Abstract

Micro and Small Enterprises (MSEs) play significant roles in the economic landscape of economies. But the roles they play now is with mixed perception as most of them rather face problems with their financial performance. This has been linked to the way they manage their cash management processes. It is against this backdrop that this study sort to assess the effects of cash management on the financial performance of MSEs in Bertoua municipality.

The study has as specific objectives to establish the effects of cash planning on the financial performance of MSEs in Bertoua municipality, to evaluate the influence of cash budgeting on the financial performance of MSEs in Bertoua municipality, to determine the effects of cash control on the financial performance of MSEs in Bertoua and lastly the study seeks to investigate the effects of cash collection on the financial performance of MSEs in Bertoua municipality.

The study was cross sectional in nature and the study population for this work included some selected registered micro and small enterprises in Bertoua municipality. This comprised of the owners and cashiers of these MSEs.

The researcher worked with 50 out of the 100 enterprises which therefore made a total of 100 respondents as the target population for the study. This study adopted a multi stage sampling technique that comprised of stratified sampling, random and purposive sampling techniques. Equally, the sample size for this study was made up of 50 enterprises and since the researcher had decided to work with two workers per enterprise, this therefore gave a total of 100 respondents as the sample size of the study sample of 50 enterprises.

The study made use of both primary and secondary data equally. Data were analyzed using Pearson product moment correlation coefficient to get the effects between cash management and financial performance of these MSEs in Bertoua municipality.

Also, tables were used to present the data. Base on the specific objectives, the findings revealed that there exist a significant positive effect between cash planning, cash budgeting, cash control and cash collection and the financial performance of MSEs in Bertoua municipality. And from there, the study brought forward some recommendations such as a regular supervision via the sending of control team should be effected by the government through the Ministry of Small and Medium Sized enterprise.

CHAPTER ONE

INTRODUCTION

1.1 Background to the Study

There is a worldwide consensus that the action of Micro and small enterprises contribute to high rates of economic growth, economic and social development as well as poverty reduction. Micro and small enterprise does not have any unique definition. This is due to the diverse and flexible nature of the sector that overcomes any minute categorization.

Therefore, micro and small enterprises definition are based on the following features such as the yearly sales turnover, labor, and size of the loan, capital, and non-current assets. Most enterprises usually make use of these features to define micro and small enterprises. For instance, in Canada, it is defined based on the number of workers and total sales. While South Korea defines it on the capital or assets.

European Commission’s defines micro and small enterprises as those enterprises that employ less than ten workers, having an annual turnover not more than 2 million euros with a yearly position statement not exceeding two million euros. Micro and small businesses mean privately own business in which the owner practices a close control policy.

The definition and characteristics of Micro and Small businesses have been seen in different perspective in the World today. For example in the United State (US), it refers to own independent enterprises that employ less than 50 workers with a revenue of less than $10 million practicing a close control (New world finance, 2010).

These businesses in the US have been able to employ close to half of the labor force. Equally, Babson (2016) states that MSEs have been accounted for more than 60% of the private sector in the US. They have also been characterized by lower revenue and profitability, short-term employees, small market areas, located in limited areas (Ingram, 2006).

Around the1980s in the Middle East, the Australia Bureau of statistic (ABS) defined micro and small businesses as those which employee is lesser than 20 persons (Mazzarol, 2012) and are characterized in terms of their low income, small size, less number of employees or operators (Characteristics of small business, Australia, 2002). The record has proven that micro and small enterprises have let to the development of Australian economy”.

Equally, micro and small businesses are those with an annual capital base of less than two million Naira. On the other hand, micro businesses are those which are privately owned and operate with less than five employees and have less than no influence on its producing industry.

Also, the central bank of Nigeria equally defined micro businesses as those with assets of less than one thousand Naira. This e perception of MSEs is not different from that of Cameroon. However, the Ministry of Commerce in Cameroon defined micro businesses as those with an asset of fewer than one million CFAs less than five employees (CMC). Also in 1998, the Nigerian Central bank defined micro and small businesses as those with a range of 11 to 100 employees and a total cost of less than 50 million naira including working capital excluding the cost of land (Ngwu, 2005).

This was equally supported up by the Ministry of Planning and Economic development. Which stipulated that more than 80% of the Uganda’s output is gotten from micro and small enterprises and has been able to employ more than 2 million people in Uganda, and are characterized by low wages, low work force and these small businesses are mostly involve in the agricultural sector (Uganda investment authority, 1996).

Also, micro small business does not only include the means of involving in businesses activities he went forward by saying that, it equally includes the fact of someone staying home catering for children in the absence of their parent, and those who also involve in service deliveries such as those who own restaurants, shoe vendors, tailors, saloons, cloth vendor just to name the few are also forms of micro and small businesses.

Micro and small like those in the advanced World. Whereas in the advanced developed world small-scale enterprises are well organized and coordinated than in the less developed countries this is as a result of the praises they do receive from the government for their importance at the national level.

Furthermore, Nead (1998) observed that especially in the emerging nation, the economy health of the economy as a whole has a strong correlation with the health and nature of Small and Micro Enterprises sector. Micro and Small Enterprises (MSE) plays important role in the economic growth and sustainable development of every nation. It’s as a result of this that the government of Cameroon has been cultivating small business growth in recent years through initiatives such as one-stop business registration centers. It also plans to open a bank to lend to small-business owners. A two-year tax exemption for new business owners to allow entrepreneurs to invest in their ideas to achieve the goals of Cameroon Vision 2035, furthermore, the banking sector has recently improved its financial Services to the SMEs.

Micro And Small businesses already contribute significantly to Cameroon’s economy. According to Enumedi, (2013), at least 90 percent of enterprises in Cameroon are micro and small businesses and employ nearly 70 percent of the population.

Given all these credits to (MSE), the enterprises have however been facing numerous problems including lack of efficient access to finances from the banks and other lending institutions and collapsing of the MSEs due to mismanagement (Koril, 1999; MESPT, 2011; Kyendo, 2010), since small business (especially micro) are generally poor, and there are no facilities for cheap credit, they fall into the clutches of money A lender who charges a high rate of interest. Equally, Longenecker et al. (2006) observed that, poor financial management has been posted as the main cause of failure on the MSEs.

Also, Bowen (2009) stated that there is a strong link between the performance of businesses and the level of training in business management especially in book keeping and business finance. Management, especially in business finance record keeping.

The knowledge and skills of effective cash management are one of the major factors that contribute (immensely) positively to the performance and sustainability of micro and small enterprises. Cash is seen as one of the components of current assets which tend to be highly liquid and can either be cash at bank and the cash in hand.

Cash management is concerned with the management of cash into and out of business, management of cash flows within the firm as well as the management of the balances of cash kept that is been handle by the entrepreneur at a point of time by funding deficit or investing surplus cash.

Managing cash is all about the entrepreneur ability to buy assets, pay workers, service as well controlling operation of the business. Cash is regarded as the backbone of every business. Ross, Wester field, and Jordan (1998) stipulate that small businesses, in particular, must pay attention to the timing of flows to ensure that cash is available to meet their financing needs effectively plan for unforeseen (precautionary) contingencies in the future.

Equally, Moyer, Maguigan, and Kretlow (2001) assert that effective cash management is specifically vital for the following reasons. Firstly, it helps in preparation of financial statement plan to support the application for bank loans. Secondly, it decreases the problem of cash shortage; it equally enables firms to keep track of its cash resources which are used in stock and account debtors. Finally, it encourages the operation of less amount of cash resources by entrepreneurs. This is as a result of an inadequate access to capital as well as the high cost.

The financial performance of selected micro and small enterprises in Bertoua. Cash is an important tool as it helps driving enterprises forward. Therefore, it is the responsibility of a firm to closely watch at their cash to avoid the enterprise from running bankrupt. Pandey (2004) looks at cash planning as a technique to plan and control the amount of cash used. It comprises an effective preparation of cash receipt cash forecast and cash payment to achieve future cash requirements.

On the other hand, Cash budget according to Brigham and Houston (1999) refers to a table that shows the flows of cash (cash receipts, balances, and disbursement) by a firm over a given period.

Lienert (2009) revealed that modern cash management has four major objectives. That is to secure that adequate cash is available to pay for expenditures when they are due, to obtain borrow when needed and to decrease government borrowing costs, to reduce and manage risk as well as returns on idle cash by investing temporary excesses, productively, against adequate collateral.

According to Patel (2010), cash flow management is very important for the business profitability, future planning, and sustainability. So, the putting in place of cash flow management will enable the entrepreneurs of micro and small enterprises to sustain their business and thus lead to financial performance. Attom and Mbroh (2012) define cash as currency (coins and paper) that is accepted as a medium of exchange for goods and services. According to Abioro (2013), No business operation is isolative of cash management.

Equally, The“2009 Best practice Handbook on European cash management” looks at cash management implementation trends and challenges. According to this Handbook, cash management is a system that comes to reduce working capital requirements over a longer term by improving efficiencies and generating cost savings in the management of cash flows and overall liquidity.

So for companies to overcome financial and liquidity crisis both internal as well as externally, they should effectively look at their existing cash management structures and procedures. Despite these strategies put in place, they, however, encountered some contemporary cash management challenges such as tough business conditions, instability in the global market and risk management. The Chartered Institute of Management Accountant (CIMA, 2002) stipulated that cash management is imperative in every business organization, cash is considered as the living blood of any business.

In Africa, cash management implementation is becoming more sophisticated. It has been 15 years since the original cash management handbook was written. Equally, a work by Kwame (2007) that was centered on the fact that, the putting in place of a cash balance policy ensures prudent cash budgeting and investment of surplus of cash.

Therefore, reducing the time cash is tied up in the operating cycle improves business profitability and market value as well as business performance. Proper management of cash will enable the owners of micro and small enterprises to meet up with cash disbursement, minimizing funds committed to cash balance as well as to meet up with optimum cash balance. The various ways through which an enterprise can manage cash includes; planning, control, budgeting and collection of cash.

However, the perception of cash management is not different like that in Cameroon. Globally in Bertoua, there exist many micro and small businesses. Some of these enterprises includes clothing vendors’ book vendors, shoe vendors, saloons, bakeries, poultry vendors, restaurants, hotels, tomatoes sellers, provision shops, micro institutions, just to name the few. The operations of these businesses through employment has contributed tremendously to the booming nature and growth of the area.

Due to it hospitality nature, it has therefore let to the cohabitation of other inhabitants who are not indigenes of the area. These enterprises are however facing some challenges. Some of the problems encountered by these Businesses include absence to get micro credits, inadequate Infrastructures, bad debts challenges as well the absences of good record keeping and bank accounts problem.

Also, poor financial performance was equally seen as an issue to these micro and small enterprises. . It was therefore because of this that the researcher decided to carry out a study in these enterprises. More deeply with the willingness to investigate the reasons behind the issue with their financial performance..

So, it was observed that, they equally encountered issues with their cash planning, control budgeting, and collection as it was noticed by these MSEs in the Bertoua municipality. In essence, it is against this background that this study was set to find out engagement in cash management by MSEs Owners and accountants/ cashiers in Bertoua municipality, the activity which is key to the success of their business.

1.2 The Problem Statement

Irrespective of the effort made by the government of Cameroon through the ministry of small and medium sized enterprises as well as chamber of commerce to support the growth of MSEs sector by creating and enabling good business environment through appropriate legal and regulatory procedures.

And in spite the fact that banks have recently made micro-credit accessible to MSEs There is no indication that the sector is growing. For the past decade in the Eastern region specifically in Bertoua, the financial performance of some micro and small enterprise has been dropping drastically (Information from the owners of micro and small enterprises Bertoua, 2017).

This has been the alternate reason why some of them have reduced their employment capacity, send away most of their workers, inability to have other branches elsewhere, less diversification, drop down in their market share, and decrease in profit, inadequate cash as well as a reduction in the return on capital employed. So the researcher has been wondering why the situation is the way.

it is and she started looking for what could have been the reasons for this poor financial performance.

Furthermore, from a discussion with the General Manager of CFCE (Center of Formalities and Creation of Enterprises) in Bertoua, the researcher discover that, according to him, this poor performance observed in these micro and small enterprises are as result of the poor cash management practices in these enterprises.

In fact, these enterprises face a lot of challenges with their cash management practices. For instance, in the cash planning, they are facing problems like, having a very vague estimation of the amount of cash they will have in the next month, did not have a proper plan for their expected cash inflows and outflows.

For the cash budgeting, the problem observed is that they fail to practice sound cash forecasting to know when they will experience the peaks and slump of the business cycle. As it was found out by Mong (2011:33-34) that, only 28% of the small businesses drew up cash budget. With the case of cash control, these owners cited that, they don’t have good safeguarding cash procedures as well as sound recordkeeping procedures and equally at times fails to issues receipts on their invoices issued.

On the part of cash collection, the researcher noticed that these micro and small enterprises face issues of bad debt as well as debtors’ payment period. As it is asserted that, sound receivable timing helps for businesses success. It’s therefore out of this poor background that the researcher seeks to ascertain whether this poor financial performance observed in these micro and small enterprises is being resulted in the poor cash management practices among them.

1.3 Objectives of the Study

To attain the above aim, the following objectives will be addressed:

1.3.1  Main objective

The main objective of the study is to assess the effects of cash management on the financial performance of selected micro and small enterprises in Bertoua municipality.

1.3.2 Specific Objectives

The following are strategically designed specific objectives for the study;

1. To establish the effects of cash planning on the financial performance of some selected micro and small enterprises in Bertoua municipality.
2. To evaluate the influence of cash budgeting on the financial performance of selected micro and small enterprises in Bertoua municipality.
3. To determine the effects of control on the financial performance of selected micro and small enterprises in Bertoua municipality.
4. To investigate the effects of cash collection on the financial performance of selected micro and small enterprises in Bertoua municipality.

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