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 UNIVERSITY

A SENIOR RESEARCH SUBMITTED

TO THE DEPARTMENT OF ACCOUNTING
BUSINESS FACULTY
ST. MARY’S UNIVERSITY

IN PARTIAL FULFILLMENT OF THE

REQUIREMENTS FOR THE DEGREE OF
BACHELOR OF ARTS IN ACCOUNTING

BY
SEMAN HASSEN
WELDE MARIAM MELIS
WOINSHET ZEBERGA

June 2014
SMU
ADDIS ABEBA
 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

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Table of Content
Acknowledgement ............................................................................................................ i
Table of Content ..............................................................................................................ii
List of Tables ................................................................................................................. iv
Abstract ........................................................................................................................... v
CHAPTER ONE
1. INTRODUCTION ....................................................................................................... 1
1.1. Background of the Study....................................................................................... 1
1.2. Statement of the Problem ...................................................................................... 2
1.3. Research Question ................................................................................................ 3
1.4. Objective of the Study .......................................................................................... 3
1.4.1. General Objective ...................................................................................... 3
1.4.2. Specific Objective ...................................................................................... 3
1.5. Significance of the Study ...................................................................................... 3
1.6. Scope of the Study ................................................................................................ 4
1.7. Research Design and Methodology ....................................................................... 4
1.7.1. Data Type and Sources...................................................................................... 4
1.7.2. Population and Sampling Techniques .............................................................. 4
1.7.3. Methods of Data Collection .............................................................................. 5
1.8. The Limitation of the Study .................................................................................. 5
1.9. Organization of the Study ..................................................................................... 5
CHAPTER TWO
2. REVIEW OF RELATED LITERATURE .................................................................... 6
2.1. What is Cash? ........................................................................................................... 6
2.2. Cash Management .................................................................................................... 6
2.3. Cash Management Techniques .............................................................................. 9
2.3.1. Cash Flow Synchronization .......................................................................... 10
2.3.2. Using Float ..................................................................................................... 10
2.3.3. Acceleration of Receipts ............................................................................... 11
2.3.4. Lock Boxes .................................................................................................... 11
2.4. Reasons for Holding Cash ...................................................................................... 12
2.4.1. Speculative Motive .......................................................................................... 12
2.4.2. Precautionary Motive ...................................................................................... 12
2.4.3. Transaction Motive........................................................................................ 13
2.4.4. Compensation Balance .................................................................................. 13

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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

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 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:
A. 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.
B. 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
i. 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
i. operating
ii. None operating and
iii. 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 Item No. of respondents Percent %

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
Item Frequency Percent (%)
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

Item Response Percent (%)
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

Item Response Percent (%)
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
Item Response Percent (%)
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.
St. Mary’s University
Department of Accounting
Questionnaires

This questionnaire is assigned and prepared by the student’s of St.

Mary’s University doing a research paper in partial fulfillment of
requirement of a Degree in Accounting. With this questionnaire the
researchers intend to “ASSESSMENT OF CASH MANAGEMENT OF
COMMERCIAL BANK OF ETHIOPIA.

Please answer the questions by marking “x” Either yes on No or write

your answer for the opened questions briefly thanking you for your
cooperation, are would like to inform you that all your responses will
only, be used for academic purpose and be kept confidentially.

How to answer this questionnaire

I. General
 Would you be kind enough to answer and making (√) mark the
box provided
 If you have any personal opinion for a questionnaire, kindly
comment on the space provided
 No need to write you name
II. Back ground
1. Personal
Your approximate age
25 years or below 36-45 years
26-30 years 45 years or 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?
Agree Strong agree
Moderately agree Disagree
2. How do you define the implementation of cash management
system of the commercial bank of Ethiopia?
Excellent Good Average
3. How is management concern to review the cash management
system?
Excellent Good Average
4. How does evaluate each management strategies of commercial
bank Ethiopia?
Excellent Good Average
5. Does the management provide training program to its employees?
Excellent Good Average
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