CASH MANAGMENT PRACTICE IN COMMERCIAL BANK OF

ETHIOPIA (A CASE STUDY on Wolaita Sodo ON dicha branch)

A RESEARCH PAPER SUBMITTED IN PARTIALFULFILMENT

OF B.A DEGREE IN ACCOUNTING and finance

SUBMITTED BY: andebo chamo

ID NO: ACC/WE/061/08
ADVISOR: Garedew Ganecho (Msc).

Wolaita Sodo UNIVERSITY

COLLEGE OF BUSINESS AND ECONOMICS
DEPARTMENT OF ACCOUNTING and finance

april, 2019

Wolaita Sodo, ETHIOPIA

 ABSTRACT
This research seeks to address the cash management practice of commercial bank of
dicha branch. It would address five basic research questions designing to assess cash
management performance of the bank. For the purpose of the study both primary and
secondary data are used, but much focus on primary data in which more information is
obtaining by interview and questionnaires.After the data has being gathered, it will be
analyse and present. The data analysis will be carrying out basis on tabulation and
percentage method. Care full interpretation of analyses information will be carrying out
to arrive at reasonable generalization. Ultimately the research will be expecting to
provide rescannable results that can help the management to take reasonable decision
for their future activity.

i
 ACKNOWLEDGEMENT
First of all I would like to extent my special thanks to my Advisor Ato
Garedew G. For his generous and unreserved assistance to carry out
thisproposal. Next, I thank for Wolaita Sodo University especially, the
colleges of Business and economics for designing such program through
which student’s development their knowledge. Finally I would like to
thank for all my friends for their supporting me all aspect of doing this
paper.

ii
Contents
ABSTRACT.................................................................................................................................................i
ACKNOWLEDGEMENT...........................................................................................................................ii
Acronyms...................................................................................................................................................iv
CHAPTER ONE..........................................................................................................................................1
1. INTRODUCTION...................................................................................................................................1
1.1 Background of the Study...................................................................................................................1
1.2 Background of the Organization........................................................................................................2
1.3 Statement of the Problem...................................................................................................................3
1.4 Objective of Study.............................................................................................................................5
1.4.1 General Objectives......................................................................................................................5
1.4.2 Specific Objectives.....................................................................................................................5
1.5 Significance of the Study...................................................................................................................5
1.6 Scope of the Study.............................................................................................................................5
1.7 Limitation of the Study......................................................................................................................6
CHAPTER TWO.........................................................................................................................................7
2. Literature Review....................................................................................................................................7
2.1 Cash Management.............................................................................................................................7
2.1.1. Control over cash.......................................................................................................................8
2.1.2. Cash plan (budget).....................................................................................................................9
2.1.3. Cash control...............................................................................................................................9
2.2. EmpiricalReviews...........................................................................................................................12
CHAPTER THREE...................................................................................................................................14
3. Research Methodology and Design.......................................................................................................14
3.1 Area of the Study.............................................................................................................................14
3.2 The Research Design.......................................................................................................................14
3.3 Data Type and Source......................................................................................................................14
3.4 Method of Data Collection..............................................................................................................14
3.5 Sample Size and Sampling Technique.............................................................................................14
3.6 Data Analysis and Presentation........................................................................................................14
CHAPTER FOUR.....................................................................................................................................16
4. DAT ANALYSIS, INTERPRETATION AND PRESENTATION...................................................16
4.1 Cash management practice..............................................................................................................18

iii
 4.2 Investment of Idle cash....................................................................................................................19
4.3 Managing cash receipts and payments.............................................................................................21
4.3.1 Internal control of cash receipt..................................................................................................21
4.3.2 Control over cash payments......................................................................................................22
CHAPTER FIVE.......................................................................................................................................25
5. CONCLUSION AND RECOMMENDATION.................................................................................25
5.1 CONCLUSION...............................................................................................................................25
5.2 RECOMMENDATION...................................................................................................................25
Reference...................................................................................................................................................27
Appendix...................................................................................................................................................28

Acronyms

CBE Commercial Bank of Ethiopia

CA Capital Asset
iv
FI Financial Institution

IC Internal Control

MS Marketable Security

v
 CHAPTER ONE

1. INTRODUCTION

1.1 Background of the Study

Cash is a medium of exchange that the bank would accept for deposit and
immediate credit to depositor account that include currency and coins,
personal checks, bank drafts, money order credit cards, select drafts and so on
(Planket, 1986).

Cash management is one part of the financial management system. It is a

proper use of an entities cash resource, since the bank play a major role in
facilitating the way of financial sector operates with banks utilize. Cash is
important for understanding not only banking behaviour but also for the role
that the bank play in the transmission mechanism by effective cash
management banks can reduce cash balance at the minimum level and at the
same time customers requirement can be insured banks are business
established that safeguard can be insured banks are business established that
safeguard people’s money and use it to loan and investment, cash management
services as the mean to keep the bank functioning by making the best use of
cash or liquid resources of the bank. Therefore banks are very much interested
in establishing procedure for increasing the efficiency of their management.
Among the procedure carefully prepared cash forces (short-term and long term)
and investment of idle cash is the major ones. (WWW.Docstoc.Com 2:00 PM).

Commercial Bank of Ethiopia gives various type of service to their customers

for example the mobilization of financial resources and lending the resources to
the business community mobilization of

Financial resource arises from the fact that the amount of productive
investment is very low. In order to receive financial constraints on investment

1
financial intermediaries are expected to play a deceive role is bringing about
efficient way of rising the required level of funds through application of proper
financial management system. There for financial managers how cash the bank
will carry, the specific types of securities to issue and how match of the firms
earning to Retain versus to pay dividends, (www.com bank eth.com)

1.2 Background of the Organization

The State Bank of Ethiopia was established in 1942 with on objectives
the duties of both commercial and central bank is 1963 established as
share company to take over the commercial banking activities of the
state bank of Ethiopia. In the 1974 revolution, commercial Bank of
Ethiopia got its strength by emerging with privately own Addis Ababa
Bank. Since then it has been playing significant role in the development
end over the country.

The Commercial Bank of Ethiopia which is striving to embark in to

world class commercial bank hindering the state of the art and
reliable service to its millions of customers both locally and abroad. The
business strategy of the bank focuses in the stake holders its services.

On April 30, year 2011 the number of branches reached 364 stretches
across the length breadth of the country. CBE combines a wide capital
base with more than 9700 talented and committed employees. In 2011
whom it regard as its key asset for employees. In 2011 whom it regard as
its key asses for banking development. The state owned commercial bank

2
of Ethiopia still dominates the market interms of asset capital and
customer base and Branch Network, deposit the growing competition
from Private Bank over the last 15 years.

This makes it one of the most reliable and strong commercial Bank in the
country and the region. Its strong capital base above 67 years of rich
experience in the market and large branch network through the country
enable the bank to accommodate large demand for banking service, Bank
from private and public companies and to increase its overall revenue on
sustainable base the fundamental component of our mission statement
includes customers. These are the most important asset we continuously
revise our attitude towards the customers with the view to securing.

Maximum customers satisfaction in order to optimally meet the need of

our customers and effiently manage our business we are committed to
enhancing long term share holder have, the other is to get quality
customers employees are very important Quality customers service is
possibility only through motivated and skilled employees to this end the
bank is highly concerned for the wellbeing of its employees. It tries to
developed a work force that enjoy working for and prides itself is
associated with bank and we believe that our success always emantes
from the effort we continuously expert on securing reliability and public
confidence from the community at large.

1.3 Statement of the Problem

Management is responsible for controlling and protecting of the business like
inventory, receivables, plant assets and cash. Cash management is one part of
financial management system that focuses on internal control and forecasting
the future cash requirement. (Www. Investopedie –com.6:00 pm).

3
Cash is the most important element of banks day today activity. By effective
cash management banks can reduce the excess cash at optimum level and
ensure customers’ requirements. Cash management involves neither excess not
deficient amount of cash on hand at right time proper cash management
requires that the bank know how much cash is need as well as how much it
has and where that cash is at all time. Cash management also require
knowing the amounts of fund available for investment and the length of time
that can be must. (Planket, 1986).

Banks are increasing becoming innovative and anticipating the needs of

corporate towards standardization, enterprise resources planning integration,
reconciliation, real time reporting, providing an end view as cash management
value chain besides offering the ability to reach and breached their own
customers the mounting pressure from competition forces the banks to look an
information technology vendor who offer better solution and services in cash
management (www. Hcltech.Com. 9:50am at local).

Even though, cash management receive a priority for financial institution

especially Commercial Banks little is known on how effectively monitor its
cash flow, how to accelerate collection receipt and optimize timing of
disbursement, maximizing interest relate collection receipt and optimize timing
of disbursement, maximizing interest earning and properly secured
investment.

There for this study tried to investigate a solution for the following basic
research questions.

 What is the source of short term financing used by CBE?

 How the banks control cash receipt and disbursement?
 Does the bank have idle cash?
 Does the bank have cash budget?
 Does the bank posse cash shortage?

4
1.4 Objective of Study

1.4.1 General Objectives

The general objective of the study focus on the cash management practices of
CBE in Wolaita Sodo.

1.4.2 Specific Objectives

In addition the above mentioned general objective the study has the following
specific objectives.

 To identify the source of short term finance in the bank.

 To determine the internal control of cash receipts and disbursement.
 To satisfy the bank’s its cash budget.
 To identify idlecash and its investment area.
 To compare theoretical aspect of cash management practice within actual
practice of CBE.

1.5 Significance of the Study

This study would benefit CBE of Dicha branch by identifying factors that affect
the internal control over cash and suggesting possible recommendation. It also
reflects the researcher cash management practice of Dicha branch with its
limitation and weakness and gives possible combative idea or solution as to
how the financial manager of the banks of dicha Branch shall control its cash
under the proper management of cash.

1.6 Scope of the Study

Here the researcher knows that the study includes the whole banks cash
management practice but time and financial constraints the researcher forced
to focus on the assessment of cash management practices of CBE dicha
branch. After this study the community will expect to compare the cash
management practice of CBE with theoretical aspect of cash management and
it there is cash management problem give possible solution (Advices).

5
1.7 Limitation of the Study
During the collection of data for this study purpose the researcher would
face different limitation, like voluntariness of the concerned people to
give the information and there was also a time constraint to do this
study.

6
 CHAPTER TWO

2. LITERATURE REVIEW

2.1 Cash Management

Definition of cash- medium of exchange that a bank accepts deposits and gets
immediate credit to the deposit account. Cash is a medium of exchange that a
bank was accepting force value which include bank deposit current coin bank
draft a money order.

Definition of management: It is process of set organize and achieve given

management decision basic function which would have been as plan, organize,
control and direct the utilizehuman, financial and material resource.

Management would have been process by which under take one or more
person achieves the stated goal. (Planket1986). Definition of cash management-
it was strategy by which company-administer and invest its idle cash.

Cash management would concern the management of cash balance held by the
bank it was for liquidity purpose and investment by idle cash.

Cash management means-managing the cash properly to maintain the

profitability cash excess and to minimize the cash shortage risk.

Cash management-generally a centre on forecast and control internally cash

management is important for any business enterprise because cash a means of
acquire good and service a management necessary since cash constitute the
smalls portion of asset but it would need considerable time miss appropriation
in the order to solve uncertainty about cash inflow and out flow and lack of
balance between cash receive and disbursement the firm should have
developappropriate strategy for cash management by what strategies the firm
management.

The following are some of the cash management strategy

7
Cash plan- cash inflow and cash out flow a plan to protect cash surplus/deficit
for each period of plane cash budget prepare this purpose management the
cash flow the flow of cash is properly manage the cash outflow it was decrease
and inflow relatively increase.

Optimum cash level- The firm would decide the appropriate level of cash
balance the excess cash and cash deficit matched to determine the optimum
level of cash balance.

Invest surplus cash- Surplus cash balance properly invest to earn profit the
firm (bank decided about division of cash balance between alternative short
term investment will depend on the short term investment such as bank
deposit and market security ideal cash management depend on the firm
product competition and etc. Cash is the most liquid asset that standard
medium of exchange the base for major and to account for all other term. Cash
is the most current is ultimate output expect to be realize after service is
delivered. To be reportable to readily available the payment current obligation
and it will free from any contractual distraction that will limit its use in the
satisfy debt. In accounting cash consists of coin currency and available fund
deposit and the bank negotiable instrument such as many order certified check
personal and bank draft are view cash saving consider as a cash (Keisonetal,
2001).

2.1.1. Control over cash

Due to it’s easily transferability, cash is valuable to theft since many
transactions other directly and indirectly affects the receipt or payment cash
the objective of internal control over cash provide current information about
cash. To avoid cash shortage and excess (ideal) cash protected cash from theft
and miss use to control) the cash receipt the firm record the cash receipt
properly and immediately deposit the cash receipt amount.

8
2.1.2. Cash plan (budget)
Cash plan technique to plane and control used to cash protect the firm
developed project cash management from force of exact cash inflow and out
flow from the future period. Cash budget is planned tool that help the
management of the business in making important decision. Cash plan is a
schedule expectcash payment and cash receipt. Cash plan result the effect on
cash position at a given level of a given operation. Cash plan is a very
important in develops over all operation plan of the firm the cash plan (budget)
may be does on monthly quarterly, yearly the period andfrequency of the cash
will be depend on the size the firm and philosophy of management, cash
budget is a set of formal (write) cash budget considered as standard at the
future period and service as a control device to help management measure the
firm performance may be improve. Cash budget helped the financial manager
to measure the amount and duration of the cash shortage and prepared
repayment schedule and shortage to finance borrow (collage accounting p,230).

2.1.3. Cash control

Proper internal control of cash is a mechanism to provided management with
responsible assurance that intends a safe guard practice consistently. Due to
easily expose of theft and miss use especial control needed and organization for
the effective of cash control in an organization the one principle and standard
segregation of duty represent for each work would difficult for employee in
order to create for each employee responsibilityand it assure that one following
cash control method used cash control.

 Person would not use misuse.

 For this purpose the following functionsegregate in order to maintain
segregation of duty.
 Record keep functions a process and post transaction and cash.
 Register record for selected transactions manually and prepare cash
receipt backup (Araig 1988).

9
 Authorization function review and up rovingtransaction for example
approve in voice, refund and other correct entices.
 Reconciliation function it had present supervisor level or accounting
office to use compare fund collect to the account recoupable post
compare collection to deposit compare department record of revenue to
the general ledger.
 Accountability-proper accountability present when an asset or cash and
all cash handle activities and account for properly documented and
trance able to specific cash handle.
 The following function obtained performing in order to maintainedproper
accountability structure individual accountability it whom access to an
asset and why they access.

Cash accountability: proper secure means that where can asset is at all
time audit it presented all fund remain properly secure receipt given to each
and every customer and key word are secure.

Processaccountability: means that proper documentation was know what

is occur form been began of process to the future of process it is recent then
all transfer are well document receipt are will be properly prepared and
secure. (Craig 1988).

Transaction record have been correct and the appropriate back up is

maintain it is present when it daily receipt are reconcile to the cash register
to take and the receipt collect authorization and approval means that proper
supervisor and manage review and approve transaction.

Reason of all cash- bank maintain on inventory of currency to satisfyits

objective primarily it melt daily currency demand of deposit either at the
teller window of author much teller machine.

The bank would know certainly the daily flow currency or deposit and
withdraw the amount of cash required determined clearly.
10
If there are all least associate which shipment currency reduced back their
hold and cash and increase the frequency of currency shipment.

Bank use a cash balance to purchased service from correspondent (Timothy

etal 1955).

Investment of surplus (ideal)-investment alternative in order to managed

properly the ideal (surplus) cash bank are one of financial institution which
hold surplus of each cash for short of time and with to earn at least some
return one temporarily ideal cash. The primary function acts as depositor
for its customer fund to meet credit meet for its service area.

Investment ideal cash as to primary function 1 stit was major source get earn
2ndto provebank liquidity.

Investment of temporary ideal cash selects marketable security is key

element of marketing to financial management. (Rose Stephen 1995).

2. Manage cash receipt and payment) – cash receipt and payment

properly manage for purpose of company.

Internal control over cash receipt all cash receipt by the organization should
record without any misappropriation.

Internal control over cash payment – cash disbursement is particularly

exposing to fraud and embezzlement to avoid this cash paid only after the
receipt of specific authorization by document that establish the validity
amount of the client.

Basis of internal control principle for cash payment all payment will make
by check. Thecheck will authorize and approve by dependent individual
preparation before payment is essential.

Voucher system- systemof internal controls for cash payment that will
provide documentary evidence authorization for each obligation incur.

11
2.2. EmpiricalReviews
According to (Davidsonetal1999). Cash is any medium of exchange which is
immediate negotiable.

Cash is to meet the prim requirement to general acceptability and

availability for instance use in purchase and payment debit. Cash is
channel available cash into expenditure that enhance productivity directly
or indirectly profit growth does not miserly mean more cash (Davidson et al
1999).

Cash taken important current asset for the operation of the business cash
is the basic input to need keep business run continues basis cash simply
remain ideal. Without contribute anything the profitability this major
function of the financial manager is to maintain sound cash position
(Pandey 2007).

According to (Zimmereretal 2008) cash management is the process of

forecasting, collecting and disbursinginvestigating and planned for company
need to operate smoothly. They further added that cash management is vital
task. Because it is the most important yet least productive asset that small
business owns. Business must have enough cash to meet sits obligation or
it was be declared bank repute creditors employers and lenders expect to be
paid on time and cash is the required medium of exchange.

However some firm retain an excessive amount at cash to meet any

unexpected circumstances that might arise these dormant.

Cash have an income earning potential that owners are ignore and lower
itsprofitability investing cash even for short time can add to company
earning proper cash management permits the owner to adequately meet
cash demands of the business avoid retaining unnecessarily large cash
balance and stretch the profit generating power at each dollar the business
owners (Zimmereretal 2008).

12
Cash management is particularly important for a new and growth (Geffrey P
daysinonegal 1992) indicate in their book that cash flow can be a problem
even when a small business has numerous client, officer, supervisor
product to its industry one objective of make review of the related literature
is to know the current knowledge in the field it helped the researcher to
understand what kind of knowledge developed in the relative to the
researcher planned to the study.

These tasks reflectsthe very meaning of cash management already

empiricalstudy presented descriptive summary of cash management
practice.

13
 CHAPTER THREE

3. RESEARCH METHODOLOGY AND DESIGN

3.1 Area of the Study

This study would conduct on the cash management practice of commercial
bank of Ethiopia dicha branch.

3.2 The Research Design

For this study descriptive design type of research, is going to be useful.
Because, the aim of the study is todescribe the actual cash management
practice of dicha branch.

3.3 Data Type and Source

For this study, the researcher was used both quantitative and qualitative data
type especially the later one. The researcher also use both primary and
secondary source of data.

3.4 Method of Data Collection

For primary method of data collection observation and unstructured interview
would be useful rather than other method of data collection because in order to
understand the real cash management practice needs to observe the activities.
The secondary data is collectable by reviewing the company publish and
unpublished journals, magazines and reports.

3.5 Sample Size and Sampling Technique.

From a total population of Twenty five employees of CBE 14 employees would

selected as sample size by using judgmental sampling techniques-Because this
14 employees are especially engage in the area of cash management practice.

3.6 Data Analysis and Presentation

After necessary data are collect from the primary source and secondary sources
the data would process and analyse data processed is an activity which

14
involves interpretation data to make the data appropriate for analysis. Data
analysis would be done both by using qualitative and quantitative data
processed from the data get the data present would be descriptive data
presentation by using tables and others.

15
 CHAPTER FOUR

4. DAT ANALYSIS, INTERPRETATION AND PRESENTATION

The analysis and interpretation of this paper is based on primary data by using
non–probability sampling technique which is judgmental sampling based on
their experience. The questionnaire was distributed for 14 employees the
cashier, accountant, secretary and others. The bank’s manager was also
selected to evaluate the cash management practice of commercial bank of
Dicha branch. However secondary data are also used as abase for evaluation.

Table 4.1 Educational back ground of respondents

No Educational status No of respondents Percentage%

1 Diploma 2 14.3%

2 Degree 9 64.3%

3 Other 3 21.4%

4 total 14 100%

Source: - Researchers own computation of primary data

As it is shown in the Above the respondent educational back ground is leveled

in to three categories other 21.4%, diploma 14.3% and degree holder 64.3%
most of the respondents are degree holders while one of the them are diploma
are holder.

From the above table the researcher understand that in commercial bank of
Dicha branch there is educated employees. Therefore the bank can serve its
customer on time because of educated employees Service to the customers
when they need. This implies that the customers are initiated to deposit their
cash in this branch. As a result the bank get efficient amount of cash to serve
its customer.

Table 4.2 Respondents department in the bank

16
No Department No of Respondents Percentage %

1 Cashier 7 50 %

2 Accountant 6 42.9%

3 Manager 1 7.1%

4 Total 14 100%

Source: - Questionnaire

In the table above 50% of the respondents are from cashier, 42.9% of the
respondents are from the accountant, 7.1% from the manager. From the
percentage shared by looking the number of respondents the researcher
decided that, there is segregation of duties in the commercial bank of Ethiopia
dicha branch by segregating duties, that is, by avoiding putting of employees in
position of excessive trust and responsibility. Avoiding giving of one person
control over all stage of process the bank manages cash effectively.

Table 4.3 Service years of respondents in department that they

Working

No Service year No of Respondents Percentage %

1 1 -2 year 1 7.1%

2 2 -6 year 6 42.9%

3 Above 6 year 7 50 %

4 Total 14 100%

Source: - Researchers own computation of primary data

As it shown in the table the is years of the respondents is categorized in three

categories that is 1-2 years, 2-6 years, above 6 years. Most of the respondents
(50%) have above years gave service in the

17
 bank. This implies, they are familiar with Jobs and they have been
experienced, these have a great advantage for the control of effective cash
management.

4.1 Cash management practice

Cash management involves having the optimum (that means neither excess
nor deficit amount of cash on hand at the right-time). In order to manage the
cash of the company properly, the bank knows how much cash is needed in
the operation. To manage the cash appropriately the commercial bank of
Ethiopia generally and Dicha branch particularly set primary goal. These
include providing the cash need to meet the firm’s payment and to minimize
the amount of idle cash held by the bank.

Table 4.4 Analysis of cash management practice

Does the bank perform response Number of Percentage%

theoretical aspect in to actual employee
cash management? Yes 14 100%

No -

total 14 100%

Source: - Questionnaire

According to the response of the respondents all of them said the bank perform
theoretical forms in to actual management.

In this case the advantage of this to know the bank have effective cash
management procedure and maintaining sufficient cash amount in operational
activities.

18
 4.2 Investment of Idle cash
Businesses cannot service without cash to pay bills and to finance growth. On
the other hand having too much cash is insufficient because cash earns
considerably less than firms cost of capital.

Table 4.5 Idle cash

Does the bank possess Response Number of Percentage

idle cash? employee %

Yes 10 71.4%

No 4 28.6%

Total 14 100%

Source Questionnaire

From the above table 10(71.4%) of respondents said that yes and 4( 28.6%)

Said no. this shows the bank has excess amount of cash on hand that is not
needed for immediate purpose rather it needed in the future period Hene, the
researcher understand that the bank has a problem of cash management.

Table 4.6 Response regarding to investment of idle cash

What criteria the Response Number percentage%

banks consider to of
invest its idle cash? employee

Maturity 0 0%

19
 Liquidity 4 28.6%

Profitability 10 71.4%

Total 14 100

Source Questionnaire

The table 4.6 clearly shows that 71.4% of respondents select profitability as the
criteria that the bank consider to invest its idle cash and 28.6% of each
respondents select liquidity as criteria. From these the researcher understands
that, profitability play a major role in the investment of idle cash because it
measures the income level or the operating success of the bank for company
ability to develop. And also, liquidity is the next criteria of the bank in order to
invest idle cash because it is frequently used as the ultimate test of
managements operating effectiveness.

Table 4.7 Response Regarding too rate of cash position in bank

In the operation of the bank Response No of Percentag

How do you rate the cash employee e%
position? Mostly Excessive 11 78.6%

Optimum 3 21.4%

Relatively Deficient 0 0%

20
 Mostly Deficient -

Total 14 100%

Source Questionnaire

From table 4.7 the researcher clearly knows that 78.6% of respondents that the
rate of the bank cash position was mostly excessive and 21.4% says that the
rate of cash position was optimum. From this the researcher concludes that
there is mostly excessive cash position in commercial bank of Ethiopia in Dicha
branch. This indicates that there is idle cash that not used for immediate
purpose.

4.3 Managing cash receipts and payments

Just as cash the beginning of operating cycle. It is often starting point for
company’s system of internal control. Cash is the mere assets that are ready
convertible in to any other type of asset.

4.3.1 Internal control of cash receipt

In order to protect cash from the theft on misuse business control cash
receipts similar to different types of business. As the manager said Dicha bank
control cash receipts in different procedures, the bank prepare record of all
cash receipts as soon as cash is received, because most theft of cash occurs
before record is made. The bank designated cashier is authorized to handle
cash receipts different individual receive cash record cash, receipts and deposit
and hold the cash.

4.3.2 Control over cash payments

Cash is paid for several reasons, such as to pay expense and liabilities or the
purchase asset. The paying teller is only responsibility for making payment and
required to check that the signature and the checks are verified. That the
amount bear signature verified machine operator and internal auditors report
when every a paying teller requests for additional cash. The morning cash
checks and vouchers are journalized and be compared with the total submitted
21
by paying teller cash on hand at the end of the payment from the blotter must
agree with the total amount of cash withdrawn from the chief casher.

The chief cushier checks the correctness and balancing of the cash by verifying
the cash pocket and counting the lose notes.

Table 4.8 Response regarding cash receipt and payment.

Did the bank manage its Response No employee Percentage%

cash Payment and cash Yes 14 100%
receipts properly?
N0 - -

Total 14 100%

Source Questionnaire

As it is observed from the above table, the response of the respondents shows
that 100% of respondents said yes. According to the above table the bank
arrange it cash receipts and payments properly. Adequate system of internal
control provides protection of cash balance and procedure for the management
of cash payments to accomplish these objectives each day’s receipts and all
cash payment made by checks.

From these the researcher understand that the bank have its cash
management system and apply giving quality service to practical.

Table 4.9 Response regarding cash budget

How is the cash budget Response No of employee percentag

e
Compared with actual?
Very good 14 100%

Good - -

Moderately - -

Not satisfy - -
22
 Total 14 100%

Source Questionnaire

As can see from the above table all respondents gave their idea on preparation
of cash budget. Hence the researcher concludes that the commercial bank of
Dicha branch appropriately prepared cash budget. Commercial bank Dicha
branch used cash budget as one of the financial principal method of
forecasting the finance needs of venture and forecasts the combined effects of
planned operation on the companies’ cash flow. The cash budget thus indicates
the amount of funds. That will be needed or available for operation of bank.

Table 4.10

What are the sources Response No of employee Percentage

of short term finance
for the bank?

Customer’ 9 64.3
deposit

Capital reserve 3 21.4%

Other 2 14.3%

Total 14 100%

Source:- Questionnaire

23
From the above table the respondents response shown that 64.3% are
customer’s deposit, 21.4% is capital reserve and 14.3% is other.

The researcher conclude that the bank have many customers that use deposit
service. This indicates there is high cash flow. As a result the bank gain
amount of profit by lending the money to other customers or by investing in
government treasury bills.

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 CHAPTER FIVE

5. CONCLUSION AND RECOMMENDATION

5.1 CONCLUSION
The main objective of the study is to assess the cash management practice in
commercial bank of Dicha branch. Based on the analysis and findings of the
previous chapter the following has been concluded.

 Many of the employees in commercial bank of Dicha branch has service

years above six years. This implies they are well familiar with jobs they have
been assign.

 Internal control of cash receipt and disbursement in the bank applies in a

good way which in the theoretical aspect of cash management.

 Adequate system of internal control provides protection of cash balance and

procedure for the management of cash payment to accomplish this objective
each day’s receipts and alias payment made by check.

 The bank of Dicha have relatively enough (sufficient) short term financing
for its normal operation which come from different source like customer
deposit and capital reserve.

 Investment of idle cash which is one base principle of cash management,

commercial bank of Dicha branch have better investment trend of idle cash
in short term market investment by considering its liquidity and
profitability.

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 The bank used cash budget as one of the financial principal method of
forecasting the finance needs of venture and forecasts the combined effects
of planned operation on the companies’ cash flow.

5.2 RECOMMENDATION
From the discussion held in chapter four the researcher suggests the
following points for better achievement of its objective of cash management
practice.

 The bank should give necessary training for their employee for further
success of the bank and to save time and cost.

 The bank should manage it cash more than the current method for
the success of bank and satisfaction of customers.

 When the progress of the time, organizations updates their previous

cash management system, so commercial bank of Dicha branch use
effective and efficient updated technology for the improvement of its
cash management is Advisable by the researcher.

 Even though source of short finance for the bank relatively sufficient
for its normal operation try to find other sources of financing its short
term finance rather restricted on the existing source finance.

 The management of cash receipt and disbursement of the bank trend

and appreciable way which is acceptable in the universal policies, the
bank shall continue by this trend in the future operation period.

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  The bank should use the excess cash for investment purpose in order
to generate target profit (interest) rather than putting the money on
hand incurred cost for excess cash.

 Finally, the researcher suggests that because of cash is liquid and it

is important to manage it. Therefore the collection disbursement, and
failure to collect note receivable should be given special attention for
cash management because cash is the blood of an organization, it is
unthinkable to operate any activity without cash.

REFERENCE

Arens.Lobeck. 2001. Auditing integral Approach 9th.Edition.

Bringham.F, 1995.Fundamental of financial Managing 7th edition.

Dav`s, Dukes, Dychkam. 1995. Intermediate Accounting 3rd edition

Kieso.Weygadite, war filed.2001.Principle of Auditing 9th edition.

Kockw, timothy, mach Donald.1995. Bank management 4th edition

Planket. 1986. Fundamentals of managerial finance 2nd edition.

Raymond, P. Nevell 1985 fundaments of managerial finance 7th edition.

Rose Stephen. 1995. Fundamental management and corporate finance 4 th

edition.

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 Appendix

Wolaita Sodo University

College of Business & Economics

Department of Accounting and Finance

Dear respondent

The purpose of this questionnaire was to collect data for requirement for partial

fulfillment of B.A degree in accounting in Wolaita Sodo university your genuine

28
response for the following question is extremely important for the successful

completion of this paper the information provide used for purpose indicated

and will be kept highly confident I would like to thank you in advance for your

cooperation and scarification of your time.

Part one: - General Information

Education Status

Diploma  degree  other specify  experience 

Salary 1000-1500  1500-2000  above 2000 

Service 1-2  2-6 above 6 years 

29
Part 2 questions

1. What are the sources of short term finance for the bank?

Customer’s deposits  other (specified) 

Capital reserve 

2. When the bank paying the payment?

On the due date  be for due date 

After the due date 

3 does the bank possesses idle cash? If yes where dose the bank invest idle

cash------------------------------------------------------------------------------------

4 what criteria the bank consider to invest its idle cash?

Maturity  profitability

Liquidity  other 

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5 does the bank has cash budget

Yes  no 

6. If yes in what terms?

Monthly  semi annually 

Quarterly  annually 

7. Does the Bank perform theoretical aspect in to actual cash management

Practice? Yes  No 

8 In the operation of the bank how do you rate the cash position?

Mostly excessive relatively deficit 

Optimum  mostly deficit 

9. How do you rate the survive quality at the bank

Yes  No 

10. Did the bank manage its cash a payment and cash receipt properly?
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 Yes  No 

11. What is your responsibility in the bank?

Accountant  secretary  other 

Casher  manager 

12. How is the cash budget compared with actual?

Good  very  good moderately  No satisfy 

13. What method does the bank use to control cash receipted disbursement?

32