Cash Management and Financial Performance of Small Scale Businesses in Bombo Town Council in Luweero District-Uganda

ABSTRACT 

The study sought to establish the effect of cash management on financial performance of small scale Businesses in Bombo town council in Luweero-Uganda. It was guided by three specific objectives, that included i) to determine the effect of disbursements on financial performance of small scale businesses in Bombo town council in Luweero district, ii) to establish the effect of cash collection on financial performance of small scale businesses in Bombo town council in Luweero district and iii) to establish the effect of cash control on financial performance of small scale businesses in Bombo town council in Luweero district. The study used a sample size of 367 respondents and employed cross-sectional, survey and descriptive research design to describe the variables as the research instruments. Descriptive statistics were used in this study included frequencies, means and regression analysis on variables. The findings revealed the following: The findings indicated that disbursements significantly affects the financial performance of small scale businesses in Bombo town council in Luweero district, the findings revealed that there is a significant effect cash collection has on financial performance of small scale businesses in Bombo town council in Luweero district, findings of this study also indicated a positive significant effect cash control has on financial performance of small scale businesses in Bombo town council in Luweero district. Still the conclusions were that; there is a positive significant effect disbursements has on financial performance of small scale businesses in Bombo town council in Luweero district, effective cash collection significantly improves financial performance of small scale businesses in Bombo town council in Luweero district, cash control highly affects the financial performance of small scale businesses in Bombo town council in Luweero district Uganda. The researcher recommended that the small scale business owners should develop a good system to monitor cash payments, record and track all the cash payments so that there is effectiveness in payment of cash and ensure to cover loopholes if any in the system to enhance financial performance. Small scale business owners and managers should develop cash collection system for example alternatives ways of collecting cash from customers which makes cash collection easy and flexible so as to boost financial performance, small scale business owners should develop cash control system and make sure they always have a cash plan that enables them have minimum cash balances at all times, this will help them control cash and hence increase in the financial performance of their businesses and it Contributes to knowledge by providing empirical evidence that cash management significantly affect the financial performance of small scale businesses in Bombo town council in Luweero district-Uganda The study will be useful to other Firms wishing to implement better cash flow management practices as it will enable them to identify challenges posed while implementing best practices and be able to mitigate such challenges.

TABLE OF CONTENTS

DECLARATION i

.APPROVAL ii

DEDICATION iii

ACKNOWLEDGEMENTS iv

TABLE OF CONTENTS v

LIST OF TABLES ix

LIST OF FIGURE x

ABBREVIATIONS AND ACRONYMS xi

ABSTRACT xi

CHAPTER ONE 1

INTRODUCTION 1

1.0 Introduction 1

1.1 Background of the Study 1

1.1.1 Historical Perspective 1

1.1.2 Theoretical Perspectives 2

1.1.3 Conceptual Perspective 3

1.1.4 Contextual Perspective 4

1.2 Statement of the Problem 5

1.3 Purpose of the Study 5

1.4 Research Objectives 5

1.5 Research Questions. 6

1.6 Hypothesis. 6

1.7 Scope of the Study 6

1.7.1 Geographical Scope 6

1.7.2 Content Scope 6

1.7.3 Time Scope 7

1.8 Significance of the Study 7

1.9 Operational definition of key terms 7

CHAPTER TWO 9

LITERATURE REVIEW 9

2.0 Introduction 9

2.1 Theoretical Review 9

2.2 Conceptual Framework 11

2.3 Cash Management 11

2.3.1 Effect of Disbursements on Financial Performance 12

2.3.2 Relationship between Disbursements and Financial Performance 14

2.3.3 Effect of Cash Collection on Financial Performance 14

2.3.4 Relationship between Cash Collection and Financial Performance 15

2.3.5 Effect of Cash Control on Financial Performance 16

2.3.6 Relationship between Cash Control and Financial Performance 16

2.4. Financial Performance of Small scale Businesses 18

2.4.1 Profitability 19

2.4.2 Sales Growth 20

2.3 Identifying the Gap…………………………..…………………………………………………………..20

CHAPTER THREE 22

METHODOLOGY 22

3.0 Introduction 22

3.1 Research Design 22

3.2 Research Population 22

3.3 Sample Size 22

3.4 Sampling Procedure 23

3.5 Research Instrument 23

3.5.1 Questionnaire 23

3.6 Validity and Reliability of the Instrument 24

3.6.1 Validity 24

3.6.2 Reliability 24

3.7 Data Gathering Procedure 25

3.8 Data Analysis 25

3.9 Decision Rule 25

3.10 Ethical Consideration ………………………………..…………………………………………………26

CHAPTER FOUR 27

DATA PRESENTATION, ANALYSIS AND INTERPRETATION 27

4.0 Introduction 27

4.1 Demographic Characteristics of the Respondents 27

4.2 Cash Management 28

4.3 Financial Performance 31

4.4 Objective One; Effect of Disbursements on Financial Performance of Small Scale Businesses in Bombo Town Council in Luweero District 32

4.5 Objective Two; The Effect of Cash Collection on Financial Performance of Small Scale Businesses in Bombo Town Council in Luweero District 34

4.6 Objective Three; Effect of Cash Control on Financial Performance of Small Scale Businesses in Bombo Town Council in Luweero District 36

 4.7 Multiple Regression Analysis.………………………………………………..40

CHAPTER FIVE Error! Bookmark not defined.

DISCUSSIONS, CONCLUSIONS AND RECOMMENDATIONS 40

5.0 Introduction 40

5.1 Discussions 40

5.1.1 Objective One; The Effect of Disbursements on Financial Performance of Small Scale Businesses in Bombo Town Council in Luweero District 40

5.1.2 Objective Two; The Effect of Cash Collection on Financial Performance of Small Scale Businesses in Bombo Town Council in Luweero District 41

5.1.3 Objective Three; The Effect of Cash Control on Financial Performance of Small Scale Businesses in Bombo Town Council in Luweero District 42

5.2 Conclusions 43

5.2.1 Objective One; The Effect of Disbursements on Financial Performance of Small Scale Businesses in Bombo Town Council in Luweero District 43

5.2.2 Objective Two; The Effect of Cash Collection on Financial Performance of Small Scale Businesses in Bombo Town Council in Luweero District 43

5.2.3 Objective Three; The Effect of Cash Control on Financial Performance of Small Scale Businesses in Bombo Town Council in Luweero District 43

5.3 Recommendations 44

5.4 Contribution to Knowledge 44

 5.5 Limitations of the Study………………………………..………………………………………………..44

5.6 Areas for further Research 45

REFERENCES 46

APPENDICES 50

APPENDIX I:QUESTIONAIRE 48

APPENDIX III: CRONBACH’S RELIABILITY STATISTICS 54