HE ROLE OF CASH MANAGEMENT IN ORGANIZATION PERFORMANCE: A CASE STUDY OF TANESCO-GONGO LA MBOTO
BY
"Zaiko Kapaya Yusuph" & "Stewart Mbegu"
ABSTRACT
Managing cash is a real problem for financial managers for many organizations in Tanzania. many organizations receive money from improper sources that cause problems in cash management as a result of poor organization performance.The performance of any organization depends on the financial position under cash management and howmanagement is, as an indication of success or failure at a certain particular time.The study was conducted at TANESCO Limited in Gongo la Mboto-Dar es salaam. The purpose of this study was to assess the role of cash management in organization performance; The study specifically focused into three specific objectives that was to identify the key functions of cash management in organization, to examine the benefits of cash management in organization, to determine the challenges faced by an organization in cash management.
The study employed case study design, with sample of 40 respondents from a target population of 67 employees from Tanzania Electric supply Company limited at Gongo la Mboto in Dar es Salaam Region. Both Quantitative and qualitative research approach were employed. Data were collected through, questionnaires and documentary reviews and then data were analyzed using Statistical Package of Social Science (SPSS) version 20.0 computer software.
The study findings identifiedthat cash management enable organization to maximize its liquidity and lead to improve in organization performance. Cash management is influenced by the management who are ready to use the available cash resources effectively to stimulate organizational performance, furthermore the findings reveal that cash management helps to reduce risk and lead to organization performance,However the studyrevealed that there was no improve in inventory management in organization hence lead to poor inventory management and ineffectiveness organization performance.
Based on the study carried, researcher concludedthat for organization to improve, the top management, finance department, and accounting department has to use the available cash resources effectively and manage inventory effectively in order to improve performance within the organization. The researcher recommended that management has to make sure that rules and regulations are not supposed to change frequently so as to ensure good cash management and effective organizational performance.
CHAPTER ONE
INTRODUCTION
This chapter covers the background of an organization, background of the study, problem statement, objectives of the study both general and specific, and research questions, significance of the study and scope of the study, limitations and delimitations of the study.
1.2 Historical Background of the Organization
1.2.1 Legal description of the company
Tanzania Electricity Supply Company Limited (TANESCO) was established as a Public limited Company under the provisions of Chapter 212 of the Companies Ordinance (now Companies Act), under the jurisdiction of the board of directors, and its powers and responsibilities comply with the provisions of the Company act
In their corporate business plan_2016/2017 of June, 2016 said that TANESCO is a public organization that relies on the Ministry of Energy and Minerals under the close supervision of the Board of Directors. The board of directors is appointed by the government, which exercise control through the Ministry of Energy and Minerals.
The Energy and Water Utilities Regulatory Authority Act, Chapter 414 of the Tanzania Law, created the Energy and Water Utilities Regulatory Authority (EWURA), whose mission is to oversee and supervise the operation of Utilities of Energy and Water. In the exercise of its powers, EWURA has granted TANESCO the following permits:
i. Electricity Generation Licence; Licence No. EGL-2013-001
ii. Electricity Transmission Cross Border Trading Licence
iii. Electricity distribution and Cross Border Trading Licence; Licence No. EDCBTL- 2013 -001
iv. Electricity supply Licence; Licence No. ESL- 2013 - 001
Each license is valid for 20 years starting March 1, 2013.
The company has a district-wide business license issued by the Ministry of Industry, and trade and Marketing under Department of Revenue Collection Trade License. The Company has long running contracts with major power generators in the country and mini hydro independent power producers/developers. The Company also imports and exports power from/ to the major electricity utility companies in the region.
1.2.2 History of the company
Tanzania Electricity Supply Company limited (TANESCO) is a parastatal organization established by Memorandum and article of association on 26 November 1931, which incorporated Tanzania Electricity Supply Company, Limited. (by then Tanganyika Electricity Supply Company, Limited-TANESCO). The company produces, buys, transmits, distributes and sells electricity to mainland Tanzania and sells large amounts of electricity to the Zanzibar Electric Power Company, which in turn sells it to the public in Unguja and Pemba. TANESCO owns most of the power generation, transmission and distribution facilities in mainland Tanzania, with an estimated population of more than 50 million. In their corporate business plan_2016/2017 of June, 2016 said that historically Germans established Tanzania's first electricity supply in Dar es Salaam in 1908. It serves the railway workshops and some cities. In 1920 the British authorized Tanganyika territory to the Tanganyika region, and the government power department was established under the Tanganyika Railway (TANESCO, 2016).
In 1931, the government handed over the Dar es Salaam company and other new companies that appeared in Dodoma, Tabora, and Kigoma to private companies. Two private power companies were formed, one was Tanganyika Power Supply Company Ltd. TANESCO, which obtained a concession area in Pangani Falls near Tanga. Another company is Dar es Salaam and District Electric Supply Company Limited whose concession areas are Dar es Salaam, Dodoma, Tabora and Kigoma; then it expanded to Mwanza, Moshi, Mbeya, Morogoro Mtwara. And other Townships. Power generation in all these townships based mainly on imported diesel. TANESCO developed the first hydroelectric power station in 1962 at Hale along the Pangani River.
In 1964, three years after independence, the government bought all the shares of two private companies and merged them into a public service company under TANESCO. In 1968, the company changed its name to Tanzania Power Supply Company Ltd., as it is known today. In 1992 Government declaration at the parliamentary budget meeting allowed the private sector to participate in the energy business to end the TANESCO monopoly. So far, the power generation sector has attracted many private investors, although few investors have invested in the distribution sector. (TANESCO, 2016).
Between 2002 and 2006, the government decided to place TANESCO under the management contract of NetGroup Solutions Pty (NetGroup) Managers in South Africa to improve the performance of the company. During this period, since TANESCO was designated as privatization, NetGroup was unable to invest in the development and improvement of the system. TANESCO was de-designated in 2005 to allow investment. NetGroup management failed to improve the performance of the company. His contract was not renewed after it expired in 2006. Management has reverted to the old system. (TANESCO, 2016)
Tanzania's power sector has expanded in terms of scale and network coverage over time. Its output (at the utility level) at the end of the strong monopolist era looks very different from the levels seen from 2002 to 2009. For example, from 482 MW at the end of 1991 to 963 MW in 2009, installed capacity in both the main and isolated grids has more than doubled (TANESCO, 2010). In general, the composition of electricity output by generation source has shifted over time. Peak demand on the corresponding grid has more than doubled, from 297 MW in 2002 to 769 MW in 2009 (TANESCO, 2009). However, in the recent past, drought conditions in the region, especially in 2004 and 2006, had a negative impact on electricity generation from the hydro-system.
Due to these difficulties, TANESCO has attempted to minimize hydro-power reliance by turning to other sources of energy, which has resulted in ongoing attempts to transfer thermal generation contribution from the current 40% to a balanced hydro-thermal contribution of equal amounts. Up to July 2009, thermal power plants generated about 40% of all electricity (TANESCO, 2009). The generation mix in 2013 and thereafter is expected to be 39% hydro and 61% thermal-power. The sector's expansion has been fueled by the increased use of natural gas as a power source. The budget also reveals that electricity and natural gas contributed 2.1% to GDP in 2009 (based on 2001 prices), up from 2.0 percent in 2008 (TANESCO, 2009). Despite this, electricity and natural gas 4 contributed 1.7 percent of GDP in each of the two years based on current prices (TANESCO, 2010).
On the other hand, TANESCO understands the importance of resolving these problems and has taken a variety of steps to do so. In 2011, 169MW of new generation capacity was set to be installed, with another 450 MW set to be installed in 2012-2013. (TANESCO, 2011). The 2011-2014 Capital Investment Program outlines a detailed strategy to minimize distribution losses, with a Loss Reduction Program targeting to reduce losses from 19.7% in 2009 to 14.6 percent by 2014.The Capital Investment Program details TANESCO's investment strategy for TSh 4,249 billion from 2009 to 2014. (TANESCO, 2010). The Capital Investment Program includes upgrades to the country's transmission backbone, a comprehensive Loss Reduction Program, and the construction of additional generation capacity, all of which will result in Tanzania being a net exporter of electricity to countries in South and East Africa. Donors are expected to lend over TSh 3,000 billion during this period, and TANESCO's financial stability is critical to securing this funding (TANESCO, 2009). TANESCO must demonstrate that it is restoring its full Cost of Service, demonstrating its ability to meet loan repayments and being a low-risk and deserving beneficiary of donor funds. In the meantime, a new tariff application was filed, resulting in a 21.7 percent rise in tariffs beginning January 1, 2008. (TANESCO, 2009). This has helped TANESCO recover its cash operating expenses, but it is not enough to cover all of the costs. The aim of this study was to assess the role of cash management in organization performance in Tanzania, the case of TANESCO.
One out of every three businesses fail and close due to poor cash management (Mohon, 2013).Business owners their biggest problem is not about making profit, but rather it is lacking cash management system (Mohon, 2013). Tanzania Electric Supply Company limited in their corporate business plan of June, 2016/2017 said that, there is corruption in the company among of the government officials who are not integrity in performing their duties. This contributes to poor cash management within the organization. Furthermore, it observed that, weak procurement management performs unfavorable power purchase agreement and improperly negotiated thus leading to high operating costs in the
business which results to poor cash management in the organization. (TANESCO, 2016).The company fail to manage cash flow within the organization since it is not able to collect all dues hence leading to accumulated outstanding amount of debts. It observed that, Poor debts collection from citizens and government departments resulted to under investment in power infrastructures (TANESCO, 2016). The World Bank report revealed that roughly 7.3% of worldwide GDP declined due to absence of good cash management and controlling of cash flow. Consequently, the economy of these states particularly less industrialized nations like Tanzania fail to develop in a rational and desirable proportion (Bank of Tanzania, 2014).
Tobe effective, cash management,require a regular process of monitoring the expected payments and receipts, and forecasts must be constantlyupdated to reflect the latest revenueand expenditure data. The effectiveness of the cashmanagement process is highly dependenton obtaining accurate data and a goodinformation system, which canprovide reliable forecasts from each expenditure departmentor agency, as well as tax revenue forecasts, and donor collections anddebt service obligations (World bank, 2001).Also (Visa Inc. 2006) Observedthat 53% of small business owners reportedthat their most challenging part in business was managing andreceiving payments from customers.Some companies are being forced to close due to the lack of attention paid to the position of cash management in recent years (Magdalena, 2013). As a result of losing their cash management control scheme, they have insufficient money. The most critical feature of any company is the cash control management system, which is used to handle the organization's liquid resources. It is clear that due to incompetence, bribery, embezzlement, and reckless and organized robbery, Tanzanian offices are experiencing problems with their cash management control system
Cash management is necessary for the business because, cash is said to be the life of the organization, since it plays a vital role in business’s operations of an organization. While conducting day to day operations business are required to maintain a balance between liquidity and profitability. Liquidity is a precondition to ensure that firms are able to meet their short-term obligations as they fall due and at the same time ensuring that profitability is maintained (Weston & Copeland, 2008) noted that companies need a cash reserve in order to balance short term cash inflows and outflows since these are not perfectly matched. Cash management directly affects liquidity and profitability (Raheman & Nasr, 2007).
Effective cash management does not only increase chances of survival of a business, it also helps to attract investors who can fund its expansion as that is the first thing investors look for when evaluating a business and its cash flow which in turn reflects cash management practices (Merchant factors, 2013). Cash needs to be effectively managed in order to meet routine business operations and objectives of the organization. The gap between cash expenses and cash collection enhances liquidity position, profitability leading to overall business growth over a period of time (Brinchk, Soeren, & Gemuenden, 2011). Management of cash flows in organization enables business entities to use the surplus cash to invest in other assets in order to strength the financial position of an organization. Business entities are not advised to use overdraft as the means of finance. Cash is needed in an organization for operations of the organization or business entity. It’s the basic input needed to keep the business running on a continuous basis (Tabanja, 2005). It would be right to say that many firms and business entities do fail because of poor management of cash and low performance. Cash flow management is critical tobusiness profitability, future plans, business performanceand sustainability. Practicing the basics ofcash flow management will help companiesplan for unforeseen events.Business and financial analysts report that poor cash management and low performance is the major reason why most businesses and firms fail (Patel, 2010).
Ineffective cash management and lack of control over cash flows can be detrimental to the organization, business struggle more often than not due to poor cash management. As a result, effective cash management is a requirement for companies, firms and organization. The money management process has been a major challenge for many companies, because of its significant impact on corporate results. The success of any business is predicted by how management managers and manages its cash flow (Akinsulire, 2003). Good financial management is the key to ensure that the company's finances are in good condition.One aspect that keepssmallbusiness owners awake at night from sleepingis cash flowmanagement.Almost71% of the companies and firms encounteredcash flow management problems(Meng, 2013).
Managing money is a real challenge for financial managers in organizations, many companies receive money from improper sources that cause problems in financial management and therefore, inconsistencies in investment decisions (Akinsulire, 2003). The scope of financial management services plays the primary role of a financial manager whose broad approach includes planning, monitoring, and managing a company's financial flow and financial position while maintaining its budget. Poor management practices have been found to restrict business operations and some customers who are dissatisfied with the services are running away and slowing business growth by showing poor performance (Coyle, 2010).
The problem stems from trying to encourage managers to spend money wisely instead of investing in projects with lower minimum returns or wasting those funds in organizational inefficiency (Wang, 2010). When a company does not have enough cash or cash equivalents, disruption occurs in the normal flow of most business activities. A large number of businesses were experiencing negative cash flow in their operations, which caused difficulties in meeting company obligations such as paying suppliers, staff salaries, wages, and in meeting deadlines for tax payments. However, inadequate cash management, slowing ordering due to delays in payment by suppliers, led to timely delivery of services. These insufficient or incorrect cash management practices were one of the main problems. (Kaketo, Timbirimu, Kiizah, & Olutayo, 2017).
The objectives of the study were categorized into general objectives and specific objectives
The General objective of this study was to assess the role of cash management in organization performance.
The following are the specific objectives of the study
i. To identify the key functions of cash management in organization
ii. To examine the benefits of cash management in organization
iii. To determine the challenges faced by an organization in cash management
1.6 Research questions
i. What are the key functions of cash management in organization?
ii. What are the benefits of cash management in organization?
iii. What are the challenges faced by an organization in cash management?
1.7 Significance of the study
This study was of great important to a number of stakeholders as described here under:
i. To the Researcher
This study was of great importance to the researcher since it was part of the requirement for the award of Bachelor degree of Mzumbe University. So successfully completion of this paper enabled the researcher be awarded the Bachelor degree of Mzumbe.
ii. To TANESCO Management
The outcomes from this study expected to enlighten the administration of Tanzania Electric Supply Company limited, on how to act on proposed changes within institution`s accounting department, the study gave an overview to employees on how cash management do impact them on the organizational performance, and how it can be reviewed, thus employees suggestions availed and help management in further advancement and improvement of accounting management functions by ensuring that all accounting activities are done as per approved budget.
iii. To TANESCO Employees
The study’s conclusion provides great importance to the accountant staffs of TANESCO, as it provided the challenges faced in implementation of accounting plan in an institution and hence be a base for identifying the areas for their improvement in their career.
iv. For Future Researchers
The study was a helpful tool for future study by exploring further challenges facing public sector in implementation of cash management plan and hence become the benchmark for further studies.
v. For Mzumbe University
This study expected to be used as the reference for further studies by other students from MU and hence the MU students gain basic understanding on key concepts related to cash management and how it helps an organization to attain its strategic goals
The focus of this study was to examine the role of cash management on the performance of the organization a case study of Gongo la Mboto district.
1.9 Limitations of the study and Delimitations
i. Researcher finds hard to obtain data from respondents in TANESCO through interview because respondents were not ready to be recorded. This allowed the researcher to collect primary data for the study only through questionnaires.
ii. Some respondents reluctant to provide information during the study because of fear or suspicion. However, the researcher decided to choose the purposive sampling to select members of the population to participate in the study based on his own judgment.
CHAPTER TWO
LITERATURE REVIEW
2.0 Introduction
This chapter consisted definitions of conceptual terms, theoretical literature review, empirical studies, knowledge gap and conceptual framework which shows the relationship between dependent and independent variables
2.1. Definitions of conceptual Terms
Cash is said to be life of an organization or any business entity. The organization remains healthier and strong when cash is managed properly. The manual on government financial statistics (GFS) defines cash as the term used in GFS to describe notes, coins, and deposits kept on demand by government institutional units (IMF, 2001). In other words, when cash is managed poorly in organization then such organization can fail to perform their duties. Organizations which are not value cash management as vital issue are probably undermining short-term and long-term financial stability of the company (Davidson &Charles, 2012). In organization financial managers have significance role in managing cash flows. If the organization fails to settle short-term liabilities when is due because of lack of money, the organization is insolvent.Cash is a critical current asset for a company's activities (Ngonyani, 2005). Cash is the most basic input required to keep a company going on a continuous basis, as well as the ultimate production anticipated to be realized from the sale of the firm's service or good. The company should have enough cash on hand, not too much nor too little. The firm's production activities would be disrupted by a cash shortage, while surplus cash would simply sit idle, adding little to the tint's profitability. As a result, one of the most important responsibilities of the financial manager is to maintain a healthy cash position (Pandey, 2007). Cash refers to funds that a company will disburse without restriction right away. The word "money" refers to the company's coins, currency, and checks, as well as its bank account balances. Cash may also include near-cash products like marketable securities and bank time deposits (Arnold,2005). The main feature of near-cash assets is that they can be turned into cash quickly. When a company has extra capital, it usually invests it in marketable securities. This type of investment generates revenue for the company. (Heald, 2003).Insolvency is the major reason of firms or organization to go bankruptcy. Effective cash management it is more than preventing bankruptcy. Cash management improves stability of the organization, profitability and reduce the risk to which the organization is exposed (Hill & William, 2010).
World Bank (2020)Defined cash management as the process which involves managing of a day-to-day in and out flows of cash in organization. It was further stated that the main objectives of the Cash management are to ensure that the organization has the right quantity of money available at the right time in the right place to enable the government settle its obligations (Eric, 2017). International monetary fund urged that for effective organizational cash management enable the implementation of the operational targets of fiscal policy, the public debt management strategy, and monetary policy smoothly. (IMF, 2020). cash management is a component of working capital that determines a company's optimal cash level. Cash management is critical for companies, both new and established. Companies may experience cash flow problems as a result of a lack of safety margin in the event of unexpected expenses, causing them to have difficulty obtaining funds to cover those expenses. As a result, it's reasonable to conclude that cash management is primarily concerned with controlling cash flows that is inflows and outflows (Nampanga, 2013). This includes revenue generated, capital inflow, acquisitions, expenditures, and a variety of other factors that influence the organization's cash balance. As a result, it's reasonable to conclude that cash management is primarily concerned with controlling cash flows, i.e., inflows and outflows. This includes revenue generated, capital inflow, acquisitions, expenditures, and a variety of other factors that influence the organization's cash balance. (Nampanga, 2013). Also, cash management is described as a broad term that encompasses a wide range of activities." It has a range of features that assist individuals and companies in efficiently processing receipts and payments within their organizations (Malcolm & Harris, 2010). Cash management often relies on a variety of manual and automated support services provided by a variety of organizations, including banks and other financial institutions. Cash management services range from basic bookkeeping and balancing to bond and other security investments. It goes on to say that when it comes to cash collections, organizations have several choices to consider, including the use of automated software systems that allow for easy cash management (Malcolm & Harris, 2010). In their book Essentials of Managing Corporate Cash, (Allman & Sagner, 2003) elaborate on a variety of issues related to cash management. The first is the perspective that cash management is both an art and a science. It is all about controlling a company's short-term capital to support its operational operations, whether it is an art or a science. It also entails fund mobilization and liquidity optimization. The authors define a cash management period as the effective use of a firm's current assets and current liabilities, as well as the structured preparation and control of the company's collections, disbursements, and account balances. And the collection and management of information on the most efficient use of the funds available, as well as the identification of danger. As a result, Cash Management is described as a set of nine major functions that include accelerating and efficiently collecting cash inflows, concentrating collected funds, and managing cash outflow timing. Forecasting the cash situation, securing appropriate short-term funding sources, and maximizing the use of any temporary cash surpluses are among the others. The roles also include gathering timely information, implementing the systems and services required to track, manage, and control cash position, and ensuring the internal and external transfer of financial data. (Allman & Sagner, 2013). Every profitable organizations, keeps cash on hand to fund day-to-day operations. Cash rises as a result of revenues and donations, and it shrinks as a result of investments. The expense may be for inventory, promotion, or both (CJVolk Associates, 2002). TANESCO in their annual report said Cash Management has put a lot of work into collecting debts. The rollout of LUKU meters (prepayment) to Government Ministries, Departments, and domestic customers in the country, as well as revenue security measures and daily meter inspection, have all helped to reduce the high rate of energy theft. Governance Enhancement (TANESCO, 2015)
Finance is similar to blood in our bodies; as long as blood circulates freely, we feel safe and capable of working. It will be difficult for a business concern to make financial decisions related to determining the amount of long-term finance needed and the sources from which such finance is to be collected if circulation is not proper. The best capital structure should be calculated by considering both long-term and short-term financing needs. (Masaka, 2013). Without a doubt, the investment decision is critical in the long run to help with the changing market landscape. A business company is often confronted with the issue of capital expenditure decision, since the investment in this project is very large and must be made right away, but the return would be available in the long run. The availability of short-term funds in the most liquid form is also very necessary for replacement expansion diversification. say a common occurrence. (Masaka, 2013). As a result, we may assume that businesspeople desire to keep a fair amount of liquid assets in their balance sheet. So that it isn't subjected to unreasonable solvency threats. This is a rational method of determining the amount of liquid resources available. As a result, in today's market environment, financial experts must accept a minimum amount of liquid ability in the company to assist management in estimating the property that prospects need. Inadequate liquid resources may cast a negative light on the company's reputation, as external parties may question the company's ability to pay short-term obligations. As a result, the definition of liquidity is described in terms of a company's financial health (Masaka, 2013). The efficiency or ease with which an asset or security can be transformed into ready cash without affecting its market price is referred to as liquidity. Cash is the most liquid of all assets (Investopedia, 2021). The willingness of a financial institution to fulfill its obligations is referred to as financial liquidity. Depositors and adequate liquidity rates are, in general, directly proportional to a firm’s profitability (Kamande, 2017). To measure liquidity, managers can use the ratio of cash and debt liquid assets from firms, available for selling of shares, and government securities to total assets. The term liquidity can easily be defined as the measurement of commercial activity’s ability to change its assets into money for the reason of settling the short-term obligations of an entity. It actually shows how an entity can change goods with high values into cash so that it can settle its obligations. Many organizations would prefer to increase the degree of liquidity in order to settle their liabilities.(Kamande, 2017)
Profitability is similar to profit, but there is one crucial distinction. Profit is an absolute number, but profitability is a relative number. It is the statistic that is used to determine the scope of a company’s earnings in relations to its size. Is a metric for determining how efficient a company is-and, ultimately, whether it succeeds or fails (Investopedia, 2019). Profitability defined as an organization’s ability to make profit from all of its business activities; it demonstrates how effectively management can profit by utilizing all available market resources (Masaka, 2013). Furthermore, profitability was elaborated as an investment’s ability to generate profit from its use, however, the terms profitability and efficiency are not synonymous, and management should not be used interchangeably (Harward & Upton, 2007). Profitability is the degree to which a business or activity yields profits or financial gain. Profitability may not improve until well next years. The state of yielding profits or financial gain, growing sales and a return to profitability. It’s through profitability an organization can gain sustainable economic growth. the ability of a business to produce profit is described as profitability. (Hempell, 2002). If a company is not profitable, it will be forced to exit the market. Profitability was evaluated in the current research, among other aspects, in relation to liquidity as one determinant among others that were examined. (Hempell, 2002). Profitability also refers to the likelihood of a venture's financial performance. Shareholders may assess this before entering a business or firm (Frederick, 2014). It can also be used to evaluate a presently operating venture. This will contribute to the discovery that a particular set of variables is unlikely to be efficient or ineffective. It may also assist in deciding whether or not to continue with the company (Frederick, 2014). It was observed that, is a company's ability to generate income from its assets at any given time while maximizing the use of its assets (Muiruri, 2017). Also claimed that profitability refers to a bank's ability to make money regardless of competitive factors. This is usually measured once a year. Making income by raising more money than the financial year's annual expenditures and taxes was argued to be a required condition for the company's survival. In terms of profitability, (Kamande, 2017) recommends calculating financial success using return on assets (ROA) and return on equity (ROE).
a) Return on assets (ROA)
The efficiency in which total assets are used to produce profit is measured by ROA. This is usually determined by dividing total wealth by net income. A higher return on investment (ROI) indicates that a bank's profitability has increased (Bwacha & Xi, 2018).
Net Income/Total Assets = Return on Assets (ROA).
(b) Return on Investment (ROE)
The ratio of a company's net profits to its shareholders' equity is known as return on equity. Shareholders see them as promising as well (Bwacha & Xi, 2018).
ROE (Return on Equity) is the ratio of net income to shareholder equity.
Firm's success is the product of the tactics it uses to meet its financial objectives. An organization's level of success is determined by its financial results over a specified time span (Liao & Wu, 2009). Financial performance is the calculation of how a business organization has used its resources to produce revenue (Alfred, 2007). The financial performance of corporate companies is measured by their financial statements, which are a compilation of reports on the financial results of the business over a specific time span. Financial health. (Harash, Fatima, & Essia, 2013). defined financial performance as a measure of an organization's financial situation or financial results as a result of management decisions made by the organization's members. a company cash flow management policy, of working capital in the form of cash receivables from consumers, inventory keeping, and cash payments to suppliers is closely related to improved financial performance (Kroes &Subramantam, 2012)
In their study of the impact of cash flow management on mutual fund efficiency, (Robert & Hamacher, 2015) found that increased cash flows had a positive impact on financial performance. The entrepreneurial activities of a company are jeopardized when the entrepreneur lacks the necessary skills to effectively handle their finances (Adomako & Danso, 2014). A company's solvency, flexibility, and financial results are determined by its ability to produce positive cash flows from operations, investments, and financing (Turcas, 2011). One of the ways to assess financial success is by careful consideration and preparation of funding liquidity management, and as a result, companies can improve their operating cash flow to positively affect their performance (Waswa, Mukras, & Oima, 2018). Financial optimization of an organization is normally done on a long-term and short-term basis (Podilchuk, 2013). The former aims to optimize the capital structure, which is the balance of debt and equity that maximizes the firm's value. Liquidity control is the subject of short-term optimization. Indebtedness has a negative impact on a company's financial performance (Makokha, 2017) `But financial risk exposure has a negative impact on a company's financial performance. (Gongera, Ouma, & Were, 2013). Good financial performance is a prerequisite for achieving long-term growth (Wu, Li, & Zhu, 2010). Financial performance of a company is the profitability of the firm as measured by financial (Gao, 2010) It refers to a company's ability to run effectively profitably, prosper, and develop (Miller, Boehije, & Dobbins, 2013). One of the accounting instruments used to assess a company's financial results is free cash flow. It depicts the company's cash flow after deducting growth and recurring expenses. (James & Frank, 2014) Human capital development have become one of the most significant managerial tools for improving an organization's financial Performance (Ganotakis, 2010) Similarly, (Janaki, 2016) found that human capital is one of the most significant business success factors for achieving better financial performance. It was further stated that financial performance it is the measure of how well a business entity can use its resources from its primary type of business and generate revenue (Kenton, 2020) Also, it said that investors and analysts use financial performance to compare same business entity across the similar industry (Kenton, 2020) financial performance of an enterprises is influenced by proper management of invested funds in business activities. (Ebenezer & Asiedu, 2013)
2.3 Theoretical Literature Review
2.3.1 Importance of Good Cash Management
Proper cash management has significant impact on organization performance. The well managed cash among others, contributes to:
i. Enable an organization to maximize its Liquidity
One way for an organization to maximize its liquidity is to reduce overhead. (Eric, 2021). Many activities that do not make benefit, or do so only indirectly are included in overhead costs or operating expenses. Rent, electricity insurance and professional fees such as licenses are all type of overhead expenses. (Eric, 2021) furthermore it was observed that liquidity in organization can be improved through the cash conversion cycle (CCC) (Investopedia, 2020). This is one of several measures of management effectiveness. It measures how quickly organization can convert available cash into more available cash. CCC does this by tracking cash or capital investment because it first converts sales and accounts receivable to inventory and accounts payable and then converts to cash. Generally speaking, the lower the cash conversion cycle (CCC) number, the better for the organization. Although it should be combined with other metrics such as return on equity (ROE) and return on assets (ROA), CCC may be useful when it comes to close competitors, because organization or firms with the lowest CCC are usually organization with good management. CCC is a combination of several activity ratios, including accounts receivable, accounts payable, and inventory turnover rate. Accounts receivable and inventory are short-term assets and accounts receivable are liabilities. All of these ratios can be found on the balance sheet. Essentially, these ratios indicate how efficiently management uses short-term assets and liabilities to generate cash. This allows investors to assess the overall health of the business. (Investopedia, 2020).
ii. Lead to maximize profitability in organization
Various measurement of profitability in the company has been used. The indicators used in this study that quantifies the profitability of an organization are, return on equity (ROE), return on invested capital (ROIC) and operating profit margin, Return on invested capital (ROIC) measures the efficiency of resource allocation and also the quality of management of an organization (Pandey, 2007). ROIC is defined as measuring the efficiency in generating profits from an organization’s assets before the effects of financing. It is an indicator to quantify the effectiveness of the Enterprises' assets (Armstrong, 2001). Also, it was observed that in order for organization to improve its profitability is through concentrating on sales efforts. Further stated that there are two key strategies to increase profitability through sales (Business gateway, 2016) Sell more products to existing profitable customers and find similar customers to sell, Provides high sales and high profit customers. Organization can also significantly increase its profitability by nurturing customers who profit greatly from low sales. If customers get low profit from high sales, they can modify the price to get more revenue from them. If customers generate low sales and low profits, consider whether it is worth continuing to do business with them (Popa & Ciobanu, 2014)
iii. Inventory Management
The control of stock is considered as a critical detail for the reduction, dealing with and controlling of general costs and improvement of the volume of service furnished with the aid of using manner of the agencies (Gill, 2010). Stock control area performs an important feature within side the common value of operations and deliver chain of any agency. Inventory is used as a cushion in competition to the deliver and get in touch with for uncertainties (Abuzayed, 2012). Additionally, discovered that stock is a double-edged weapon, because of the reality lack of inventory effects to terrible general performance, lack of productivity, while extra inventory ends in lack of profitability. Consequently, claimed that manipulate of stock has an instantaneous and massive impact on operational performance (general performance) and corporation fee range, therefore effective inventory control will typically deliver a competitive advantage to the agency over its competitors (Abuzayed, 2012). The manager of stock objectives at optimizing the investment through keeping proper sufficient and high-quality degrees of substances able to assembly the needs of clients (Gill, 2010). To meet this goal, managers need to discover the high-quality solution basing on questions which are; "How a good buy to reserve?" and "whilst to order?” In answering those questions, the alternate-off most of the pastimes of value minimization need to be considered, at the same time as searching for the pleasure of provider degrees. Further to this alternate-off, with the developing huge sort of gadgets with unique name for patterns and characteristics, complexity will increase in material management. Therefore, the authority’s vicinity needs greener stock controls.
Furthermore, proper stock manipulate enables the authorities’ sectors/organizations in mitigating its stock prices as an instance; holding costs, stock out prices, lead time amongst others. Further, the sectors can be able to improving its shipping time main to quick shipping of products and services (Walter, Washington, & Dingilizwe, 2014) noted that, integration is one of the stock control tools used to gather performance.
Inventory plays the function in the growth and survival of an agency in the enjoy that useless and inefficient manipulate of inventory will suggest that the organization loses clients and additionally decline in its sales. Cautious manipulate of inventory facilitates in reducing depreciation, pilferage, and wastages even as making sure the supply of the materials as at even as required (Gill, 2010). Inventory control is crucial to a firm’s success in those days’ competitive and dynamic marketplace. This entails a reduction in the price of keeping stocks with the aid of using manner of retaining simply enough inventories, in the proper area and the proper time and price to make the right quantity of wanted products. Immoderate ranges of inventory held in inventory have an impact on adversely the procurement normal overall performance out of the capital being held which influences coins waft main to decreased overall performance, effectiveness and distorted capability. Cash management helps an organization in managing its inventories. Large inventory in hand indicates trapped sales, and this further leads to less liquidity, therefore a company must always focus on fast pacing its stock out for allowing the movement of cash.(Gill, 2010).
iv. Receivable Management
Debt’s receivable manipulate is a very important detail of organizations finance as it immediately has an impact at the liquidity and profitability of the enterprise (Pandey, 2007). It is useful to bear in mind the selection to provide credit score rating in phrases of carrying charges and feasible charges. Wearing costs are the costs related to granting credit score rating and making investment in payments receivable. It includes the put off in receiving cash, the losses from terrible money owed and the charges of managing payments receivable. Possibility expenses are the misplaced income from refusing to provide credit score rating. Inside the sugar enterprise, this entails inadequate uncooked fabric as farmers have land but won't have the assets to increase the cane (Tobias, 2014). Finance Manager can variety the volume of money owed receivable in line with the exchange-offs among profitability and chance. Financial conditions and the organization’s credit score rules are the leader effects of the volume of money owed receivable to be maintained through the usage of an organization at any given time.(Tobias, 2014). It was observed that cash owed receivables control calls for controlling and coping with the corporation's stock and receivables if you want to obtain the stability among risk and returns and thereby contribute virtually to the advent of a corporation cost. Immoderate investment in stock and receivables reduce the variety of earnings, whilst too little funding will boom the danger of now not being able to meet commitments (Nyabwanga, 2012)
It is recognized that in many corporations globally, liquidity characteristic is, therefore, a vital trouble which have to be taken into consideration through organizational financial managers. The liquidity country of an organization can be decided through their risk-go back characteristics. Therefore, balancing every of the debts receivables components is the most important purpose of manager of debts receivables. Enterprise fulfillment carefully is primarily based totally on the ability of the organization monetary managers to efficaciously manage receivables, inventory, and payables (Nyabwanga, 2012).
Firms focus on increasing its invoices so that revenue can be boosted. The credit period with respect to receiving cash may range between a minimum of 30 and a maximum of 90 days this means that the organization has recorded all its revenue, but the cash with respect to these transactions has not been received, in such situation cash management’s functions will ensure that there is a faster recovery of all receivables to avoid probable cash crunch. (Investopedia, 2019)
v. Payable management
This is the management of a company’s outstanding debts, or liabilities to vendors for credit-based purchases of goods or services. The important purpose of money owed payable manipulate is to pay creditors as slowly as feasible without poor its credit score (Nyabwanga, 2012). Cash owed payable is one of the critical assets of secured quick-term financing. Making use of the fee of courting with the payee is a better purpose which desires to be highlighted as critical as having the maximum beneficial degree of preventions. Because the effect sturdy alliance amongst enterprise and its carriers will strategically beautify production traces and assist credit score document for destiny enlargement. Corporate Governance and Capital Management Efficiency Payable arise when the organization made purchases on credit and needs to make payments for the same within a fixedtime(Falope, 2009)
Company’s governance is set putting in vicinity the shape, strategies and mechanism that guarantees that the agency is being directed and managed in a manner that enhances long time percent holder charge via duty of managers and enhancing organizational overall performance. Accurate agency governance practices are essential in decreasing threat for investors; attracting funding capital and improving the general overall performance of companies (Kyereboah, 2007). The company governance is taken into consideration because the manner, with the useful resource of which corporations are directed, managed, and held to account. This means that company governance encompasses the authority, accountability, stewardship, management, route, and manage exercised in the approach of coping with corporations. Kyereboah, (2007).
Running capital is a crucial element and its miles considered as the problem it really is affecting capital investment (Isshaq, 2009). Efficient going for walks manipulate in corporations includes the method of making plans and controlling of present-day liabilities and assets in a manner it avoids immoderate investments in present day assets and forestalls from running with few modern residences in sufficient to be able to fulfill the responsibilities. Cash conversion cycle is considered as a key diploma to determine the performance in going for walks cash manipulate. Also, the coins conversion cycle for an employer is the length all through which its miles transited from coins to first-rate and yet again to money. In his take, a study going for walks capital manipulate is a direct mechanism of ensuring the functionality of the company to fund the difference among the short time period assets and short time period liabilities. And also, it is been protected with the aid of using the usage of the sports of the employer related to the providers, clients and products. Due to that, now an afternoon, going for walks capital manipulate has been taken into consideration because the precept vital troubles in monetary control with the useful resource of the government/managers.
The importance to optimize wealth of shareholders desires agency governance mechanisms to recognition on improving the economic performance of an agency (Isshaq, 2009) diagnosed that governance form of any agency impacts its cap potential to address outside factors and it has an impact on its monetary standard performance. Finally, well-ruled groups have been called file better standard performance; as a result, right company governance is center in improving shareholder’s price. (Dittmar, 2003) argue that agency governance practices are techniques which can be formulated as a manner to fulfill the short, medium, and longtime goals of a agency further to those of the shareholders. As an cease result, running capital control performance becomes an vital mechanism for assembly the fast term dreams of an agency
This part examines the findings of other researchers on the study of the similar nature. In our context, the part explained the studies related to roles of cash management in organization performance. This part consisted two parts which are local studies and international studies.
Emmanuel (2013) in his study on effectiveness of cash management and quality of service delivery in health sector revealed that cash management has a great impact on better service delivery. He also found that charges that are charged to customers who get health services in hospital should be well managed. This implies that lack of enough control of cash collected in the organization can harm the economic performance of organization.
Repoa (2004) in their study on poverty eradication, it was revealed that poor cash management has significant impact on the service delivery due to poor income data management, lack of transparency on organizational transactions, user fee income data for district hospital and Primary Health Centre level were difficult to obtain due to poor internal control system adopted by management of public health service centers. Based on what information is available; it was concluded that revenues raised from customer’ in public health service hospital were not reflecting the actual revenue collected due to poor cash management collected through revenue. It has been found that proper cash management provides solutions to many financial and public organizations problems (Exim Bank, 2019)
Ndirangu (2017) in his study on effect of cash management on financial performance, it was revealed that size of organization has influence on seriousness on cash management control. He found that, organizations with large operational size strive to strengthen its cash management system so as to avoid wastage of resources.
Maranga (2011), in his study on the relationship between working capital and financial performance of the organization, it was revealed that they are directly related. This means that, proper cash management influence and increase the working capital.
After passing through various literature reviews, the researcher has identified that several studies on role of cash management in organizational performance, their findings revealed that the cash management has a significant impact on the organizational performance in such as that profitability is being increased; company liquidity also is being improved. Further It has been also observed that many studies have been conducted in departmental organizations as well as Local government organizations. This study has been conducted in the parastatal organization so as to find whether the analyzed roles have impact on organization performance.
Therefore, this study focused much on making in depth assessment on how organizations are much affected or contributed by cash management on their performance using Tanzania Electric Supply Company (TANESCO) as a representative organization which is the autonomous governmentparastatal organization operating in Tanzania.
This shows the grammatical representation of the
Figure 2.1 Conceptual Framework
The figure above shows the relationship between dependent and independent variables.
The functions of cash management, benefits of cash management and challenges of cash management have direct impact on organizational performance.
Key functions of cash management in organization performance include to maximize Liquidity; maximize profitability in organization, Inventory management, Receivables Management, Payables Management. The framework also has shown the relationship associated with cash management challenges that hinder performance of organizations. The common challenges that have been identified to hinder better performance of organization includes poor forecasting, regulatory problems, and having many currencies in transaction
CHAPTER THREE
RESEARCH METHODOLOGY
3.1 Introduction
The research methodology was explained in this chapter, which included the type of study, study area, study population, units of analysis, sample size and sampling techniques, types and sources of data, data collection methods, and data analysis methods used in this study.
3.2 Research design
A research design is the arrangement of conditions for collection and analysis of data in a manner that aims to combine relevance to the research purpose with economy in procedure. It is the conceptual structure within which research is conducted; constituting the blueprint for the collection, measurement and analysis of data (Kothari, 2004). In order to achieve the research objective, the used case study design because it is flexible for data collecting and less expensive, in context and holistically, in which data are arranged and the study object is viewed as a whole. This design facilitates a great deal to be learned from a few examples of the phenomenon under study (Adam & Kamuzora, 2008).
3.3 Area of the study
The study was conducted in Dar es Salaam at Tanesco limited located in Gongo la Mboto district. The main reason of choosing Tanesco limited is because it is the public organization and also because of its accessibility.
3.4 Population, Sample and Sampling Techniques
3.4.1 Target Population of the study
Population in research study can be termed as a large group of people or items that carries the characteristics of a research study. Was observed as a group which involves individuals, element or things those convulsions in a particular specification (Kothari, 2018). This definition related directly to the purpose of the study, the considered population in this study was the staff from Accounting department, finance department, User departments as well as District management.
Sample equal or above 10% is valid to generalize results for the whole population (Best & Kahn, 2006). Therefore 66.6 (%) percent of the target population was used as a sample size of this study from TANESCO Gongo la Mboto’s Accounting management, finance department, User departments as well as District Management. About 40 people were involved in data collection and then data analysis
Table 3.1: Sample Size and Sampling Procedures
Category | Study Population | Sample | Percentage |
Accounting and Management | 13 | 6 | 19.4% |
Finance and user department Staff | 54 | 34 | 80.6% |
Total | 67 | 40 | 100% |
Source: Field (2021)
Justification for the entire sample size from Table 3.1 taken from 40 people, to who were questionnaires distributed for it was easy to get them in mainly few days. Therefore, sample size was very important because a researcher found that it was easy to reach the findings of the study.
The sampling method is the process of selecting sample items, and it is a good way to make you a consultant for all citizens. (Saunders, 2003). The sample techniques were built on probability and non-probability sampling techniques, this study used simple random in probability sampling and Judgmental or purposive sampling used in non-probability sampling.
Under this sampling design, every item of the universe has an equal chance of inclusion in the sample; Likelihood testing each respondent had an equivalent possibility of being chosen by the arranged example measure (Kothari, 2004).
This was the probability sampling techniques used in the study to select 40 respondents found at TANESCO in Gongo la mboto due to a reason that the population size of this group was large as well as the technique provided equal chance to the units of inquiry of being selected to form a sample as well as the less expenses of the technique.
3.4.6 Judgmental /Purposive Sampling
Purposive sampling was used because it provides an opportunity for some key respondents to include in sample, with their position and status, so that respond to specific Subject (Sanders, et al, 2003). The study used this procedure to select respondents due to their characteristics or knowledge of the study for the purpose of getting relevant information; however judgmental sampling technique was used to the management and Accountant staffs because they have sufficient knowledge on the practice of the matter and that they were responsible and commonly participating in decision making meetings where general overview of the organizations’ performance reports is presented.
3.5 Data types and sources
Both primary and secondary data were used in the investigation. The Primary data are those data, which collected directly from the field by the researcher, primary data has the advantage of providing the researcher with a thorough understanding of the research findings, promoting accurate answers, and a better understanding of the research process (Gall, 2005). These data were obtained through questionnaire that were administered to participants. Secondary data that is second hands, the data obtained from literature sources or data collected by other people for some other purposes. Thus, secondary data provide second hand information and include both raw data and published ones (Saunders & Thornhill, 2003).
3.6 Methods of Data Collections
Mishra (2017) provided that primary data are information which was fresh, originally collected and hence were original in nature. This study intended to adopt both primary and secondary data. The first-hand data were collected from respondents using questionnaires. Also, Secondary data was expected to be collected while conducting the study which was those data which has already collected by previous researcher as well as other documentary review and internet.
Questionnaire is a list of questions answered by respondents for a given study. Design the questionnaire in this way to help reduce open-ended questions and obtain well-structured answers. This method helps to take pictures of the event and make a final reading of it. Compared with interviews and observations, the questionnaire method is easy to use. This method also gets rid of the prejudice of interviewers, costs less, and now does not cause too much pressure on the interviewees, thereby making them more confident (Adam and Kamuzora, 2008). On this basis, the researchers decided to use this method.Structured and adaptive questionnaires were used to collect data because the method facilitates the easiest way of gathering information. Each item in the questionnaire is developed to address a research objectives and research questions of the study. The questionnaires consist of two parts which enable the researcher to have consistent information throughout the study. Part one contains demographical information of the respondents while part two contains research questions related to the objective of the study to assess the role of cash management in organization performance as shown in Appendix 1.
The researcher collected data from different documentary sources which had already been collected by other researchers. Researcher visited libraries in Mzumbe university, so as to gather data from published and unpublished document such as past report on research done on similar subject. However, researcher collected Secondary information from the internet which helps a lot in the study.
3.7 Data Analysis Techniques
Data analysis is defined as a practice in which raw information is ordered and organized in order that useful facts may be extracted from it (Creswell, 2008). The data analysis and presentation in this study was through editing feedback from the respondents obtained from filled and answered questionnaires, the editing is considered vital as it dictates, correct mistakes and omit errors in raw data. This was done purposely in order to ensure data quality and then followed by arranging data into specific tables in order to fit statistical test and analysis. Basically, the editing and analysis was based on the subject matter of this study which was the role of cash management in organization performance. Accuracy and generality of the data collected and tables adopted to present the obtained data, this was done through percentages and frequency.
3.7.1 Descriptive Statistics
Descriptive statistics is a summary statistics that quantitatively describes or summarizes features from a collection of information, was applied to describe the general characteristics of the study sample on general characteristics of the respondents of the study.
PRESENTATION AND DISCUSSION OF FINDINGS
This chapter, presents and discusses the research findings in the context of sample characteristics and in relation to the study objectives which were; to identifying key functions of cash management in the organization performance, benefits of cash management in organization performance, challenges of cash management in the organization
4.2 Demographic Characteristics
4.2.1 Gender
The respondents were asked to state their gender, and the table 4.1below shows the results.
Table 4.1: Gender of Respondents
| Gender | Frequency | Percent |
| Male | 24 | 60.0 |
Female | 16 | 40.0 | |
Total | 40 | 100.0 |
Source: Survey Data (2021)
The table 4.1 above shows that 24 (60%) respondents who responded were male and 16 (40%) respondents were female. The results point out that there was a dominance of male respondents rather than female respondents who have responded to the study. This is due to the fact that in Tanesco Gongo la Mboto Management many members are male and only few females.
4.2.2 Age Rangeof Respondents
The respondents were asked to state their age range and the following table 4.2 indicates the response of respondents.
Table 4.2: Age Range of Respondents
Age | Frequency | Percent |
15-24 | 2 | 5.0 |
25-34 | 15 | 37.5 |
35-44 | 18 | 45.0 |
45-54 | 4 | 10.0 |
55and above | 1 | 2.5 |
Total | 40 | 100.0 |
Source: Survey Data (2021)
The researcher asked the respondents to state their marital status and the following table 4.3 provides the findings: -
Table 4.3: Marital Status of Respondents
| Marital Status | Frequency | Percent |
| Single | 8 | 20.0 |
Married | 32 | 80.0 | |
Total | 40 | 100.0 |
Source:Field Data (2021)
4.2.4 Education level
Table 4. 4:Education Level of Respondents
| Education Level | Frequency | Percent |
| Diploma | 08 | 40.0 |
bachelor degree | 30 | 55.0 | |
Masters | 2 | 5.0 | |
Total | 40 | 100.0 |
The table 4.4 above shows that 16 (40%) respondents hold diploma level where 22 (55%) respondents’ hold Bachelor level, and 2 (5%) respondents hold master degree. The analysis reveals that many respondents hold bachelor degree level.
4.2.5 Position Rankof Respondents
The respondents were asked to state their position in their organization. The following table 4.5shows the findings.
Table 4.5: Position Rank of Respondents
| Position Rank | Frequency | Percent |
Valid | Senior manager | 4 | 10.0 |
Line Manager | 8 | 20.0 | |
Subordinate | 28 | 70.0 | |
Total | 40 | 100.0 | |
Source:Field Data (2021)
The table 4.5 above shows that 4 (10%) respondents were in senior level where 8 (20%) respondents were line managers and 28 (70%) respondents were subordinate. The findings reveal that most of respondents were at subordinate level.
4.3 Findings and discussion in relation to the study objectives
Recall the objectives which were guiding the study as follows:
i. To identify the key functions of cash management in organization
ii. To examine the benefits of cash management in organization
iii. To determine the challenges faced by an organization in cash management
The findings were presented and discussed in the context of these study objectives as follows;
4.3.1 Organization to Maximize Its Liquidity
Respondent were asked to state their level of agreement or disagreement with the statement that ‘cash management enable organization to maximize its liquidity’. The responses were as presented in the table 4.6 below:
Table4.6: Organization to Maximize Its Liquidity
| Responses | Frequency | Percent |
| strongly agree | 7 | 17.5 |
Agree | 32 | 80.0 | |
Disagree | 1 | 2.5 | |
Total | 40 | 100.0 |
Source: field (2021)
The table 4.6 shows that 7 (17.5%) respondents strongly agreed while 32 (80%) respondents agreed and 1 (2.5%) respondent disagreed with the statement. The findings show that many respondents agreed that cash management enable organization to maximize its liquidity and improve performance of an organization by ensuring that all planned activities are budgeted and performed effectively by the finance managers and accountant’s department.Therefore, from the above finding and discussion it can be said that for organization to maximize its liquidity, management has to use the available Cash resources effectively and efficiently to stimulate organizational performance.
4.3.2 Increase profitability of organization.
Respondents were asked to state their level of agreement or disagreement with the statement that “Cash management increase profitability” and the response were as shown in the table 4.7 below.
Table4.7: Profitability of organization
Responses |
| Frequency | Percent |
| Strong Agree | 4 | 10.0 |
Agree | 31 | 77.5 | |
Neutral | 1 | 2.5 | |
Disagree | 4 | 10.0 | |
Total | 40 | 100.0 |
Source: Field Data (2021)
The table 4.7 above shows that 4 (10%) respondents were strongly agreeing while 31 (77.7%) respondents agreed and 1 (2.5%) respondent was neutral while 4 (10%) respondents disagreed. The findings revealed that cash management increase profitability of organization and influence organizational performance.
4.3.3 Improves Inventory management.
Table4.8: Inventory management
Response | Frequency | Percent |
Agree | 6 | 15.0 |
Neutral | 1 | 2.5 |
Disagree | 31 | 77.5 |
Strong disagree | 2 | 5.0 |
Total | 40 | 100.0 |
Source: Field Data (2021)
The table 4.8 above shows that 6 (15%) respondents agreed while 1 (2.5%) respondent was neutral and 31 (77.7%) disagreed while 2 (5%) respondents strongly disagreed. The findings showed that, there was poor improve in inventory management within the organization. The arguments for less response from the respondents showed that there is no relationship between cash management and organizational performance.
4.3.4 Improves receivable management
Table4.9: Receivable management.
|
Response | Frequency | Percent |
| Strong agree | 4 | 10.0 |
Agree | 36 | 90.0 | |
Total | 40 | 100.0 |
Source: Field Data (2021)
The table 4.9 above shows that 4 (10%) respondents were strongly agreeing while, 36 (90%) respondents agreed. The findings indicate Cash management improves receivable management hence lead to organizational performance.
4.4 Findings and discussion in relation to the second objective
Recall the second objective of the study as to examine the benefits of cash management in organization. The findings were presented in the context Reduce risk.
4.4.1 Help to reduce risk
Respondents were asked to state lever of their agreement or disagreement with the statement that“Cash management help to reduce risk” The response were as shown in the table 4.10below: -
Table 4. 10: Reduction of risk.
| Responses | Frequency | Percent |
| strongly agree | 6 | 15.0 |
Agree | 34 | 85.0 | |
Total | 40 | 100.0 |
Source: Field Data (2021)
Table 4.10 above show that 6 (15%) percent respondents were strongly agreed while 34(85%) respondents agreed with the statement. The findings reveal that Cash management helps to reduce risk within the organization. This shows that managing of cash by financial managers in organization helps to reduce financial risk hence led to organizational performance.
4.4.2 Streamline other processes.
Table4.11: Streamline other process.
| Response | Frequency | Percent |
| Agree | 11 | 27.5 |
Neutral | 2 | 5.0 | |
Disagree | 26 | 65.0 | |
strongly disagree | 1 | 2.5 | |
Total | 40 | 100.0 |
Sources: Field Data (2021)
Table 4.11 shows that 11 (27.5%) respondents agreed while 2 (5%) respondents were neutral and 26 (65%) respondents disagreed while 1 (2.5%) respondent strongly agreed with the statement. The findings reveal that there is poor organizational performance due to the fact that many respondents disagreed with the statement that is Cash management cannot streamline other processes.
4.4.3 Faster access to cash and data
Respondents were asked to state their level of agreement or disagreement with the statement that“cash management help to faster access to cash and data”. Table 4.12 provides the findings.
Table4.12:Respondent’s Views on access to cash and Data
| Response | Frequency | Percent |
| Agree | 25 | 62.5 |
Neutral | 1 | 2.5 | |
Disagree | 14 | 35.0 | |
Total | 40 | 100.0 |
Source: Field Data (2021)
Table 4.12 shows that 25 (62.5%) respondents agreed while 1 (2.5%) respondent was neutral and 14 (35%) respondents disagreed with the statement. The findings imply thatthere is accessibility to cash and data hence lead to organizational performance. Cash management in organization lead to accessibility of cash and data in organization which influence organizational performance.
4.4.4 Influence on true partnership
Respondents were asked to state their level of agreement or disagreement with thestatement that “Cash management influences true partnership”. The findings were provided in the table 4.13 below
Table4.0‑13: Respondents’ Views True partnership
|
Response | Frequency | Percent |
| Agree | 7 | 17.5 |
Neutral | 2 | 5.0 | |
Disagree | 26 | 65.0 | |
Strong disagree | 5 | 12.5 | |
Total | 40 | 100.0 |
Sources: Field Data (2021)
Table 4.13 above shows that 7 (17.5%) respondents agreed while 2 (5%) were neutral and 26 (65%) respondents disagreed with the statement. The findings show that not all True partnership is due to Cash management. Therefore, organizational performance is not due to cash management.
4.5 Compliance problems due to regulatory changes limits cash management
Recall the third objective of the study as to determine the challenges faced by an organization in cash management. The findings were presented in the context of how a compliance problem due to regulatory changes limits cash management.
4.5.1 Response on Regulatory changes and organizational performance
Respondents were asked to state their level of agreement or disagreement with the statement that “Compliance problems due to regulatory changes limits cash management” and the results were as shown in the Table 4.14 below: -
Table 4:14: Response on Regulatory changes and organizational performance
Response |
| Frequency | Percent | Cumulative Percent |
| Strong agree | 5 | 12.5 | 12.5 |
Agree | 34 | 85.0 | 97.5 | |
Neutral | 1 | 2.5 | 100.0 | |
Total | 40 | 100.0 |
|
Source: Field Data (2021)
Table 4.14 above shows that 5 (12.5%) respondents were strongly agreed while 34 (85%) respondents agreed and 1 (2.5%) respondent was neutral with the statement. The findings imply that regulatory changes in organization, limits cash management in organization hence lead poor organizational performance.
4.5.2 Forecasting speed and quality affect cash management
Respondents were asked to state their level of agreement or disagreement with the statement that “Lack of forecasting speed and quality affects cash management” and the results were as shown in the Table 4.15 below: -
Table 4.15: Forecasting speed and quality affect cash management
|
Response | Frequency | Percent |
| Agree | 4 | 10.0 |
Neutral | 6 | 15.0 | |
Disagree | 29 | 72.5 | |
Strong disagree | 1 | 2.5 | |
Total | 40 | 100.0 |
Source:Field Data (2021)
Table 4.15 above shows that 4 (10%) respondents agreed while 6 (15%) respondents were neutral and 29 (72%) respondents disagreed while 1 (2.5%) respondent was strongly disagreed. The findings imply that Cash management is not sufficient leading to ineffectiveness in organizational performance.
4.5.3 Redundant system and bank volume to organization performance
Respondents were asked to state their level of agreement or disagreement with the statement that “Redundant system and bank volume limits cash management” and figure 4.1 below provide the findings;
Figure4.1: Respondents ‘Views on Redundant system and bank volume
Source: Field Data (2021)
Figure 4.1 above shows that 7 (17.5%) respondents agreed while 4 (10%) respondents were neutral and 29 (72%) respondents disagreed with the statement. These findings reveal that redundant system and bank volume cannot limit cash management.
4.5.4 Many currencies limit cash management and organization performance
Respondents were asked to state their level of agreement or disagreement with the statement that “Transaction in many currencies limits cash management” Table 4.16 below provides the finding.
Table 4.16:Transaction in many currencies’ limits cash management
|
Responses | Frequency | Percent |
| strongly agree | 15 | 37.5 |
Agree | 25 | 62.5 | |
Total | 40 | 100.0 |
Source:Field Data (2021)
Tables 4.16 above show that 15 (37.5%) respondents were strongly agreeingwhile25 (62%) respondents agreed with the statement. These findings imply that Transactions in many currencies limits cash management hence lead to poor organizational performance.
CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMMENDATION OF THE STUDY
5.1 Introduction
This chapter gives the summary of the study findings, conclusion of research problem research objectives and research questions and other policy implication. It also recommends on the Tanzanian public sector on effective cash Management.
The study findings showed that cash management enable organization to maximize its liquidity and lead to organizational performance. This was evidenced by 97.5% of the respondents, who indicated that cash management enables organization to maximize its liquidity. However, it was also revealed that there was no improve in inventory management in organization hence lead to poor inventory management and poor organizational performance. This was revealed by 33 (82.5%) respondents who indicated that cash management does not improves inventory management in organization and was because of lack of some materials in store. The findings also revealed that cash management has great influence on reducing risk in organization hence lead to effectively organizational performance.
This was revealed by all 40 (100%) respondents who indicated that cash management help to reduce riskin organization hence lead to performance. This is due to the fact that many cash management often introduce custom armored cash in transit pickup and distribution schedule to ensure that the business still has enough cash on hand. Regulatory changes are among of the limiting factors to cash management in organizational performance; this was revealed in the study that compliance problems due to regulatory changes limit cash management. This was evidenced by 39 (97.5%) respondents who indicated that compliances can be difficult to ensure due to constantly evolving rules, legislations and work practices constantly. However, it was also revealed that cash management is not sufficient leading to ineffectiveness in organization performance. This was evidenced by 30(75%) respondent who stated that cash management is not sufficient leading to ineffectiveness in organization performance.
5.3 Conclusion
Based on the findings of this study it was revealed that cash management has significant role in organization, which contribute in improvement of organizational performance. By ensuring that all planned activities are budgeted and performed effectively by the finance managers and accountant’s department. However, the study revealed that there is a challenge in inventory management within the organization and this was due to lack of materials and inefficiency practice in cash management by the finance managers and accountant’s department within the organization.
Furthermore, the study revealed that regulatory changes are among of the limiting factors to cash management in organizational performance; this was revealed in the study that, compliances can be difficult to ensure due to constantly evolving rules, legislations and work practices constantly. However, it was also revealed that cash management is not sufficient leading to ineffectiveness in organization performance these was evidenced in the study by the respondents.
The researcher recommended that management has to make sure that rules and regulations are not supposed to change frequently so as to ensure good cash management and effective organizational performance. The management has to use effectively available cash so as to stimulate organizational performances. The researcher also recommends that cash management practices should be made basing on the available resources so that the planned activity is well performed. Management should be committed to give full support to ensure cash management is effectively implemented by providing required financial and human resources, establishing effective accounting policies and facilitating capacity building to all stakeholders involved inaccount managements.Furthermore, for effective cash management in the organization, the procurement department practices should be made basing on capable Staff in negotiations especially in the procurement management unit,and toestablish close cooperation with Public Procurement Regulatory Authority (PPRA)
5.5 Recommendation for Further Studies.
This study looked at only role of Cash management in organizational performance using Tanzania electric supply company limited. The researcher recommended further research to investigate among of the following topics, Effectiveness of internal control system in public sector, Impact of technology on cash management in public sector, factors affecting cash management in Company that influences effective performance.
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