Abstract

Cash management practices are important for all business because it helps the business manage the circulation and usage of cash which is the most important thing in the life of a business so that the business can survive, grow and make profit. This study sets out to assess cash management practices in Small and Medium Size Enterprises in Village Douala, its main aim was further divided to three specific objections which were, to determine the effectiveness of cash inflow practices are in SMEs in Village Douala, to determine the effectiveness of cash out flow practices are in SMEs in Village Douala, to determine the extent to which accounting practices are used by SMEs in Village Douala.

This study employed a survey research design using stratified random sampling while data collection was done through a primary source which was a questionnaire. The projected total population was 50 SMEs in Douala village. Data was analysed quantitatively with the use of Regression model analysis through SPSS computer statistical package and excel 2019.

The results also revealed that 80% of SMEs have well-established procedures, but the review and analysis of cash outflow patterns to identify cost-saving opportunities is less common, with only 60% engaging in such practices,the regression analysis shows that cash inflow practices (β = 0.414, p < 0.05), cash outflow practices (β = 0.331, p < 0.05), and accounting practices (β = 0.243, p < 0.05) all have positive and statistically significant relationships with the effectiveness of SMEs.

The study concluded that SMEs in Douala Village have successfully implemented and benefited from sound cash management strategies across various dimensions. The study            encourages the adoption of more advanced accounting software and digital tools to streamline accounting processes and enhance the reliability and transparency of financial reporting.

CHAPTER ONE

INTRODUCTION

1.2 Background to the study

Cash is seen as the “lifeblood” of every business organization. Khan and Jain (2013) opine that, apart from the fact that cash is the most current asset, it is also seen as the common denominator to which all current asset can be reduced. They explained this to mean that all other liquid assets, such as; inventories and marketable instruments can all be converted to cash eventually.

This is how the act of recording, classifying money, transactions can help to monitoring and maintaining the flow of cash to ensure that a business has enough funds to function and also make profit in a company of not more than 100

According to Scherr (1989), “cash management deals with determining the optimal level of cash, the appropriate types and amount of short-term investment in cash as well as the efficient methods and controls of cash collections and disbursements”. This involves the administration of liquid assets and liabilities, as well as the raising of funds to finance a business.

While holding cash has its own benefits to the business, it nonetheless comes with the opportunity cost of the profit that could be made if the cash was invested elsewhere. It is therefore the duty of the financial manager to balance the firm’s liquidity with its profitability. A business organization must develop appropriate mechanism to manage and correctly forecast its cash needs in order to make appropriate decisions with respect to borrowing and investment. Proper cash management therefore is an effective way of ensuring that the little cash available to the business is managed well to bring full benefits to the business in question. Planned acquisition and utilization of cash or near cash resources ensure that the businesses are in the position to meet their liquidity requirements while earning reasonable profits on their cash reserves. On the other hand, poor cash management practices can lead to the following problems: the inabilities to honor financial obligations and to put idle funds into profitable ventures and failure to expand.

Unfortunately, studies on this subject matter reveal that availability and proper management of funds remains a major challenge to the survival, growth and expansion of businesses in Cameroon. Mbroh (2012) indicates that, although the burden of cash management remains critical in decisions regarding the establishment, operation, success or failure of the business sector, majority of business operating in Cameroon are cash-strapped as a result of inadequate cash inflow to meet their operational needs. Logli (1981), on the other hand, identified poor management of funds as a major problem affecting businesses in Cameroon.

This study was conceived and conducted with the intention of providing some current insight and understanding on the extents to which cash management practices are carried out in Enterprises in general and SMEs in particular in Cameroon.

1.3 The Research Problem Statement

Small and Medium Enterprises (SMEs) play a crucial role in the economic development of developing countries like Cameroon, particularly in the Village Douala region. However, the financial management practices of these enterprises, including cash management, are often overlooked and understudied.

Understanding the cash management practices, the effectiveness of cash inflow and outflow practices, and the extent of accounting practices used by SMEs in Village Douala is essential for their growth and sustainability. Cash management is a critical component of financial management for SMEs, as it directly impacts their ability to meet short-term obligations, finance operations, and invest in growth opportunities.

Ineffective cash management practices can lead to cash flow problems, late payments, and missed opportunities. Therefore, it is essential to investigate the cash management practices employed by SMEs in Village Douala, as well as the effectiveness of their cash inflow and outflow practices.

Accounting practices are also fundamental to the financial management of SMEs, as they provide the necessary information for decision-making, financial reporting, and compliance with regulatory requirements. Understanding the extent to which SMEs in Village Douala utilize accounting practices can shed light on their overall financial management capabilities and identify areas for improvement. This creates a knowledge gap and is the motivation behind this study which seeks to assess to what extent are the cash management practices being used by SMEs in Village Douala.

1.4 Research Questions

1.4.1 Main Research Question

To what extent are the cash management practices being used by SMEs¬¬ in Village Douala?

1.4.2 Specific Research Question

1. How effective are the cash inflow practices in SMEs in Village Douala?
2. How effective are cash outflow practices in SMEs in Village Douala?
3. To what extent are SMEs using accounting practices in Village Douala?

1.5 Research Objectives

1.5.1 Main Objective

To determine how much SMEs in Village Douala use cash management practices.

1.5.2 Specific Objectives

1. To determine the effectiveness of cash inflow practices in SMEs in Village Douala.
2. To determine the effectiveness of cash outflow practices in SMEs in Village Douala.
3. To determine the extent to which SMEs in Village Douala use accounting practices.

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