Cash Management Practices and the Financial Performance of Private Universities in Kenya
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Date
2019
Authors
Waiganjo, Polycarp Denis Muigo
Journal Title
Journal ISSN
Volume Title
Publisher
Kenyatta University
Abstract
Kenya’s higher education sub sector is among the highly growing. Therefore, cash management
becomes more significant compared to other liquid assets since cash is a vital asset to be held by
a firm. Cash management practices are necessary undertaking that enhance matching the timing
of payments and the available of cash which may hamper with operations of a firm. Private
universities have erratic cash flow dependent of lone stream and limited access to capital. The
problem is magnified by the management focus on growth which put much pressure on cash
management systems. Cash deficiency in Kenya private universities will expose the universities
to financial risk that may ultimately affect the daily operations in provision of higher education
leading to liquidation. The study endeavored to establish the effect of cash management practices
on financial performance of private universities in Kenya. The objectives of the study were to
identify effect of cash budgeting, to determine the effect of cash policies, to establish the effect
accounting practices and to identify the effect of investing of surplus cash on the financial
performance of private universities in Kenya. The study was guided by free cash flow theory and
decision usefulness theory. The study targeted 35 private universities registered by Commission
for university education and sought observations of 35 finance officers. The descriptive research
design was adopted during the study. The study adopted a census in the data collection.
Questionnaires were administered to the targeted population. Data was coded and analyzed using
Statistical Packages for Social Sciences (SPSS) and Microsoft excel. Data analysis was presented
using descriptive and inferential statistics. Descriptive statistics involved weighted average and
percentages and inferential statistics involved regression and correlation analysis. The findings
revealed that cash budgeting assist in making cash forecasting and variance analysis, however,
does not enhance budgetary control, spending of cash as planned, control of university spending
habits and involvement of all departments; cash policy ensured proper cash management and
safe custody of financial documentation, however did not ensure security and tracking of
university funds and that financial controls were strictly followed; accounting practices enhanced
tracking of business transactions and preparation of financial statements but not keeping of daily
cash receipts and payments; investing surplus cash did not show improved liquidity and
profitability and returns being consistent with risk undertaken. The correlation analysis results
revealed that at 1% level of significance cash budgeting, cash policies, accounting practices and
investing surplus cash have a significant positive influence in determination of financial
performance in private universities. The results from regression analysis revealed that cash
budgeting accounts 21.9% magnitude in influencing financial performance; cash policy accounts
43.1% magnitude of influence on financial performance; accounting practices accounts 29.8%
effect size in influencing financial performance in private universities. The study recommended
that the university management to formulate guidelines on cash budgeting process with
involvement of all departments, formulation and strict adherence of cash policies; Commission
for university education to cause adherence of accounting standards and conduct yearly audit
and investment be undertaken after due diligence report is approved by the university governing
body.
Description
A Research Project Report Submitted to the School of Business in Partial Fulfilment for the Award of Degree in Master of Business Administration (Finance) of Kenyatta University