Effects of cash management on financial performance of small scale businesses. a case study of Kampala central division
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Date
2018-09
Authors
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Publisher
Kampala International University, College of Economics and Management
Abstract
Globally, organizations have strict cash management controls to monitor its inflows and outflows while retaining a sufficient amount in order to take advantage of attractive investments or handle unforeseen liabilities. Efficient management of cash prevents loss of money due to theft or error in processing transactions. Numerous best practices are adopted to enhance management of company's funds. This involves shortening of cash collection periods, regular follow ups for collections, negotiation of favorable terms with suppliers allowing delay in payment periods, and preparation of cash flow forecasts. Businesses also use of technology to speed up cash collection process. This study examined the effects of Cash Management on Financial Performance of Small Scale Businesses in Kampala central division. Other purposes included examining the impact of cash management on return on investment of small scale business enterprises in Kampala central division, establishing the impact of cash management on sales turnover of small scale business enterprises in Kampala central division and establishing the impact of cash management on profitability of small scale business enterprises in Kampala central division. A total population of 100 respondents was considered for the study, these mainly comprised of traders, KCCA management and local leaders and more focus was put on effects of cash management on financial performance of small scale businesses. This was achieved through use of Krejcie, R.V. & Morgan and D.W. (1970) table which illustrates that if the target population is 100, the sample size becomes 80. However, selection of the subjects strictly was done randomly. A total of 50 traders were randomly selected and 30 represented the rest of the response. The aim of the study was to establish the effect of cash management on the financial performance of the Small Scale Businesses. Cash management was measured by the three variables which included cash conversion cycle, company size and leverage and return on assets measured the financial performance. The study employed the secondary data which was obtained from the financial statements of the companies. Data analysis involved descriptive data analysis, correlation analysis and the regression analysis. The descriptive analysis was aimed at establishing the trend performance of the cash flows record keeping, sales cycle and the financial performance. Following the outcome of the study, the study proposes that the companies listed of Small Scale Businesses to increase their receivable period, inventory period and payable periods. This will increase the cash management cycle which will in turn improve the financial performance of the companies listed of Small Scale Businesses. The study recommends that the companies listed of Small Scale Businesses to increase the proportion of debt in their capital structure since high leverage will improve the financial performance and this is evident from the research findings that leverage had a positive and significant relationship with the financial performance.
Description
A dissertation submitted to the College of Economics and Management in partial fulfillment of the requirement for the Award of a Bachelor's Degree of Business Administration of Kampala International University
Keywords
Cash management, Financial performance, Small scale businesses, Kampala central division