Cash management policy and performance of small enterprises in Kampala district

Abstract

The study examines the relationship between cash management policy and performance of Small Enterprises. The objectives are; to determine the effect of cash receipts on performance of small enterprises, to establish the effect of cash disbursements on performance of small enterprises and to establish the effect of cash planning on performance of small enterprises. A case study design was used to conduct the study with a sample size of 56 respondents. Various data collection instruments were used in this study and these include; questionnaires, interview guide. From the data collected they had reduced mailing time; they had reduced clearing time and they operated depository transfer checks. However on the other hand they didn’t usually operate automated clearinghouse transfers and they have not ensured that the processing time is always reduced. From the data collected they usually maintain a minimum amount necessary to pay bills on deposit; payment terms frequently offer a substantial discount for early payments; have their payments through petty cashier for small sums of money and operate master accounts that cater for both suppliers and payroll. However on the other hand they do not have their payments through bank for large sums of money. From data collected they learnt that it is crucial to develop the overall operating plans; use cash planning to anticipate the future cash flows; have a daily, weekly/monthly basis of cash planning and always correct their poor cash positions and conditions using it. However on the other hand they do not use it to reduce the possibility of idle cash balances. From the data collected, it was concluded that there is a statistically significant correlation that existed between cash management policy (CMP) and performance (P) with a positive relationship. From the study it can be argued that cash management policy strongly affects the performance of small enterprises. The research recommends that small enterprises should ensure that cash receipts, cash disbursements and cash planning are always given priority in order to increase their performance.