted in an increase in interest charges. The majority of SMEs experienced cash flow problems. Findings also indicate that respondents never received cash discounts from their suppliers because they never paid on maturity or on the due date. The study recommends that the government as well as institutions such as SARS should provide training or workshops for business owners to equip them with knowledge and relevant skills, which will enable them to run their companies effectively and efficiently. In doing so, the government as well as SARS, stands to benefit because SARS receives most of its income from these SMEs. In turn, the government would also benefit as it receives its funds from the receiver of revenue.