effects of cash management techniques on the performance of large enterprises

ABSTRACT

This research work investigates the effects of cash management practices on the performance of Eneo Cameroon. Studies have noted that many companies have maintained large cash reserves and liquidity positions within their investment portfolios in an effort to partially accommodate unforeseen expenditure. However, an inadequate cash management practice among these companies has led to slow rate of service delivery. The objectives of the study was to identify the effects of preparing cash budgets on operational performance of ENEO, to determine the effects of operating bank accounts on operational performance of ENEO and to establish the effects of Book Keeping on operational performance of ENEO. The descriptive survey research design was adopted in the study. The study was undertaken at The ENEO head office Bali. The target population was 100 respondents consisting of employees in the accounting department, treasury department, expenditure and recovery department, stock and inventory department. The sample size was 100 respondents which were selected using census sampling technique. Primary data was collected using a questionnaire. The data was tabulated, and then analyzed using descriptive and inferential statistics with the help of Social Sciences (SPSS) version 22 software. Descriptive statistics involved the use of weighted averages and percentages while inferential statistics involved the use of ANOVA and regression analysis. The findings revealed that cash budgets assist in making cash flow projections and ensures budgetary control and controls ENEO‟s spending habits; operating bank accounts ensured security of ENEO‟s funds besides helping keep track of company transactions; the company keep records of all cash payment and receipts on daily basis, facilitating accountability that improves operational performance of their funds. The ANOVA results revealed that, at 5% level of significance, cash budget, operating bank account(s) and book keeping all have a significant influence in determining the operational performance of ENEO. The findings from regression analysis realized that cash budgeting account for 38.9% effect size in influencing operational performance, operating bank accounts account for 14.1% effect size in influencing operational performance while book keeping account for 49.3% effect size in influencing operational performance. The study findings are helpful to ENEO because it will help them in understanding the importance of preparing cash budgets, operating bank accounts and Book Keeping to improve operational performance more efficiently.

CHAPTER ONE INTRODUCTION
Small, medium and large enterprises play an important role in every economy. However, the success of large enterprises largely depends on a number of challenging factors including sound cash management technique, prevention of fraud, misuse of financial resources, cash control practices, as would be highlighted in this project work researched at Eneo during my professional Internship period.
1.1 Background of the Study.

1.1.1 General Background.

Cash is considered as the life line of all business establishments, whether small, medium or large in scale, it is the most vital and fragile financial asset which provides the basis of its life span. It should be managed efficiently to support the growth and financial strength of the business. With sufficient cash and efficient use, a business would have the ability to buy almost any of the other resources. Due to its vitality, cash management can be crucial and difficult up to a point in which every decision can affect the business in a great degree. It is a key component of ensuring a business‟ stability and insolvency. If at any time, a business fails to pay a due obligation, the business would be considered insolvent which the primary reason why businesses go bankrupt is. This is the reason why good management of cash is required in running a business.
Cash is both a fundamental resource and the means by which the entity acquires other resources. To manage cash is to manage the entity’s ability to purchase assets, service debt, pay employees, and control operations. Thus, effective cash management directly correlates with the entity’s

ability to realize its mission, goals, and objectives. The term cash management has been defined in different ways by different scholars. For instance, Barrett (1999) defines cash management as the series of processes used by an organization to obtain the maximum benefit from its flow of cash funds. Storkey (2003) defines cash management as having the right amount of money in the right place and time to meet the government‟s obligations in the most cost -effective way. The Chartered Institute of Management Accountant (CIMA, 2002) observed that, cash management is imperative in every business organization as cash is said to be the life blood of any business. No business operation is isolative of cash management (Abioro, 2013).The success of enterprises largely depends on a number of factors including sound cash management practices (Attom, 2014). Maguigan and Kretlow (2001) submit that effective cash management is particularly important for the following reasons: First, it assists in preparation of financial statement plan to support application for bank loans; secondly, it reduces cash shortage problem, thirdly, it helps firms to keep track of its cash resources which are used in inventories and accounts receivable, fourthly, it enables a firm to operate only a minimum of cash resources because of the high cost of, and limited access to capital.
Sound cash management involves better timing of expenditure decisions, earlier collection and banking of revenue, and more accurate forecasts of cash flows. This helps minimize the cost of any borrowing that is necessary and facilitates investing surplus funds to achieve the best return overall (Barret, 1999). The techniques of cash management and the degree of sophistication in business processes will vary from entity to entity and will be influenced by an entity size, geographical location and the nature of its operations. This can be exhibited by the fact that small and medium level enterprises with diverse branches located in different regions within a given

country or in different countries normally will try to adopt the cash pooling technique in managing its cash since it takes into consideration cross currency variations thus eliminating currency risk exposure (Ondiek et al., 2013). Basically, the process of managing cash today has been significantly influenced by the growing developments in the business world over the years (Kesseven, 2006). Lienert (2009) found out that modern cash management has four major objectives, namely; to ensure that adequate cash is available to pay for expenditures when they are due, to borrow only when needed and to minimize government borrowing costs, to maximize returns on idle cash and to manage risks, by investing temporary surpluses productively, against

1.1.2 Specific Background

Cash management is the primary goal or objective of almost all financial institutions, companies, enterprises and industries. For these institutions to respect the going concern concept, there need to put in place good managerial strategies in order to assure cash flows .ENEO is one of the largest enterprises in Cameroon and for this reason proper management of it cash flows is very necessary, reason why I researched on.
Looking at the different services offered by ENEO Cameroon, it was realized that its source of revenue are generated from production, transportation and the distribution of electrical energy within the national territory and some CEMAC states like Equatorial Guinea. Despite all these sources of revenue, if the management of its financial resources and cash is not well planned, the company faces controversies such as a slowdown in the payment of its invoices. Due to its status as a monopoly in the manufacture and distribution of energy in Cameroun, ENEO uses negotiable instruments so as to avoid a negative cash flow position and also be able to pay huge amount of
invoices to some of its suppliers.

1.2. The Problem Statement

Cash management techniques are adopted by organizations in order to ensure effective investment of cash and to achieve profitability both in the short run and long run but despite the adoption of these cash management techniques, still most present organizations run bankrupt to the extent that some are even closed due to poor cash management.
Despite the fact that cash management in large enterprises involves managing monies to maximize cash availability and performance which involves synchronization of business cash receipts perfectly with cash payments bearing a broad aspect of maximizing performance.
Most Large enterprises are still faced with a problem of delayed payment of which perhaps is caused by poor management of cash. Many firms are having negative cash flows which result to difficulties in funding firm‟s commitments such as paying suppliers, meeting payroll demands and paying taxes. Holding inadequate amount of cash or cash equivalent interrupted the normal flow of most firm activities. There is also failure by most business firms to satisfy the cash budgeting, cash collection period and cash disbursement.
Cash management is necessary to avoid mismatches between the timing of payments and the availability of cash. Past studies note that cash shortage is a chronic challenge to most firms, and its management is crucial to the survival and growth of enterprises (Attom, 2014). It‟s upon this fact that I was motivated to research on this topic to ascertain the effects of cash management techniques on the case of ENEO Cameroon. This low performance in this corporation may be attributed to inappropriate cash management policies adopted. If some firms do not adopt appropriate cash management policies, they are likely to collapse.

1.3. Objectives of the Study

This study is based on the following general and specific objectives;

 To investigate the effect of preparing cash budgets on operational performance of ENEO Cameroon.
 To analyze the effect of operating bank account on operational performance of ENEO Cameroon.
 To identify the effect of book keeping on the performance of ENEO Cameroon

1.4 Research Questions

To achieve the above objectives, the study sought to answer the following research questions:

 What are the effects of preparing cash budgets on operational performance of ENEO Cameroon?
 What are the effects of operating bank accounts on operational performance of ENEO Cameroon?
 What are the effects of book keeping on the performance of ENEO Cameroon?