Cash Management Practices and Profitability of Star Rated Hotels in Nairobi City County, Kenya
Cherono, Joel Chebon
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Globally, successful operation of the firm is dependent on sound management of cash receipts, payments and balances. The study sought to establish the effect of cash management practices on profitability of star rated hotels in Nairobi City County, Kenya. Hotels in Kenya have been performing poorly due to dwindling profitability that has been blamed on cash management problems. However, few studies have been carried out to establish whether cash management is leading to dwindling profitability among star rated hotels in Nairobi Kenya. The specific objectives was determine the effect of cash budgeting, cash forecasting, liquidity control and centralized banking on profitability of hotels in Nairobi City County. Research was limited to star rated hotels in Nairobi City County. The study reviewed three cash theories management theories including; Boumol model, Beranek's Model, Miller-orr model. The research adopted descriptive research design. The target population was 40 star rated hotels in Nairobi City County. The sample size was 16 hotels. Stratified random sampling procedure was adopted where hotels were stratified based on their star level that is 2, 3 4 and 5 stars. The study used purposive sampling to identify the research respondents including accountant, finance manager, credit managers and internal auditors. The study therefore picked four officers from each hotel to participate in the study hence 64 officers were the unit of analysis. The study used structured questionnaires to collect data from respondents. The research instrument was delivered by researcher through drop and pick later method. The study established the validity of the questionnaires by getting the opinion of finance experts to give their views on the validity of the questionnaires. The reliability was determined based on internal consistency method where Cronbach’s alpha for each variable was calculated. A Cronbach’s alpha of 0.70 and above was acceptable for reliability with all variables having a Cronbach’s alpha above 0.7. Filled questionnaires were coded and keyed into Statistical Package for Social Science (SPSS). Data were analyzed using descriptive and inferential statistics. The descriptive statistics included percentages, frequencies, mean and standard deviation. The inferential statistics used was correlation and multiple regressions analysis in examining the relationships among dependent and independent variables. The study ensured the names and identities of the participants remained anonymous. Second, all participants who participated at their free will and they were not required to sign any disclosures. The study established that Cash forecasting and liquidity control had a statistically significant positive effect on profitability of start rated hotels in Nairobi City County. However, cash budgeting and centralized banking had a positive but statistically insignificant effect on profitability of start rated hotels in Nairobi City County. Study thus concluded that cash forecasting had a major positive effect on profitability of start rated hotels in Nairobi City County. The study also concluded that liquidity control had a major positive effect on profitability of start rated hotels in Nairobi City County. It was also concluded that cash budgeting had a positive but minor effect on profitability of start rated hotels in Nairobi City County. Additionally, the effect of centralized banking profitability of start rated hotels in Nairobi City County was not major. Study recommended that top management should continue preparing cash budgets, setting in place strong liquidity control measures to ensure the respective hotels have adequate liquid cash to take care of maturing obligations and make short-term investments and implementing centralized banking to ensure centralized revenue collection. The study suggest that future research to include all major hotels within the country and that another study should be carried out with more cash management variables beyond what was carried out in this study. The study faced the challenge of some respondents being a little hesitant during the day of study.