Effect of Financial Management Practices on Profitability of Agricultural Processing Enterprises in Rwanda

The research aimed was to examine effect of financial management practices on profitability of agricultural organization in Rwanda because Agricultural processing enterprises performs below expectation due to a combination of factors including poor financial management and its believed poor financial management in agricultural business organisation have affected profitability of many agricultural business organisation, coupled with the fact in Nyirangarama agricultural processing industries Rwanda they are few professional accountants to conduct the practice of professional financial accounting. The researcher achieved this by use of three specific objectives namely, To analyze the effect of financial planning on profitability of Nyirangarama agricultural processing industries, To examine the effect of financial records on profitability of Nyirangarama agricultural processing industries and to establish the effect of financial reporting on profitability of Nyirangarama agricultural processing industries. The research is beneficial to the researcher, and JKUAT. The researcher reviewed both theoretical and empirical literature on the effect of the effects of financial management practices on profitability of agricultural organization around the world. The researcher used descriptive method of study based on qualitative and quantitative approach in order to get better analysis of the study. The population size was 120 and sample taken was 75 respondents. Both primary and secondary sources, with their relevant tools like questionnaire and documentary analysis were used in order to come up with required data. The researcher used mean, standard deviation and regression analysis to establish relationship between the variables. It was established Nyirangarama agricultural processing industries have financial management practices which includes, financial planning practices which includes (effective inventory plan, they cash management plan, have capital investment and asset management plan). Financial recording practices (have general ledger for records, accounts receivable records book for recording all the payments received from clients, accounts payable records book for recording all the payments made by the organization and inventory records book for recording incoming and outgoing inventory records) and financial reporting practices (have income statement, have reports on cash flow information, stakeholders equity report and have a comprehensive have financial statement). The financial management practices have got positive effect on profitability of the organization inform of net profit and liquidity. The multivariate regression model formedY= 11.610 + 0.432 X1 + 0.130+ 0.500 X2 + 1.089+ 0. . The regression equation above established that taking all factors constant net profit and liquidity improves as a result of (financial planning, financial recording and financial reporting) at Zero organisation performance Constant Term in spite of some few challenges. The financial management practices have got positive effect on profitability of the organization inform of net profit and liquidity. The organization should conduct comprehensive financial planning in order to improve on the organization profitability. The organization should employ qualified accountants to manage the financial transactions of the organization hence improving financial performance.