The effect of financial management on performance of private organizations in Uganda

Abstract

Financial management is considered to be one of the integral parts of overall management of financial resources in an organisation. The need for effective financial management comes from the fact that many private organisations have remained lagging behind amidst the available resources in the organisation which could be due to inadequate financial management systems. This study decisively looked at the effect of financial management on performance of private organizations as the major objective taking empirical case of Stella Maris College Nsuube. The study was conducted using case study research design, descriptive-cross sectional approach and applying both qualitative and quantitative techniques. Data was collected using questionnaires, interviews, review of available documents and records targeting basically the Board of Directors, Management, Finance Committee, Teaching and Support staff. Data was analyzed using the Statistical Package of Microsoft Excel Software and interpretation of results was drawn from tables and figures in the form of pie charts and bar graphs. The findings revealed that there exists a positive relationship between financial management and performance. The organization mobilizes its finance through school fees collection, loans and donations. However, it is faced with the challenges of inadequate funds due to dependency on school fees as the major source of income and lack of participatory budgeting; ineffective internal control system especially segregation of duties; poor inventory management and lack of receivable and payable management policies. The study therefore, concludes and recommends that to ensure efficient and effective financial management, the top management needs to diversify the sources of income by establishing income generating projects and seeking for donor funds. The organization should establish and strengthen the receivable management policy, strengthen inventory management and institution of internal and external audits in financial management processes; staff development, segregation of duties and reinforcement of financial guidelines and procedures. Therefore, it was concluded that good financial management is a necessary tool for the success of both public and private organizations (Stella Maris College Nsuube).