Analysis of cash management in small and medium scale businesses: A case of Makindye division

Abstract

The purpose of this study was to analyze cash management in Small and Medium Enterprises (SMEs) in this study in Makindye Division in Kampala Capital City Authority (KCCA). The specific objectives of the study were; to assess the procedures followed in collection and usage of cash by SMEs in Makindye Division in KCCA, to examine cash forecasting and budgeting procedures used by SMEs in Makindye Division in KCCA and to assess the challenges to cash management faced by SMEs in Makindye Division in KCCA. The study adopted a cross-sectional survey design that was largely quantitative in approach to study a sample of 103 Small Scale Businesses. These businesses were selected using systematic and stratified random sampling techniques. Data which were largely primary in nature were collected using researcher administered semi-structured questionnaires Data were analyzed using descriptive statistics in SPSS 21.0. The study findings indicated that cash collection and usage, and cash forecasting and budgeting are averagely practiced by SMEs in Makindye Division. The findings further established that the full potential of SMEs to practice ideal cash management is hampered by both internal and external environmental challenges the challenges. It was concluded that the cash collection and usage and cash forecasting and budgeting need some improvement to achieve their full potential. It was recommended that the owners of SMEs can employ the services professionals on a consultancy basis in order to improve their cash usage, cash forecasting and budgeting and help them in competitor analysis. It was further recommended that SMEs can form business associations so as to be able to negotiate better terms such as lower license fees with the authorities.