ST.

MARY’S UNIVERSITY
BUSINESS FACULTY
DEPARTMENT OF ACCOUNTING

AN ASSESSMENT OF CASH
MANAGEMENT
IN ST. MARY’S UNIVERSITY

BY
SEMAN HASSEN
WELDE MARIAM MELIS
WOINSHET ZEBERGA

JUNE 2014
SMU
ADDIS ABABA
AN ASSESSMENT OF CASH
MANAGEMENT
IN ST. MARY’S BY
UNIVERSITY
SEMAN
HASSEN
A SENIOR WELDE
RESEARCH MARIAM
MELIS
SUBMITTED TO THE
WOINSHET
DEPARTMENT OF ZEBERGA
ACCOUNTING
BUSINESS June
FACULTY 2014

ST. MARY’S SMU

UNIVERSITY ADDI
S
ABEB
IN PARTIAL A
FULFILLMENT OF THE
REQUIREMENTS FOR
THE DEGREE OF
BACHELOR OF ARTS
IN ACCOUNTING
 ST. MARY’S UNIVERSITY

AN ASSESSMENT OF CASH
MANAGEMENT
IN ST. MARY’S UNIVERSITY

BY
SEMAN HASSEN
WELDE MARIAM MELIS
WOINSHET ZEBERGA

FACULTY OF BUSINESS
DEPARTMENT OF ACCOUNTING
APPROVED BY THE COMMITTEE OF EXAMINERS

Department head Signature

Advisor Signature

Internal examiner Signature

External
examiner
Signature
 Acknowledgement

First of all, we would like to thank our God for that he made us to reach
to this moment also we would like to thank our Advisor Ato
Gebregziabher Hagos. For the advise and encouragement he gave us
for the accomplishment of this paper. Last but not least we would like
to thank the commercial bank of Ethiopia

i
Table of Content
Acknowledgement ............................................................................................................ i
Table of Content .............................................................................................................. ii
List of Tables iv
. .. .. .. .. .. .. .. .. .. .. .. ..

Abstract .....................
...................................
...................................
................................ v
CHAPTER ONE
1. INTRODUCTION ....................................................................................................... 1
1.1. Background.......................................................................................oftheStudy 1
1.2. Statement......................................................................................oftheProblem 2
1.3. Research................................................................................................Question 3
1.4. Objective..........................................................................................oftheStudy 3
1.4.1. General......................................................................................Objective 3
1.4.2. Specific......................................................................................Objective 3
1.5. Significance......................................................................................oftheStudy 3
1.6. Scope of................................................................................................theStudy 4
1.7. Research.......................................................................DesignandMethodology 4
1.7.1. Data...................................................................................... TypeandSources 4
1.7.2. Population.............................................................. andSamplingTechniques 4
1.7.3. Methods..............................................................................ofDataCollection 5
1.8. The Limitation..................................................................................oftheStudy 5
1.9. Organization.....................................................................................oftheStudy 5
CHAPTER TWO
2. REVIEW OF....................................................................RELATEDLITERATURE 6
2.1. What is Cash? ........................................................................................................... 6
2.2. Cash Management .................................................................................................... 6
2.3. Cash Management..............................................................................Techniques 9
2.3.1...........................
.....................................CashFlowSynchroni
........... zation 10
2.3.2...........................
.....................................
.....................................
. UsingFloat 10
2.3.3...........................
.....................................AccelerationofRecei
................ pts 11
2.3.4...........................
.....................................
.....................................LockBoxes 11
2.4. Reasons for......................................................................................HoldingCash 12
2.4.1. Speculative..........................................................................................Motive 12
2.4.2. Precautionary......................................................................................Motive 12
2.4.3...........................
.....................................
......................... TransactionMotive 13
2.4.4...........................
.....................................CompensationBala
................... nce 13

ii
 2.5. The Basic Objective of Cash Management .......................................................... 13
2.6. Facts of Cash Management ................................................................................. 14
2.6.1. Cash Planning ................................................................................................ 15
2.6.2. Investment of Idle Cash ................................................................................ 16
2.6.3. Managing the Cash Flows ............................................................................ 17
2.6.4. Optimum Cash level ...................................................................................... 17
2.7. Cash Budgeting and Forecasting ......................................................................... 17
2.7.1. Cash Budget .................................................................................................. 17
2.7.2. Cash Forecasts ............................................................................................... 18
2.8. Short Term for Casting Methods ......................................................................... 19
2.8.1. Receipts and Disbursement Method ............................................................. 19
2.8.2. Adjusted Net Income Method ....................................................................... 22
2.9. Long Term Cash Forecasting .............................................................................. 23
2.10. Empirical Literature Review ............................................................................ 24
CHAPTER THREE
3 .DATA ANALYSIS AND INTERPRITATION ......................................................... 25
3.1 Characteristics of the Study Population .................................................................... 25
3.2. Data Presentation Analysis of Questionnaire ........................................................... 26
3.3. Analysis of Interview .......................................................................................... 34
3.3.1. Management Information System ................................................................ 34
3.3.2. Reasons for Holding Cash ............................................................................ 35
3.3.3. Daily Cash Operation .................................................................................... 36
3.3.4. Cash Collection.............................................................................................. 36
3.3.5. Cash Disbursement ........................................................................................ 37
3.4. Uses of Petty Cash Fund ..................................................................................... 39
CHAPTER FOUR
4. SUMMARY, CONCLUSION AND RECOMMENDATION .................................... 40
4.1. Summary of Findings.......................................................................................... 40
4.2. Conclusion.......................................................................................................... 41
4.3. Recommendation ................................................................................................ 42
References
Appendix

iii
List of Tables
Table 1: General Profile of the Respondents 26
Table 2: The Relationship Between Management and Subordinate in the Bank
27
Table 3: Evaluation and Discussion to Revise the Cash Management
System 28
Table 4: Amount of Cash Collected is Deposited in the Bank 29
Table 5: Evaluate Cash Management Strategy 29
Table 6: Implementation of Cash Management System 30
Table 7: Review the Cash Management System 30
Table 8: The Process of Checking the Bill and Amount of Cash Collected
31
Table 9: Minimum and Maximum Cash Balance Maintaining 32
Table 10: Provide Training Program to its Employees 32
Table 11: Cash Operation in Accordance With Cash Management 33
Table 12: Existence Any Fraud or Misuse of Cash 33
iv
 Abstract

The study was aimed to assess cash management practice in

commercial bank of Ethiopia. The main objective of the study was to
assess cash management practice, in order to performance of
commercial bank and to evaluate cash management strategies, to
identify techniques of cash management and to identify whether daily
cash operation is in accordance with cash management theory. The
researcher used a type of descriptive research by using both primary
and secondary data. The data collected from interview and questioner
with department of cash management commercial bank of Ethiopia. To
concludes cash management activates of Ethiopia was functioning
well. finally the study concludes that commercial bank of Ethiopia have
been evaluate cash management strategy of commercial bank,
amount of cash collected and operation in accordance with cash
management good.

v
 CHAPTER ONE
1. INTRODUCTION
1.1. Background of the Study
Cash is one of the most important assets in business enterprises,
because it helps them as medium of exchanging or means of acquiring
goods and services. Cash includes currency a coin, personnel checks,
bank drafts, money orders, credit card, sales drafts and cashers checks
as well as money on deposit with banks. Since cash is liquid asset it
needs appropriate management to the organization financial position. In
addition careful security of cash transaction is required because cash
may be readily misappropriated.

In order to relieve financial constraints on investment financial

intermediaries are expected to play a decisive role in bringing about
different way of raising the required level of funds through the
application of proper financial management system. Therefore, financial
manager has the responsibility of deciding the credit terms guaranteed
to customers. The cash account includes only those items immediately
available to pay obligations. Cash includes balance on deposit with in
financial institution. Coins and currency, petty cash and certain
negotiable instruments accepted by financial institutions for immediate
deposit and with draw the negotiable document includes ordinary
checks cashier’s checks, certified checks and money order (Thomas, et
al 2001: 316).

How much cash the bank should carry the specific types of securities to
issue and how much of the firms earnings to retain and to pay out
dividends? To manage the cash flow, the financial manager must make
certain that the investment in cash is efficiently used. In order to
minimize cash ‘’leeks‘’ the financial manager should established some
sort of central system over in coming cash. If the receipt of such funds
can be broken up
1
in to two or three steps and responsibility for each assigned to different
employee’s the ability to embezzle is greater reduce (Ballad, 2002: 212)

So, cash management serve as the means to keep the functioning by

making the best use of cash or liquid resources of a bank. Therefore, is
very much interested in establishing procedures for increasing the
efficiency of the cash management. It increases cash availability, which
improves customer’s services and increase revenue by investing idle
cash and interest charged on loan services. (Thomas, et al 2001: 316)

1.2. Statement of the Problem

Cash was blood life of the organization and also very vital component
which had the power of a country. It needs to establish a control
mechanism which enables private, government organization and the
country as a hole to monitor and regulate the economy of a country in
general. In most developing countries had various identifiable risks such
as misuse, fraud, cash shortage, and unstable economy. To reduced the
above problem all employees were subject to close supervision. The bank
statements were reconciled department after they were received from
cashiers office. Cash was highly sensitive for theft, fraud and loose.
Therefore this study was tried to investigate and assess of failure of cash
collection and disbursement procedures, weakness and other problem
related to cash management of commercial bank of Ethiopia. The
researchers were tried to address problem identify there impact on the
cash management department employees on the awareness of the cash
management and to helps to the cash management system was effective
done.
2
1.3. Research Question
 How CBE evaluate cash management strategies?
 Is there any fraud or misuse of cash?
 Does the CBE use cash management system effectively?
 What are techniques used to manage cash?

1.4. Objective of the Study

1.4.1. General Objective
The general objective of the research was to assess cash management
practice of Commercial bank of Ethiopia.

1.4.2. Specific Objective

To evaluate the cash management

strategies To identify techniques of cash
management.

To assess the minimum and maximum cash blanch maintaining

To identify source of cash, when cash shortage occurs (liquidity).
To identify whether daily cash operation is in accordance with
cash management theory or not.

1.5. Significance of the Study

It was helpful for administrators of Commercial Bank of Ethiopia to
assess their cash management style in which in term it had impact on
cash management of the bank, it helps the company to assess its cash
management system, to identify problem which face its cash
management, it creates awareness to the managers in order to carefully
planned cash management flow.
3
1.6. Scope of the Study
The study was tried to investigate cash management practice of
Commercial Bank of Ethiopia at the Head Office only due to the
constraints mentioned in the limitation part below. The study expected to
focus on the manual report which presented to head office of the bank
and also use the data of four consecutive years (2009-2012).

1.7. Research Design and Methodology

Research design was descriptive type to assess cash management of
commercial bank of Ethiopia many sources of this researches were
primary data and secondary data conducted. The selected research
method employed for this particular study was descriptive method.

1.7.1. Data Type and Sources

In the engagement of the research, both primary and secondary data
were used. The primary data was collected by interview and questioner.
Secondary data on the other hand, was collected from various sources:
which include weekly, quarterly and annual reports to head office of the
bank. Manuals and books, which are available in library and in the
organization, were also used as secondary data source.

1.7.2. Population and Sampling Techniques

The population for this study was defined as twelve officers in the cash
management department of the selected to commercial bank. The
interview and questioner were prepared and conducted with manager
and assistant manager of the bank, who had an idea about cash budget
(liquidity planning) and investment decisions as well as daily cash
operation of the bank and personnel department which information about
background, objectives and major activities of the bank was gathered.

4
1.7.3. Methods of Data Collection
The collected data were present using statement type of presentation
and descriptive method of data analysis technique were applied in this
study. Aim of discipline was to summarize asset of data. This type of
information is extremely help full to investors who wish to make most
form their investments and the results was presented in tables and
percentage.

1.8. The Limitation of the Study

In conducting this study the researchers experienced some limitation.
Lack of researching experience, in sufficient sample size and lack of
efficiency data and documents concerning the working management
book.

1.9. Organization of the Study

The study comprised four chapters. The first chapter covers the
background of the study, statement the problem, objective of the study,
researcher design and methodology, significance, scope and limitation of
the study .The second chapter presents a review of the related literatures
.The third chapter discuss about finding and analysis of the data. The last
chapter four presents summary, conclusion and discuses the
recommendations draw from findings of the data and literature review.
5
 CHAPTER TWO
2. REVIEW OF RELATED LITERATURE
2.1. What is Cash?
Cash is the important current asset for the operations of the business
cash is the basic input needed to keep in the business running on
continuous bases it is also defined as ultimate output expected to be
realized by saving the service or product manufactured by the firm The
firm should keep sufficient cash Neither more nor less. (Pan Day, 2005:
640)

Cash is ready in the bank or in the business. It is not inventory, not

accounts receivable and it is not property. These might be converted to
cash at some point in time, but it takes cash on hand or in the bank to
pay supplies to pay the rent and to meet the payroll. (Pan Day, 2005:
640)

Cash shortage will disrupt firms manufacturing operations while

excessive cash will simply remain ideal without contributing anything
towards the firm’s profitability. Thus a major function of financial manger
is Maintain a sound cash position. Cash is the money which a firm can
disburse immediately without any restriction. The term cash includes
coins, Currency and checks held by the firm and balances in its bank
accounts. Sometimes near cash items, Such as marketable securities or
bank time deposits, are also included in cash. The basic characteristics of
near cash asset is that it can ready be concerted in to cash (Pan Day,
2005: 640)

2.2. Cash Management

Definitions of cash management: - Money is an account balance. Banks
do not maintain cash on hand equal to the amount of many deposited.
Rather they kept deposited in the cash. The amount required varies from
day to day and week to week, management is the process of running
banks. It is asset of activities (including planning and decision making,
Organizing,
6
leading and controlling) directed at an organizations with resources
(human, financial, Physical and information) with the aim of achieving
organizations goals in and efficient and effective manner. The last phrase
in our definition is especially important because it high lights the basis
purpose of management to ensure that as organizations goals are
achieved an efficient and effective manner. We mean using resources
wisely and a cost effective may be effective we mean making the right
decisional successfully implicating them (WG if fine, 2006).

Deposits with a trustee for example, a bond sinking fund that is not
under the control of management of a business enterprise should not be
included in cash. An other example many airlines and companies have
millions of dollars in cash deposits do not qualify as current assets
because they are not available for payment of current liabilities.
Certificate of deposits generally are classified as short-term investments
rather than as cash because they are not available for immediate with
drawl strictly speaking saving deposits also may not be withdrawal with
out prior notice to bank, but banks seldom a force those requirement.
Consequently, saving deposits usually area viewed as cash. Patty cash
funds and change funds are minor elements of cash under the control of
management even through those founds generally are intended to be
used for specific purpose. (Mosich, 1989: 294)

In summary, The criteria generally used to define cash are that the item
be a medium of exchange be available immediately for the payment of
current debts and be free from any contractual restriction that would
prevent management of the business enterprise from using the item to
pay this creditor (Mosich, 1989: 294) Cash management is keeping
enough cash on hand to handle the banks cash business plus the cash
reserve activated by the cash policy. Cash on hand plus cash deposited
minus cash paid out equal’s net cash on hand. To ensure that the net
cash on hand meets the
7
banks needs , the cash manger must estimate with fair accuracy the
amount of cash to be deposited as well as the future cash demand. Cash
is ordered from the Federal Reserve and excess cash is returned there.
(Mosich, 1989: 294)

The term cash management processes are pre requisites to execute

payments, Collect receivables and mange liquidity. Managing the
channels of collections payments and accounting information efficiently
becomes imperative with growth in the business transaction volumes.
This includes enabling greater connectivity to internal corporate system,
expanding the scope of cash management services to include “full cycle”
processes (i.e. from purchase order to reconciliation) via ecommerce or
cash management services targeted at the needs of specific customer
segment. (Mosich, 1989: 294)

Cost optimization and value add services are customer demands that
necessitate the creation of a mechanism to service the various customer
groups.

Effective cash management is one of the basic pillars of sound public

financial management the essence of effective cash management is
conservation of cash. This includes minimizing idle cash balances by:
1. Keeping on the governments account only the working cash
balances needed to face day to day routine expenditures and
the cash needed to face immediate financial obligations.
2. Investing the remaining cash on liquid and interest earning
financial assets.

8
2.3. Cash Management Techniques
Cash management has changed significantly over the last twenty years
for two reasons. First from the early 1970 to the mid 1980.There as an
upward trend in interest rates that increased the opportunity cost of
holding cash. This encouraged financial manger to search for more
efficient way of managing cash. Second, technological developments,
particularly, computerized electronic funds transfer mechanisms.
Changed the way cash in managed most cash management activities are
performed jointly by the firm and its banks. Effective cash management
encompasses proper management of cash inflows and outflows which
includes:

Synchronizing cash
flows Using floats
Accelerating collection

Getting available founds to where they are needed and

controlling disbursements

Most businesses are conducted by large firms many of which operate

regionally, nationally or even globally. They collect cash from many
sources and make payments from a number of different cities or even
countries. For example, compares such as IBM (International Business
Monitoring). General motors and Hewlett–Packard have manufacturing
plants all around the world even more sales office and bank accounts in
virtually every city where they do business. Their collection points follow
sale patterns. Some disbursements are made from local offices. But most
are made in the city’s where manufacturing occurs or else from the home
office. Thus a major corporation might have hundreds or even thousands
of bank accounts and since there is no reason to think that in flows and
out flows will balance in each account. A system must be in place to
transfer funds from where they come in to where they are needed to
arrange loans
9
to cover net corporate. Short falls and to invest net corporate surpluses
without delay. (Brigham and Hostelry 2004: 581)

2.3.1. Cash Flow Synchronization

Permitting a firm to hold low transaction balance you as an individual
were to receive income once a year. You would probably put it in the
bank, Draw down your account periodically received in come monthly
instead of once a year , you would operate similarly , but know your
average balance would be smaller. (Brigham and Houston, 2004: 581)

If you could arrange to receive income daily and to pay rent tuition, and
other charges on a daily bases, and if you were confident of your
forecasted inflows and out flows, then you could hold a very small
average cash balance. (Brigham Houston, 2004: 581)

Exactly the same situation holds for business by improving their

forecasts and by arranging thing. So that, cash receipts coincide with
cash requirements firms can reduce their transaction balance to a
minimum. Recognizing all this utility companies. All companies credit
card companies and soon arrange to bill customers and to pay their own
bills, on regular “billing cycles” throughout month. This synchronization
of cash flows provides cash when it is needed and thus enables firms to
reduced cash balances decrease bank loans. Lower interest and expense
and boost Profit
(Brigham and Houston, 2004: 581)

2.3.2. Using Float

Float is defined as the difference between the balance shown in a firm is
(or individuals) check book and the balances on the bank’s records.
Disbursement float is the value of the checks that we have written, but
that is still being processed and thus has not been dedicated from our
account balance by the bank.
10
Collection float is the amount of checks that we have received but that,
have not yet been credited to our account. Net float show the differences
between out check book balance and the balance shown on the banks
book. Delay that because float arises because it takes time for checks to
Travel through the mail ( mail float)
Be processed by the receiving firm (processing float)

Clear through the banking system (clearing , or availability ,

float Basically, the received and to slow down collection on
checks is written. Efficient firm go to great length to speed
up the processing of income checks, thus putting the funds to
work faster, and they try to stitch their own payments out as
long as
possible. (Brigham and Houston, 2001: 582)

2.3.3. Acceleration of Receipts

Financial mangers have searched for ways to collect receivables faster since
credit transactions being. Although cash collection is the financial manger’s
responsibility the speeds with which checks are cleared depend on the
banking system, several techniques are now used both to speed collections
and to get funds where they are seeded (Brigham and Houston 2004: 583).

2.3.4. Lock Boxes

Lock box plan is a procedure included to speed up collections and reduce
float through the use of post office boxes in payers local areas A lock box
plan is one of the oldest cash management tools in a lock box system
incoming check sale sent to post office boxes rather than to corporate
head quarters several times a day a local bank will collect the contents of
the lock box and deposits the checks in the company’s local account.
(Brigham and Houston, 2004)
11
The bank them provides the firm with daily record of the receipts
collected usually via an electronic data transmission system in a format
that permits on line updating of the firm’s account receivable records.
(Brigham and Houston, 2004)

A lock box system reduces the time required for a firm to receive
incoming checks to deposit them and to get them cleared through the
banking system so the funds are available by two to five days over the
regular system. (Brigham and Houston, 2004: 583).

2.4. Reasons for Holding Cash

Johan Maynard Keynes in his great work the general theory of
employment interest and money identified three motives for liquidity:-

Speculative motive
Precautionary motive
Transaction motive

2.4.1. Speculative Motive

Speculative motive need to hold cash to take advantages of additional
investment opportunities such as bargain purchased for most firm,
Reserve borrowing ability and marketable securities can be used to
satisfy speculative motives. Thus there might be a speculative motive for
maintaining liquidity but not necessary for holding cash parse (Ross.
2000: 586)

2.4.2. Precautionary Motive

The need to hold cash to safety margin is to act as a financial reserve. It
also need for a safety supply to acts as financial reserve. Once again
there probably is a precautionary motive for maintaining liquidity.
However, given that the value of money market instrument is relatively
certain and that instruments such as t-bill are extremely liquid: there is
no real need
12
to hold substantial amounts of cash for precautionary, purposes. (Ross,
2000: 587)

2.4.3. Transaction Motive

The need to hold cash to satisfy normal disbursement and collection
activities associated with a firm’s ongoing operations. Cash also need to
have cash on hand to pay bills, Transaction related needs come from the
normal disbursement and collection activities of the firm.

The disbursement of cash includes the payment of wages and salaries,

trade bets, taxes and dividends, Cash is collected from product sales the
selling of assets and financing. The cash inflow (collection) and outflows
(disbursement) are perfectly synchronized and some level of cash
holdings in necessary to serve as a batter. As electronic fund transfers,
and high speed “paperless” payment mechanisms continual to develop:
even transactional demand for cash may all but disappears Even if it
does however there will still be a demand for liquidity to mange it
effectively.
(Ross, 2000: 587)

2.4.4. Compensation Balance

Compensating balances are an other reasons to held cash. This means
cash balance are kept at commercial banks to compensate for banking
services the firm receives .A minimum compensating balance
requirement may impose a lower limit on the level of cash a firm holds.
(Ross, 2000: 567)

2.5. The Basic Objective of Cash Management

The basic objectives of cash management is to keep the investment is
cash as low as possible while sun keeping the firm operating efficiently
and effectively. This goal usually reduces to the dictum “Collect early a
pay late
13
“According. We discussed ways of accelerating collections and managing
disbursement.

In addition firms must inverts temporary idle cash in the short term
marketable securities can be bought and sold in financial markets. As a
group , they have very little difficult risk and most are highly marketable
There are different types of these so called many market securities.
(Ross, 2000: 586)

2.6. Facts of Cash Management

Cash management is concerned with the managing of
1. Is cash flows and out of the firm
ii. Cash flows within the firm , and cash balances held by the firm at
a point of time by financing deficit or in
Financing deficit or investing surplus cash. It can be represented by
cycle.

Sales generate cash which has been to be disbursed out. The surplus has
to be barrowed cash management seeks to achieve liquidity and control ,
Cash management assumes more important than other current asset
because cash is the most significant and least productive asset that
affirm held’s. It is significant because it is used to pay the firms
obligations, However, cash is a productive Unlike fixed assets or
inventories. It does not produce goods for sale. Therefore, the aim of
cash management is to maintain adequate control over cash position to
keep the firm sufficiently liquid and to use excess cash in some profitable
way.

Cash management is also important because it is difficult to predict cash

flows accurately particularly the cash inflows because payments for
taxes. Dividends or seasonal inventory buildup. Another time, cash inflow
will be more than cash payments because they may be realized in large
sums prompt. Furthermore, cash management’s considerable time is
devoted in managing it. In recent past, a numbers of innovation has been
done in
14
cash management techniques. An obvious aim of the firm this day is to
manage its cash affairs in such a ways as to keep cash balance at the
minimum level and to invest the surplus cash in profitable investment
opportunities. (Pan Day, 2005: 641)

2.6.1. Cash Planning

Cash flows are in separable parts of the business operations of firms. A
firm needs cash to invest in inventory receivable and fixed assets and to
make payment for operating expenses in order to maintain growth in
sales and earnings. It is possible that firm may be making adequate
profits but many suffer from the shortage of cash as its grow tin needs
may be consuming cash very fast. This cash poor position of the … can
be corrected if its cash needed are planned in advance at time a firm can
have excess cash out flows. Such excess cash may remain idle. Again,
such excess cash flows can be anticipated and properly invested if cash
planning is resorted to. Thus, Cash planning can help to anticipated the
future Cash flows and needs of the firm and reduces the possibility of idle
cash balances (which lower firms profitability) and cash deficits (Which
can cause the firms failure). (Pan day, 1999)

Cash planning is a technique to plan control the use of cash. It protects

the financial condition of the firm by developing a projected cash
statement form a fore cast of expected cash inflows and outflows for a
given period. The forecasts may be based on the present operations or
the anticipated future operations. Cash planes are Very crucial in
developing the overall operating planes of the firm. (Pan day, 1999)

Cash planning may be done on daily, Weekly or monthly basis. The

period and frequency of cash planning generally depends up on the size
of the firm and philosophy of the management large firm prepares daily
and weekly forecasts. (Pan day, 1999)

15
Medium size firms usually prepare weekly and monthly forecasts, Small
firms may not prepare formal cash forecasts because of the non
availability of information and small scale operation. But if the small firms
prepare cash project. It is done on monthly basis. As a firm grows and
business operations becomes complex. Cash planning becomes
inevitable for it continuing success. (Pan Day, 1999)

2.6.2. Investment of Idle Cash

To achieve efficient use of all resources management of a business
enterprise frequently turns Un Productive cash balance in to productive
resources through the acquisition of short term investments in some
cases an enterprises may flow a policy of owing investments that may be
converted to cash as needed short term investment acquired for the
purpose of earn in a return on excesses cash resources are characterized
by their salability at a readily determine price. Stocks and bonds not
widely owned or frequently traded usually to meet the marketability test,
consequently, Securities of these types are considered for further
investment in securities of other business is also a means to influence
the short term investment. (Mossich, 1989: 306)

The surplus cash balance should be properly invested to earn profits. The
firm should decide about the decision of such cash balance between
annotative short term investment opportunities such as bank deposits
marketable securities, or inter corporate lending. (Pan day, 2005)

The idle cash management system will depend on the firm products
organization structure competition culture and options available. The
task is complex and decision taken can affect important areas of the firm.
For example to improve collections if the credit period is reduced. (Pan
day, 2005)

16
May affect sales However , In certain cases , even without fundamental
changes, it is possible to significantly rebuke cost of cash management
system by choosing as right bank and controlling the collections properly
(Pan day, 2005: 641).

2.6.3. Managing the Cash Flows

The flow of cash should be properly managed .The cash inflows should be
accelerated while. As for as possible the cash outflows should be
declared.
(Pan day, 2005: 641)

2.6.4. Optimum Cash level

The firm should decide about the appropriate level of cash balances. The
cost of excess cash and danger of cash deficiency should be marched to
determine the optimum level of cash balances. (Pan day, 2005: 641)

2.7. Cash Budgeting and Forecasting

2.7.1. Cash Budget
In the most significant device to plan for and control cash receipts and
payments. A cash budget is a summary statement of the firm’s expected
cash inflow and outflow over a projected time period. It gives information
on the timing and magnitude of expected cash flows and cash balances
over the projected period This information help the financial manger to
determine the future cash needs of the firm plan for the financing of
these needs and exercise control over the cash and liquidity of the firm.

The time horizon of cash budget many different from firm to firm A firm
whose business is affected by seasonal variation may prepare monthly
cash budgets. Daily or weekly cash budgets should be prepared for
determining cash requirements of cash flows show extreme fluctuation
cash budgets for a longer intervals may be prepared if cash flows are
relatively stable.
(Pan Day 2005: 642)
17
2.7.2. Cash Forecasts
Cash forecasts are needed to prepare cash budget. Cash fore casting
may be done on short or long term basis. Generally forecasts covering
periods of one year or less than considered short …. Those extending
beyond one year considered long term.

It is comparatively easy to make short term forecasts. The important

functions of carefully developed short term cash for east’s are: -

To determine operating cash

requirements To anticipate short term
financing
To mange investment of surplus cash

The sort term forecast helps in determining the cash requirements for a
predetermined period to run a business, if the cash requirements are not
determined, it would not be possible for the management to know much
cash balance is to be kept in hand to what extent bank financing be
depended up on and whether surplus funds would be available to invest
in marketable securities to know the operating cash requirements, cash
flow projection have to be made by a firm. (Pan day, 2005)

One of significance tools of the short term forecasts is to pinpoint when

the many will be needed and when it can be prepaid with such forecasts
in hand it will not be difficult for the financial manger to negotiate short
term fireman coming arrangement with banks. This in fact convinces
bankers about the ability for the management to run its business. (Pan
day, 2005)

The third function of short term cash forecasts is to help in managing the
investment of surplus cash in marketable securities carefully and
skillfully designed cash forecast helps a firm to: (Pan day, 2005)

Select securities with appropriate maturities and reasonable

risks Avoid over and under investing and
18
 Minimize profits by investing idle money.
Short – run cash forecasts serve money other purposes For example,
Multidivisional firms use them as a tool to coordinate the flow of funds
between their various divisions as well as to make financing arrangement
for those operations. These forecasts may also be use full in determining
the margins or minimum balances to be maintained with banks. (Pan day,
2005: 642)

2.8. Short Term for Casting Methods

The most commonly used methods of short term cash forecasting are:

The receipt and disbursement method

The adjusted net income method
The receipt and disbursements method is generally employed to forecast
to limited periods such as a week or a month.

The adjusted net income method, on the other hand, is preferred for
longer durations ranging between a few months to a year. Both methods
have their prone and cons the cash flow can be compared with budgeted
income and expense items if the receipt and disbursements approach in
showing a company’s appropriate working capital and future financing
needs. (Pan day, 2005)

2.8.1. Receipts and Disbursement Method

Cash flows in and out in most companies are on a continuous bases. The
prime aim receipts and disbursements forecast are to summarize these
flows during a predetermined period. In case of this companies where
each item of income and expense involves flow of cash, this method
favored to keep a close control over cash. (Pan day, 2005)

19
Three broad sources of cash inflows can be
1. operating
2. None operating and
3. Financial

Cash sales and collections obtained from customers and from the most
important parts of the operating inflows. Developing a sales fore cast in
the first step in preparing cash forecast All pre continues should be taken
to forecast sales as quarterly as possible. In case of cash sales cash is
received at the time of sale On the other hand, cash is realized after
some time if sale is on credit.

The time in releasing cash on credit sales depends on the firms credit
policy reflected in the average collection period. (Pan Day, 643)

It can easy be noted that cash receipt from sales will be affected by
change in sales value and the firms credit policy. To develop realistic cash
budget though changes, it should be accounted for. If the demand for the
firm products slackness, sales will fail and the average collection period
is likely to be longer which increases the change of bad debt. In
preparing cash budget account should be taken to sales discounts,
returns and allowances and bad debt as they reduce the amount of cash
collection from debts. Non operating cash inflows include sales of old
assets and dividends and interest income. The magnitude of those items
is generally small when internally generated cash flows and not
sufficient. The firm resorts to external financial sources preparation for a
cash budget is the estimated of cash out flows.

Cash out flows include : I operating out flows such as cash purchases
payments of payables, advance to surpluses wages and salaries and
other operating expenses, ii capital expenditure iii, contractual
payments, such as repayment of loan and interest and tax payments,
and iv, Discretionary
20
payments, such as ordinary and preference dividend. In case of credit
purchases a time log will exist for cash payments. This will depend on the
credit terms offered by suppliers.

It is relatively easy to predict the expense of the firm over short run.
Firms usually prepare capital expenditure budget there froe capital
expenditure are predictable for the purpose of budget.

Similarly, payments of dividend do not fluctuate widely and are paid on

specific dates. Cash out flow can also occurs when the fin repays its long
term debt Such payments are generally planned and there fore there is
no difficult predicting them.

One of the significant advantages of cash budget is to determine the net

cash inflow or out flow so that the firm is enabled to arrange financed
However, the firms decision for appropriate sources of financing should
depend up on factors such as cost and risk.

Cash budget helps a firm to mange its cash position. It also helps utilize
ideal funds in better ways On the basis of cash budget the firm can
decided to invest surplus. Cash in marketable security and earn profits.
The virtues of the receipt and payment methods are:-

It gives a complete picture of all the item of expected cash

flows It is a sound tools of managing daily cash operations

Its reliability is reduced because of uncertainty of cash for casts.

For example collection may be delayed, or an anticipated
demand may cause large disbursement

It fills to high light the significant movements in the working

capital. (Pan Day, 2005: 645)

21
2.8.2. Adjusted Net Income Method
This method of cash forecasting is tracing of working capital flows. It is
sometimes called the sources and uses approach to objective of the
adjusted not income approach are:
I) To project the companies need for the cash at a future data and ii. To
show whether the company can generate the required funds internally,
and if not, how much will have to be borrowed or raised in the capital
market. As regards the firm and content of the adjusted net income
forecast it resembles the cash flow statement. It is, in fact a projected
cash flow statement based on Performa financial statements. It generally
has three sections: sources of cash and the adjusted cash balance. This
procedure helps in adjusting estimated earning on UN accrual basis to a
cash basis. It also helps in anticipating the working capital movement.
(Pan day, 2005)

Preparing the adjusted net income forecasts items such as net income
depreciation, taxes dividends, etc. Can easily be determined from the
company’s annual operating budget. Normally difficulty is faced in
estimating working capital changes, specially the estimate of accounts
receivable (Debtors) and inventory pose problem, because they are
influenced by factors such as fluctuations in the raw material costs ,
changing demand for the company’s product and possible delays in
collections and error in predicting these items can make the reliability of
forecast doubt fill. One popularly used method of projecting working
capital is the use rations relating accounts receivable and inventory to
sales. (Pan day, 2005)

For example, if the past experience tells that accounts receivable of a

company range between 32% (thirty two percent) can be use. The
difference between projected figure and that on the books will indicate
the expected increase or decrease in the case attributable to receivable.
(Pan day, 2005)
22
The benefits of the adjusted net income methods are:-

It highlights the movements in the working capital items and

thus helps to keep a control on a firms working capital times.
It helps in anticipating firms financial requirements

It fails to trace cash flows and therefore, it is utility in controlling

daily cash operation is limited. (Pan Day 2005: 646)

2.9. Long Term Cash Forecasting

Long term forecasts are prepared to give an idea of the company’s
financial requirements in the distant future. They are not as detailed as
the short term forecasts are Once a company has developed long term
cash forecast it can be used to evaluate the on impact of say new
product developments or plant acquisitions on the firm’s financial
condition three five or more years in the future the major uses of the long
term cash forecast are :

It indicates as company’s future financial needs especially for its

working capital requirements

It helps to evaluate proposed capital projects it pinpoints the

cash required to finance these projects as well as the cash to be
generated by the company to support them.

It helps to improve corporate planning long term cash forecasts

compare cash division to plan for future and to form ware
projects
carefully.
Long term cash forecasts may be made of two, three or five year. As with
the short term forecasts, Companies practices may differ in the duration
of long term forecasts to suit their particular needs.
The short term for casting i.e. the receipts and disbursement method and
the adjust net income method can also be used in long term cash
forecasting long term for casting reflected the impact of growth,
expansion or acquisition: it also indicates financial problems arising from
this developments. (Pan day, 2005: 645)
23
2.10. Empirical Literature Review
Anchalem Ayalew, Foziya Jabir and Liya Abiyu were worked a researcher
paper in 2013 on the title of” assessment of cash management in Niyal
Insurance Share company.

The object of the paper was to assess the short term and long term
insurance police and procedures to identify the problem that the
insurance company fails during managing cash premium and Clint
benefit. Based on the objectives of researcher to conclude the insurance
company had no problem in fulfillment the minimum requirement and
the cash asset had been increasing over year.

Biruk Abebe, Tewodros Girma ,Yirga Melesachaw, Kidist Tsegaye and

Eferem Ermiyas were worked a researcher paper in 2007 on the title of
assessment of cash management a case study Niyal Insurance Share
Company.

The object of the paper was to identify strength and weakness of Nile
Insurance Company cash budget preparation process provide summary
of ledger finding and forward recommendation.

Conclude that paper line insurance company prepare cash budget for
improving the efficient and effective utilization of cash and had well
development planning and budgeting service department which prepare
the overall plans and budget for the company.

Afefayne Wudajo and Yohans Fiseha were worked a researcher paper in

2009 an assessment internal control over cash.
The object of these paper was asset the control environment and
monitoring system of the firm discover the risk detection practices of the
organization evaluate the control activity of the firm. To conclude the
researcher were only maintain and explain the weakness side of the
company.

24
 CHAPTER THREE
3 .DATA ANALYSIS AND INTERPRITATION

3.1 Characteristics of the Study Population

This section deals with data presentation, analysis and interpretation of
gathered data through quaternaries and interview.

The questioner were designed to specifically obtain relevant information

on general cash management where interview has been conducted with
manager of operation department and the company manager in order to
assess the overall cash management.

According to the following data in item 1 of table the present sex

distribution of respondents, and out of the total respondents 9(75%) are
male and 3(25%) are female. This indicate that male employees number
are greater than female.

25
3.2. Data Presentation Analysis of Questionnaire

Table 1: General Profile of the Respondents

No. of Percent
No Item respondents %

Sex
1 A. Male 9 75
B. Female 3 25
Total 12 100
Age
A. 25 years or below 2 8
2 B. 26-30 year 3 25
C. 36-45 3 25
D. 45 year or above 4 42
Total 12 100
Educational qualification
A. Diploma - -
3 B. Degree 8 66
C. 2nd Degree 4 34
Total 12 100
Work experience
Below 5 2 16
4 5-10 2 16
11-15 4 34
Above 15 4 34
Total 12 100
(Source: Primary data, questionnaire)

26
Item 2, it can be simply understand that 2(8%) of the respondents are
between the age of 26-30 year 3(25%) of the respondents are between
the age of 36-45 the rest of respondents 5(42%) are the age of 45 or
above. Shows that majority of the respondents are young and at the age
of productivity. It enables the organization to refer as the performance of
work force as well as the productivity of the organization.

As per education level of the organization employee is concerned 8(66%)

of the respondent have degree while, 4(34%) of the respondents have
second degree. This can be an indication that the majority number of the
organizations work for this qualified.

As can be seen from item 4 table 1, 2(16%) of the respondents have

below 5 year of work experience, 2(16%) of the respondents have 5-10
years of the work experiences 4(34%) of the respondents have 11-15
years of work experience, 4(34%) of the respondent also have above 15
years well experienced. This implies that experience help the employees
to manage cash effective.

Table2 The Relationship Between Management and

Subordinate in the Bank
Item
Do you think there is a good working
relationship between management and Frequency Percent (%)
subordinates in the bank?
Strong agree 3 25
Moderately agree 3 25
Agree 6 50
Disagree 0 0
Total 12 100
(Source: Primary data)

27
From the above table 2, it can be seen that 25% of the respondent said
that, they moderately agree with the good working relationship between
management and subordinates in the bank and 20% of the respondents
said that, they agree with the a good working relationship between
management and subordinates in your bank while 2% of them strongly
agree with the good working relationship between management and
subordinates in your bank.

Table 3: Evaluation and Discussion to Revise the Cash

Management System
Percent
Item Frequency (%)
Is there continues evaluation and discussion
to revise the cash management system?
Yes 10 83
No 2 17
Total 12 100
(Source: Primary data)

The data shows, 83% of respondents replied that, Yes evaluation and
discussion to revise the cash management system in the organization
and 17% of respondents that, no continues evaluation and discussion to
revise the cash management system this implies that most of the
respondent believes that the cash management system involves on the
evaluation and discussion to revise the cash management. This implies
the majority portion of the response are good evaluation and discussion
to revise the cash management system.

28
Table 4: Amount of Cash Collected is Deposited in the
Bank
Item Frequency Percent (%)
Is the amount of cash collected is deposited
in the bank on the same day?
Yes 9 75
No 3 25
Total 12 100
(Source: Primary data)

The table shows that, 75% of the respondents replied that, the amount of
cash collected is deposited in the bank on the same day but 25% of the
respondents are the amount of cash collected are not deposited in the
bank. The above percentage show that amount of cash collection
deposited in the commercial bank of Ethiopia is well.

Table 5: Evaluate Cash Management Strategy

Item Response Percent (%)
How do you evaluate cash management
strategy of Commercial Bank of Ethiopia?
Excellent 4 33
Good 8 67
average - -
Total 12 100
(Source: Primary data, questionnaire)

Table 5 above indicates that 67% of the respondent replies that, the
evaluation of cash management strategy of commercial bank of Ethiopia
is good and 33% of the respondents replies that, evaluation of cash
management strategy of commercial bank of Ethiopia is excellent. The

29
above percentage show that the evaluation of cash management
strategy of
commercial bank of Ethiopia is good.

Table 6: Implementation of Cash Management System

Percent
Item Response (%)
How do you define the implementation of
cash management system of Commercial
bank of Ethiopia?
Excellent 3 25
Good 8 67
average 1 8
Total 12 100
(Source: Primary data, questionnaire)

Table 6 above indicate that 67% of the respondent replies that, it

response are good implementation of cash management system of
commercial bank of Ethiopia while, 25% of the respondent replies that, it
response are excellent implementations of cash management system of
commercial bank of Ethiopia and 8% of the respondent replies that it
response are average the in total respondents. Accordance the
respondent’s response to majority proportion of the responses is good
implementation of cash management system.

Table 7: Review the Cash Management System

Respons Percent
Item e (%)
How management concern to review the
cash management system?
excellent 9 75
good 3 25
average - -
Total 12 100
(Source: Primary data, questionnaire)
30
Table 7 above indicates that 75% of the respondent says excellent while,
25% of the respondents says good management concern to review the
cash management system, according the respondents response majority
proportions of the response are management concern to review the cash
management system this implies that the cash management department
was good management system.

Table 8: The Process of Checking the Bill and Amount

of
Cash Collected
Item Response Percent (%)
Is there cash management officer involved on
the process of checking the bill and amount
cash collected?
Yes 10 83
No 2 17
Total 12 100
(Source: Primary data)

From the above table 8,10(83%)of the respondents response that yes the
cash management officer involved on the process of checking the bill and
amount of cash collected. but, 2(17%) of respondent is say no the cash
management officer involved on the process of checking the bill and
amount of cash collected. this implies that most of the respondent
believes that the cash management officer involved on the process of
checking the bill and amount of cash collected according the respondents
response to majority proper than after response are cash management
officer involved on the process of checking the bill and amount of cash
collected this implies that the cash management department was good
process of checking the bill and amount of cash collected.

31
Table 9: Minimum and Maximum Cash Balance
Maintaining
Item Response Percent (%)
Is there minimum and maximum
cash balance maintaining?
Yes 4 33
No 8 67
Total 12 100
(Source: Primary data, questionnaire)

Table 9 above indicate 8(67%) of the respondent that the response

maintains because cash management set cash holding limit for the
branch only maximum balance and also 4(35%) of the respondent that it
response says yes according the respondents response to majority
proportion of the response and minimum and maximum long balance
maintaining.

Table 10: Provide Training Program to its Employees

Item Response Percent (%)
Does the management provide training
program to its employees?
Excellent 9 75
Good 3 25
Average - -
Total 12 100
(Source: Primary data, questionnaire)

As it is shown the above table 9(75%) of the respondent replies that the
response are the management provide excellent training program to the
employees while 3(25%) of the respondent that the management provide
good training program to the employees.

32
From the above presentation majority proportion of the response are
excellent management provide training program to the employees.

Table 11: Cash Operation in Accordance With Cash

Management
Respons Percent
Item e (%)
Is their cash operation in accordance with
cash management
Yes 8 67
No 4 33
Total 12 100
(Source: Primary data, questionnaire)

From the above table 11, 8(67%) of the respondents yes cash operation
accordance with cash management and 4 (33%) of respondents says no
the cash operation in accordance with cash management. this implies
that cash operation accordance with cash management system is good.

Table 12: Existence Any Fraud or Misuse of Cash

Item Response Percent (%)
Is there any fraud or misuse of cash?
Yes 4 33
No 8 67
Total 12 100
(Source: Primary data, questionnaire)

As presented in table 12 shows that, 67% respondents said no any

existence fraud and misuse of cash in their organization and the rest
33% of the respondents said that, there is existence fraud and misuse.

33
3.3. Analysis of Interview
3.3.1. Management Information System
Commercial Bank of Ethiopia has several financial commitments: some
of these are depositors withdrawals finance running, expense of business
transaction and maintaining reserve and liquidity equipments set by the
national bank of Ethiopia.

Therefore, cash management involves meeting of these financial

commitments at a required quality and currencies when they occur at a
minimum cost.

According to the in rearview made with assistant manager of the bank,

there is a well organized management information system within the
bank where the liquidity (cash position) at the branch level is compiled
and regularly reported to head office and to others appropriately.

The system is set list such a way that all concerned organizing weekly
basis and sends to home office where they are reveled these reports. In
order to check that they are prepared and reported in accordance with
the banks, policies and procedures to the requirement of supervising
authority. The reports also send to the end users, which are managed
through the application of appropriate technology. With the use of
appropriate technology, the liquidity (cash position) of the bank can be
measured.

Monitored and controlled at a greater efficiency integrated management

information systems help the banks to get more information about their
customer used on the information prepared by the central bank about
the customer that unable to pay the amount they borrowed from
different bank which help to update the transaction made between the
financial institutions.
34
This information helps the bank not to lend a customer that unable to
pay the amount taken from her banks. Integrated information systems
also facilitate the customer service to get payment and send the amount
to rest of other banks. Integrated information system need by bank to
identify check clearing system.

3.3.2. Reasons for Holding Cash

According to the interview made with assistant manager of the bank, the
bank can hold cash, firstly for transaction purpose that can be needed to
pay for labor and to keep their liquidity position by paying a customer
amount they deposited; plus interest for those accounts. That generates
interest for the customer at maturity date. Secondly, the bank can hold
cash to provide loans and services to their customer that will be their
future benefit by generating interest or that is considered as
compensating balance that a bank must maintain to compensate the
bank for services rendered or for the bank can help the bank to increase
deposit mobilization by motivating a customer to have a confidence on
the bank by assuming their banks liquidity position.

Liquidity planning also help to structure their banks folio to meet the
anticipated needs. On the other hand, the bank can protect liquidity
position during efficiency period by requesting additional budget from
head office, but it is not always successful to overcome these problem in
case of huge withdrawal of a cash from the bank. Most of the time, the
bank meets its obligation by preparing a report about its liquidity base
for head office within 15 days (fifty days) of time. Based on these report
the head office was evaluated their liquidity performance. Bank forecast
liquidity, which not considers investment of idle cash, over a period of
time that, is why commercial bank of Ethiopia can also transferred its idle
cash to head office bank. This is a critical problem for the bank not to
invest in investment profile.

35
3.3.3. Daily Cash Operation
Assistant manager, casher and teller are personally responsible to
manage cash with in Commercial Bank of Ethiopia. According to the
interview made with the assistant manager of the bank, the primary
technique used to manage cash was by establishing volute room to
protect cash from danger and theft. It can achieve through dual control
over cash by both cashier and assistant manager. In the morning when
daily cash operation starts the manager open volute room by entering a
code number, after that the amount of cash taken out of set of box and
given by manager for cashier by approving and recording the balance on
sender book.

In order to make payment, the payment teller takes needed cash from
casher to facilitate daily cash operation through recording the amount of
sender book and compute, the transaction made in the day.

According to the interview, the receiving teller that can be involved in an

everyday cash operation of the bank, who is responsible to receive many
that come from customer who has been borrowed from the bank with
principal plus interest charged on the amount. Not only these receiving
teller responsible to transfer the amount for cashier by recording the
balance on sender book but also other.

3.3.4. Cash Collection

According to the interview made with the assistant manager of the bank
the company uses direct sending method from customer to bank. The
bank receives cash from the depositor and debtors in the form of cash or
check using its own check evidenced.

When cash is send to the company there is a separation of duties to

record a transaction made. The teller interest the amount received in to
sender
36
book the deposit vouchers after stamping them with respective stamps
bearing the proper data.

In the morning vouchers should be journalized and the compared with

the totals submitted by the tellers at all times. The teller who receive a
money carefully record denominations of the stamps and initially the
deposit voucher, retain the copy and hands over the original to the
customer. During cash receipts all notes are sorted out, counted and
wrapped with initially of the counter and verify under restrict supervision
of the cashier. Not only these cashier and receipt teller to be very careful
that no deteriorated notes are mixed with those fight for circulation.
During cash collection, first receiving teller collect the amount and record
on sender book, after daily cash operation would be finished, the balance
of cash collected and recorded on the computer can be checked by the
cashier and debts the amount to banks accounts. After all the process is
completed, the balance of cash collected by payment and receiving teller
prepared and approved by manager of the bank. Then the balance of
cash would be taken to volute room. Even if the bank followed to
authorize the transaction is well, only direct sending is not sufficient to
accelerate cash collection within a short period of time.

3.3.5. Cash Disbursement

According to interview made with the assistant manager of the bank, the
aimed to control over cash to reduced fraud and misappropriation. When
payment is made by payment teller once again the balance is recorded
on both sender book and computer to make the transaction is well
authorized and after the amount should be paid and to whom the
payment is identified and signature is signed by receiver in case of loan
payment; but in case of money transfer payment first the receiver of the
amount be fill all the formalities about his name, sender name, after that
the teller check all
37
the formalities with his computer balance and made the payment for
customer.

In other case, according to the interview, the banks control over

disbursement by satisfying the following formalities:

The payment is based on depositors arrangement with the bank

to withdrawal their cash.
The number of employees to hold cash is limited.

The checks payment is made after it is approved by signature of

responsible individual.

On the other hand during the payment operation the bank uses
instruments for payment, for instance, check vouchers and cash
payment order. Before reaching paying teller, the instrument in case of
saving withdrawal:

Voucher is properly made out

(filled) Voucher is dated and
signed
Signature is verified

Payees name on the voucher match with that of pass-book

withdrawal and could be made in person by the account holder
unless exception are made when other kind of payment voucher
are in valued the paying teller insure that;
Voucher is properly made out

The voucher consists of two authorized

signature The payee is identified
Amounts in words and figures agree
The pay has signed on the back of the voucher
The procedure is approved by the stamp properly.
38
3.4. Uses of Petty Cash Fund
According to the interview made with assistance manager of the bank,
the bank uses petty cash for the payment of relatively small amounts,
such as for transportation charges, or for the purchase of urgently
needed supplies at a nearby rate; store when the amount of petty cash
found is fixed in amount, about (300-500) birr is reduced to the
predetermined minimum amount, and the fund is replenished. The
amount of petty cash fund is always taken from cashier of the bank by
managerial secretary and a stored in the custody. If the requested come
from the purchases of the bank the secretary create payment without
approval by other concerning body recording the amount on the voucher.
The process followed by the bank to pay petty cash found for requested
supply by authorizing secretary of the bank to make transaction from the
begging to the end many lead to way of theft, when agreement is made
between purchaser and secretary to use some amount by them selves.

39
 CHAPTER FOUR
4. SUMMARY, CONCLUSION AND
RECOMMENDATION
This study is designed to examine the cash management of
commercial bank Ethiopia and also intended to suggest possible
solution to the problems identified in order to effective cash
management system this chapter, therefore, presents the summary of
major findings, conclusions and the possible recommendation.

4.1. Summary of Findings

Questioner was the data collection mechanism conduced for selected
respondents the findings are analyzed, interpreted and summarized.

Our respondents had been given their response on different

types of questioner concerning to evaluate the effectiveness
of cash management here based on the position of good cash
management system implementation used and commercial
bank of Ethiopia needs the management support to enhance
the effectiveness of cash management of commercial bank.
Employees believe that good working relationship between
management and subordinates in the bank.

83% of the respondents believed that the evaluation and

discussion to revise the cash management system.

8 or 67% of the response believed that the evaluation cash

management strategy of commercial bank of Ethiopia is
excellent but 4 or 33% of the respondent is good.

The implantation of cash management system of commercial

banks of Ethiopia is good.

The cash management officer a good involves on the process

of checking the bill and amount of collected

40
 The management provides training program to its employees
is high.

8 or 67% of the respondents believed that the cash operation

in accordance with cash management is a good.

4.2. Conclusion
To conclude this paper, the data which are collected have been
analyzed and interpreted within the boundary of its constraint. The
main objective of this study is to find out the effect off cash
management by making though assessment of the cash management
of commercial bank of Ethiopia.

In this section the researchers have tried to demonstrate the cash

management but what the researcher have done is to lay the
necessary foundation from which will now be able to move on and look
at the nature of cash management and the practice of cash
management of commercial bank of Ethiopia.

Cash management of commercial bank is more less

application cash management areas such as continues
evaluation to revise the cash management, evaluate cash
management strategy of commercial bank, amount of cash
collected and cash operation in accordance with cash
management good according to the study.
In order to implementation of cash management system of
commercial bank, concern to review the cash management
system, process of checking the bill and amount of collected
is sufficient.
Cash management activates of the commercial bank of Ethiopia are
functioning well the cash is safeguarded well. Segregation of duties are
more and less appropriate. .

41
4.3. Recommendation
Based on the data findings and conclusion made the have for ward the
following recommendation.

General funding for commercial bank for cash liquidity which

not considers investment of idle cash should d be determined
by looking at the past trends and changes that have occurred
that will impact future forecast.

Short term training and workshops for personnel engaged in

the analysis work should be organized regularly and also avail
relevant reading material

For cash management purpose minimum and maximum cash

balance should be increase cash holding limit for branch
• The management of the bank should established and identify
factors that affected the cash management system. As
system changes based on the changing technology and
environment

Finally the organization should give special attention to all the above
suggestion and recommendation to strengthen the cash management
receipt and disbursement due to the fact almost all transactions affect
cash account and by its very natural cash is the most liquid and
tempted to theft miss appropriation and embezzlement the
organization has to work on the implementation or cash management
receipted and bank principle.
42
Bibliography
Bhallan, V. K. (2002). Financial Management and Police (4th
edition). New Delhi:India.Vikas Pvt Ltd.

Brighan, E. (2004). Fundamentals of Financial Management (8th

edition). New York: McGraw-Hill Inc.

Mosich, A. N. (1989). Intermediary Accounting (6th edition). New

York: McGraw Hill Inc.

Panday, I.M. (2005). Financial Management (8th edition). New Delhi:

India. Vikas Pvt Ltd. Inc.

Ross, A. (2005). Essentials of Corporate Finance (4th edition). New

York: McGraw-Hill Inc.

Thomas, etal. (2001). Fundamental Financial Accounting of

Concept
(4th edition). New York: McGraw-Hill Inc.

Whittehled, Geottery (2006). Book Keeping Mode Sample (5th

edition). New Delhi: India. Vikas Pvt Ltd.
 25 years or below 36-45 years
45 years or
26-30 years above
Your sex
Female Male

2. Education
 Diploma
Degree

2nd degree
3. Work experience
Below 5 years 11-15 years
5-10 Years Above 15 years

Questionnaire of cash management

1. Do you think there is a good working relationship between
management and subordinates in your bank?
Strong
Agree agree
Moderately agree Disagree
2. How do you define the implementation of cash management
system of the commercial bank of Ethiopia?
Averag
Excellent Good e
3. How is management concern to review the cash management
system?
Averag
Excellent Good e
4. How does evaluate each management strategies of commercial
bank Ethiopia?
Averag
Excellent Good e
5. Does the management provide training program to its
employees?
Averag
Excellent Good e
6. Is there continues evaluation and discussion to revise the cash
management system?
Yes No
If your answer is no please give your reason
7. Is the amount of cash collected is deposited in the bank on the
same day?
 Yes No
If your answer is no please give your reason

8. Is there cash management officer involved on the process of

checking the bill and amount of cash collected?
Yes No
If your answer is no please give your reason

9. Is there minimum and maximum cash balance maintaining?

Yes No
If your answer is no please give your reason

10. If their cash operation in accordance with cash management?

Yes No
If your answer is no please give your reason

11. Is there any fraud or misuse of cash?

Yes No
If your answer is no please give your reason
Interview Questioners

1. What are the reasons for holding cash?

2. What type of data is using?
3. Does commercial Bank of Ethiopia invest idle cash properly?
What kind of investment?
4. What is the policy of cash collection and disbursement of the
bank?
5. What are techniques using in the CBE to manage it cash?
6. How CBE evaluate cash management strategies?
7. Do you thing your organization has good cash management
system? Why or way not?
8. How the companies manage its accounting for cash receipt/
collection and payment?
9. Does the company specify clear lines of responsibility for
allocation regarding cash management for authorizing actions
and transaction?
10. If you have only information regarding cash mgt of close could
you tell us please?
 Advisor Declaration

This paper has been submitted for examination with my approval as

the university advisor

Name

Signature

Data
 Declaration

We the undersigned declare that this senior essay is our original work,
prepared under the guidance of Gebregziabhar Hagos all Sources
materials used for the manuscript have been acknowledged.

Name Signature

Place of submission SMU

Date of submission June 2014