Implications to mitigate business failure: Aligning the impact of the South African business environment on SMEs’ trade credit management with trade credit theories

Abstract

Background: Trade credit mismanagement results in cash-flow constraints that impair business liquidity, which can be attributed to several primary reasons for small- and medium-sized enterprises (SME) failure. By understanding how several trade credit management theories align with the impact of the South African business environment on SME trade credit management, the study contributes to formulating implications for three primary challenges associated with SMEs’ trade credit management to mitigate SME failure, resulting in business exits.

Aim: To reveal how the impact of the South African business environment on SME trade credit management aligns with several trade credit management theories towards providing implications for SMEs to mitigate business failure.

Setting: This study was conducted by administering an online questionnaire.

Methods: Quantitative research design with purposive sampling by administering an online questionnaire to 10 450 SMEs.

Results: The results show the alignment between the significant impact of certain internal and external business environmental variables on SMEs’ trade credit management with several theories from which implications were formulated to mitigate business failure because of challenges associated with SMEs’ trade credit management.

Conclusion: Understanding how trade credit theories align with the business environments impact on SMEs trade credit management.

Contribution: The formulation of implications to alleviate SMEs business failure.