CASH MANAGMENT PRACTICE IN COMMERCIAL BANK OF

ETHIOPIA (A Case Study in Michele Branch)

ASENIOR ESSAY RESEARCH PAPER SUBMITTED IN PARTIAL FULFILMENT OF

B.A DEGREE IN ACCOUNTING AND FINANCE

SUBMITTED BY: EWUNETU AYELE

ADVISOR: SOLOMON MITKU

COLLEGE OF BUSINESS AND ECONOMICS

DEPARTMENT OF ACCOUNTING AND FINANCE

DILLA UNIVERSITY

MAY, 2017

Dilla,

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 LETTER OF CERTIFICATION

DILLA UNIVERSITY

COLLEGE OF BUSINESS AND ECONOMICS

DEPARTMENT OF ACCOUNTING AND FINANCE

This is to certify that the Senior Research Project submitted by student EWUNETU AYELE, entitled “CASH
MANAGEMENT PERACTICE THE COMMERCIAL BANK OF ETHIOPIA.IN CASE OF MICHELE BRANCHIN DILLA
TOWN” and submitted in partial fulfillment of the requirement of BA degree in accounting and finance
complies with the regulation of the university and meets the accepted standards with the respect to
originality and quality sugared by the examining committee.

Examiner_________________Signature__________________________Date________

Advisor_________________Signature__________________________Date________

DECLARATION
I
I, EWUNETU AYELE, the undersigned, hereby declare that the senior essay work entitled “Cash
Management practice of the Commercial Bank of Ethiopia. In case of Michele Branch in Dilla Town”
submitted by me for the requirements of BA degree in Accounting and Finance from Dilla University, is
my original work and it has not been submitted for the award of any other similar purpose for any
university or institutions.

Signature____________________

Date____________________

ABSTRACT

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This research paper seeks to address the cash management practice of commercial bank of Michele branch. It was address three (3) basic
research questions designed to asses cash management performance of the bank. For the purpose of the study both primary and
secondary data were used, but much focus on primary data in which more information was obtained by unstructured interview and
questionnaires. After the data has been gathered, it would be analysed and presented using tables and percentage.

ACKNOWLEDGEMENT

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First of all I would like to tanks you Almighty God forgive me the strength and
the completions of this paper. Next, I would like to tanks my special my Advisor
Solomon Mitku for this generous and unreserved assistance to carry out the
research paper. Next, I thank for Dilla 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
and my families for their supporting me all aspect of doing this paper.

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 TABLE OF CONTENTS

Title Page

Abstract.............................................................................................. .I
Acknowledgment.................................................................................. II
Table of Content.................................................................................. III
CHAPTER ONE
1. Introduction ……………………………………………………………….…… 1
1.1 Background of the Study ......................................................... 1
1.2 Statement of the Problem........................................................... 2
1.3 Research Question..................................................................... 2
1.4 Objectives the Study ……............................................................ 3
1.4.1 General Objective ………………………………………………… 3
1.4.2 Specific Objectives ………………………………………………. 3
1.5 Significance of the Study ............................................................ 3
1.6 Scope of the Study ..................................................................... 3
1.7 Limitation of the Study ------------------------------------------------- 4
1.8 Organization of the
study..........................................................................4
CHAPTER TWO
2. Literature Review ………………………………..…………………….………. 5
2.1 Definition of Cash Management...............
………………………………………………….……… 7
2.2 Control Over Cash ………………………………………………………… 9
2.3 Cash Planning (Budgeting)………..……………………………….……. 9
2.4 Cash Controlling ……………………………………………………………….10
2.4.1 Segregation of duties …………………………………………… 11
2.4.2 Accountability …………………………………………………… 12
2.5 Reason for holding cash ………………………………………………… 13
2.6 Managing cash receipt and payment ………………………………... 14
2.6.1 Internal control over cash receipt …………………………. 15
2.6.2 Internal control Over cash payment ………………………. 15
2.7 Basic internal control principles of cash payment …………………. 16
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CHAPTER THREE
3. Research methodology .................. …………………………………………..17
3.1 The Research design … .…………………………………………………….17
3.2 Data type and source……… ………………………………………………..17
3.3 Method of Data collection…………………………………………………..17
3.4 Target population ..........................................................................17
3.5 Sample Size and Sampling Technique….…………………….…………..17
3.6 Data Analysis.............................……………………………………………19
CHAPTER FOUR
4. Data analysis, interpretation and presentation ………………………………19
4.1 Cash management practice ………………………………………………………22
4.2 Managing cash receipt and payment ………………………………
……….. 26
4.2.1 Internal control of cash receipt ……………………………… ……… 26
4.2.2 Control over cash payments ……………………………………………26
CHAPTER FIVE
5 Conclusions and Recommendation
5.1 Conclusion ………………………………………………………………………..30
5.2 Recommendation ……………………………………………………………….. 31
Reference ………...................……………….............................................32
Appendix ………………………………………………………..………...............33

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 CHAPTER ONE

1. Introduction
1.1. Background of the study
Cash is a medium of exchange that the bank will 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 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.(Ibid).

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 arise from the fact
that the amount of productive investment is very low. In order to receive
financial constraints on investment 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 should carry, the specific types of
securities to issue and how mach of the firms earning to Retain versus to pay
dividend.(Ibid)
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 1.2 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 focus on internal control and forecasting
the future cash requirement (Ibid)

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
deficiency 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. (Planket1986).

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 be reached 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. (Ibid)

Generally, when researcher assessed different researches worked in

cash management practice in several years on the same branch in year 2013
and 2015. Those was no enough research that show the cash management
practice of the bank and in addition to assessing the cash management
practice of the bank researcher would try to found out any problem related to
cash management practice of the bank such as, cash shortage, source of short-
term finance, ineffective control of cash receipt and disbursement etc.

1.3 Basic Research Questions

The following basic research questions would be answered by the researcher.

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  How the banks control cash receipt and disbursement?

 What are the sources of short- term financing used by CBE?

 Does the bank have cash budget?

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 Michele branch.

1.4.2 Specific Objectives

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

 To assess the internal control of cash receipts and disbursement

 To identify the source of short term finance in the bank.
 To assess the bank cash budget.

1.5 Significance of the Study

This study will benefit CBE of Michele Branch by identifying factors that affect
the internal control over cash and suggesting possible recommendation. Create
awareness to the bank about cash management practices and help for the
other researchers who conduct their research on the same title and the
manager of the bank should control its cash under the proper management of
cash in the bank. For the researcher it serves as additional academic
knowledge in the area and useful inputs for future professional development.

1.6 Scope of the Study

Here the researcher knows that the study includes the whole banks cash
management practice but, due to the financial constraints the researcher
forced to focus on the cash management practices of CBE in Michele branch.

1.7 Limitation of the Study

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During the collection of data for this study the researcher would faced different
limitation, like lack of finance, lack of internet access and lack of computer
accessories to write the final draft.

1. 8 Organizations of the study

This research paper was organized by 5 chapters. The 1 st chapter presents

introduction part of the study which includes background of the study,
statement of the problem, research question, objective of the study,
significance of the study, scope of the study. The 2 nd chapter is review of
literature. Then the 3rd chapter is details of methodology and tools for analysis.
The 4th chapter deals with analysis of data and presentation of the output. In
the 5th chapter the research concludes the findings of the study and
recommendation based on the conclusion made.

CHAPTER TWO

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 2. LITERATURE REVIEW

2.1 Definition of Cash Management

Cash is a medium of exchange that a bank will accept for deposit and
immediate credit to the depositor account. Cash is any medium of exchange
that a bank will accept of face value which includes bank deposits, currency,
coins, bank draft and money order.

Management is a process of setting organizing and achieving of a given

management basic functions which as planning, organizing, controlling and
directing that utilize human, financial and material resources. Management is
a process by which under taken by one or more persons to achieve the stated
goals (Planket1986).

Cash management!-Strategy by which a company administer and invest its idle

cash. Cash management is concerned with the managing of cash balance held
by the bank for liquidity purpose and investing idle cash. Cash management is
managing the cash properly to maintain the profitability of cash excess and to
minimize the cash shortage risk. Cash management is generally focused on
forecasting and internal control. Cash management is importance for any
business enterprise because cash a means of acquiring goods and services.
The management of a cash is necessary since cash constitute the smallest
portion of asset but it needs considerable time devotion for managing due to is
nature of easily misappropriates in order to solve uncertainty about cash inflow
and out flow and also lack of balance between cash receipt and disbursement,
the firm should develop appropriate strategies for cash management. Some of
the cash management strategies are the following. Cash planning, Managing
cash inflow and out flow, Optimum cash level etc. (Ibid)

Cash is the most liquid asset and the standard medium of exchange and the
basic for measuring and accounting for all other items. Cash is important
current asset for operation of a business. It is the basic impute needed to keep
the business running on continuous basic. It also the ultimate output
expected to be realized after the service is delivered. To be reportable as such it
must be readily available for the payments of current obligation and it must be

5
free from any contractual restrictions that limit its use in satisfying debts. In
accounting cash consist of coin, currency and available found on deposit and
the bank negotiable instruments such as money order, certified cheque
personal

And bank draft are also viewed as cash .Saving account usually classified as
cash although the bank has the lead light notice is rarely demanded by banks
saving account are considered as cash (keiso.etal,2001)

2.2 Controls over Cash

Due to it’s easily transferability, cash is the asset most likely to be used by
employees and manages. Cash is also vulnerable to theft since many
transactions either directly or indirectly affects the receipt or payment of cash.
The objective of internal control over cash are to be provide accurate
information about cash .To avoid cash shortage and excess (idles) cash and
protect cash from theft and misuse. To control cash receipt the firm, should
record the cash receipt properly and immediately deposit the cash receipt
amount. (Ibid)

2.3 Cash Planning/budgeting /

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

protects the firm by developing a projected cash management from forces of
exacted cash inflows and outflows for a given period. Cash beget is a planning
tool that helps the management of the business in making important decision.
It is a schedule of expected cash payment and cash receipts. It results the
effect on the cash position at a given level of operations .The for caste may be
based on the present operation or the anticipated future operations .Cash
planning in very import in developing overall operating plant of the firm. The
cash planning (budgeting) may be done on monthly quarterly or yearly basis.
The period and frequency of cash planning generally depend on the size of the
firm and philosophy of management, cash budget is a set of formal (written)
statement of management expectation regarding sales expenses production
volume and various financial transactions of the firm for the coming period.
Cash budget consider as a standard at the end of the period and serve as a

6
control devices to help management measure the firm performance may be
improved. Cash budget helps to identify periods of cash surpluses. It also
help the financial manager to measure the amount and duration of cash
shortage and to prepare repayments schedule and it there is. Cash budget
helps to prepare prepayments schedule and it there is cash shortage to finance
with borrowed funds. (Rose Stepen,1995)

Advantages of Cash budgeting

Cash budget estimates the occurrence, amount and duration of cost and
payment schedule for any needed financing.

Is an important tool for planning and controlling because forecasted error can
be traced to the individual components of the cash budget.

Important for forecast of occurrence amount and duration of cash level

overhand above the minimum desired end of month cash balances.

Serves as an integrative analytical tool for co operation of the individual

components of that produce cash budget inflows and out flows are brought
together and their overall impact on cash flow can be estimated (Nvel, e 1985)

2.4 Cash Controlling

Proper internal control of cash mechanisms provide management with

reasonable assurance that intended safeguard are being practiced consistently.
Due to it’s easily exposed to theft and misuse special control should be need for
any organization. For the effective of cash control in an organization the
Following cash control method can be used as cash control principle and
standards.

2.4.1 Segregation of Duties

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Represent for each work different employees in order to create for each
employees responsibilities and assures that one person is not made bias. For
this purpose the following function should be segregated in order to maintain a
proper segregation of duties.

Record Keeping Functions

Creating and maintain department records such as processing and posting

transactions and cash register recording for select transactions manually and
preparing cash receipt backups .

Authorization function

Reviewing and approving of transaction example approving invoice, refunds

and other correcting entries, approving cash transfers and movement of assets
should be authorized by the management the organization or the responsible
person.

Reconciliation function

Assurance that transactions are properly taken place. It is present at a

supervisory level or by accounting office. Example comparing funds collected
to the account receivable posting comparing collections to deposits and
comparing departmental records of revenue to the general ledgers (Craig,
1988).

2.4.2 Accountability

Proper accountability is present when an asset (cash) and all cash handling
activities and accounted for properly documented and traceable to specific cash
handle. The following functions should be performed in order to maintain a
proper accountability structure.

Individual Accountability

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Proper delegation of authority and responsibility means that knowing who has
access to an asset and why they access. It represent when transaction are
identified to a person, individual cash drawers areas signed to each handless
and separate password are severed.

Cash accountability

Proper securing means knowing where asset can is at all times it presents
when all funds remain properly secured receipt are given to each and every
customer and keys and ward are secured.

Process accountability

Proper documentation means knowing what was accrued from beginning of a

process to end of a process it is resent then all transfers are well document and
receipt are properly prepared and secured.

Security monitory

Means that the safety of and transport of assets are taken in its consideration
and follow up proper protocols and procedures. It’s present when tow people
are involved in handling cash, asses one properly and transported.

Transaction recording

Transactions are correct and the appropriate back up is maintained. It is

present when daily receipts are reconciled to the cash register totals and the
receipts collected.

Authorization and approval: - means that the proper supervisor and managing
review and approve transaction. It is present when receipt issued are
reconciled and when receipt issued are reconciled and when surrey cash
counts are performed are performed on at least annual basis or turn over
exists (Craig, 1988).

2.5 Reasons of holding cash

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Banks maintain on inventory of currency to satisfy its objectives. Primarily to
meet the daily currency demands of deposition, either at teller windows or
author mated teller machine. It the bank know with certainly the daily flow
currency from deposits and with drawers, the amount of cash required could
be determine clearly. If there were on costs associated with shipments currency
backs should reduce their holding of cash and increase the frequency of
currency shipments. Secondly, regularly agency mandate legal reserve
requirements that can be meet only by holding qualifying cash asset. Thirdly,
bonks serve as a

Clearing house for nation’s checks payment system, each banks must hold
sufficient balance at financial institutions so that check written by its
depositors will clear when presented for payments. Finally, Banks use cash
balances as to purchase service from correspondent bank (timothy etal, 1995).

2.6 managing cash receipt and payment

Cash receipt and payment management if to assure that all cash receipt and
payment of the company properly managed for the purpose of the company.

2.6.1 Internal control over cash receipt

To assure that all cash receipt by a business organization should be recorded

without any misappropriation. The system control over cash receipt takes place
in two ways. The first one is cash control over the counter and cash control by
mails from charges.

Internal control of cash receipt over the counter Cash register should be used
to cash receipt and the amount written the cash resister should be visible to
customers. There should be pre numbered receipt used in sales process. The
cash receipt should be deposited immediately.

A person independent of the cashier should count cash and compare it to the
amount recorded on the receipt. Internal control of cash receipt by mail .The
mails should be locked and the key should be placed on the hand of
10
responsible person. At least two people should have to present when mail is
opened and list of money received should kept.
A prelisting of cash received should made in three copies, one copy for
Cashier, the second for account department the third copy kept by preparer
(Ibid).
2.7.2 Internal control over cash payment

Cash disbursements are particularly exposed to frond and embezzlement. To

avoid this cash should be paid only after the precept of specific authorization
by documents that establish the validity amount of the client. Besides to these
duties in the purchase of goods and services and payments for them should be
separated (Ibid).

2.7 basis internal control principles for cash payments

All payment should be made by check; the check should be authorized and
approved by independent individual preparation before payments are essential.

Voucher system:-a system of internal control for cash payment that provides
documentary evidences and authorization for each obligation incurred.
Voucher is a special form on which relevant data about a liability to be paid
and the details of its payments is recorded. It has the following functions.

It is consists of procedures for systematically gathering recording and paying

expenditures. It provides strong control by separating duties and
responsibilities for
Authorization of expenditure receipt of goods and services, validation of
Liability by examination of invoices from correctness of prices, shipping
Cash and credit terms, payments of expenditure etc (arens and lobbecke, 2002)

CHAPTER THREE
3. Research methodology
3.1 The research design

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For this study descriptive design type of research, would be used. Because,
descriptive studies were non- experimental researches that describe the
characteristics of particular individual or group. So the aim of the study was to
describe the actual cash management practice of Commercial bank of Ethiopia,
Michele branch.

3.2 Data Type and Source

For this study, the researcher also used both primary and secondary data type
and source. The primary data source of this study includes the employees and
manager of the bank and also secondary data source include books, magazine,
documents, reports and manual scripts.

3.3 Method of Data Collection

For primary method of data collection observation, questionnaire and

unstructured interview would be used rather than other method of data
collection because in order to understand the cash management practice need
to observe the activities. The secondary data was collected by reviewing
different written material published and unpublished journals, magazines,
annual reports and internet.

3.4. Target population

The target population the study was managers, cashers, and accountants
which made the total population of 22 employees working for the branch.

3.5. Sample Size and Sampling Technique.

From a total population of Twenty two employees of CBE 8 employees were

selected as ample size by using judgmental sampling techniques-Because of
this 8 employees were especially engaged in the area of cash management
practice. By using this technique individuals who were believed to have
sufficient knowledge expertise and familiar with that task as well as the
researcher permit to have complete freedom of selecting individual who can
provide relevant data and to choose sampling method according to the
researcher wish or desire .
3.6. Data Analysis
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After necessary data were collected from the primary source and secondary
sources .Data analysis would be done both by using qualitative and
quantitative data. The data analysis would be presented by using tables and
percentages.

CHAPTER FOUR

4. DATA ANALYSIS, INTERPRETATION AND PRESENTATION

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This study was designed to know the cash management practice of in
commercial bank of Ethiopia Michele branch. The results obtained based on
the data collected from respondents are presented and discussed in this
chapter. It shows general characteristics of the respondents the response rate
and finding of the study about the cash management practice in Commercial
Bank of Ethiopia. The analysis and interpretation of this paper is based on
primary data by using judgmental sampling method. Primary data analysis
collected from the bank employees on the basis of structure questionnaire and
unstructured interview data. The questionnaire was distributed for 8
employees the cashier, accountant, and branch manager. The bank’s managers
were also selected to evaluate the cash management practice of commercial
bank of Michele branch. However secondary data are also used as a base for
evaluation.

Table 4.1 Demographic characteristics of the respondent

Sex No of Respondents Percentage (%)

Male 6 75%

Female 2 25%

Total 8 100%

Source: - Questionnaire, 2017

Source As it shown the above table demographic characteristic of respondents

75%of the respondent male and25%of the respondent of the CBE in Michele
branch was females. From this one can conclude that most of the respondents
of the bank were male.

Table 4.2 Educational back ground of respondents

No Educational status No of respondents Percentage%

1 Degree 7 87.5%

2 Master 1 12.5%

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3 Other 0 -

4 Total 8 100%

Source:-Researchers own computation of primary data, 2017

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

in to two categories degree 87.5% and degree holder 12.5% .most of the
respondents are bachelor degree holders while one of them are Master
holder(PHD).

From the above table the researcher understand that in commercial bank of
Ethiopia in Michele branch there was educated employees. Therefore the bank
can serve its customer on time because of educated employees give their
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 4.3 Respondents department in the bank

No Department No of Respondents Percentage %

1 Cashier 4 50 %

2 Accountant 1 12.5%

3 Manager 3 37.5%

4 Total 8 100%

Source:-Questionnaire, 2017

In the table above 50% of the respondents are from cashier, 12.5% of the
respondents are from the accountant, 37.5% from the manager. From the
percentage shared by looking the number of respondents one can conclude
that, there is segregation of duties in the commercial bank of Ethiopia Michele
branch by segregating duties, that is, by avoiding putting of employees in
position of excessive trust and responsibility. By voiding giving of one person
control over all stage of process the bank manage cash effectively.

Table 4.4 Service years of respondents in department that they

Working

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No Service year No of Respondents Percentage %

1 1 -3 year 1 12.5%

2 3 -5 year 6 75.5%

3 Above 5 year 1 12.5 %

4 Total 8 100%

Source:-Researchers own computation of primary data, 2017

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

categories. That is 1-3 years, 3-5 years, and above 5 years. Most of the
respondents (75%) have between 3-5years gave service in the bank,12.5% of
respondents between 1-3 years and 12.5% of respondents above 5 years gave
service in the bank. This implies that, they are familiar with Jobs and they
have been experienced .This have a great advantage for the control of effective
cash management.

Table 4.5 Responses regarding to source of short-term finance.

What are the sources Response Number Percentage(%)

of short-term finance of
for the bank? employee

Customer 5 62.5 %
deposit

Capital 2 25%
reserve

Other 1 12.5%

Total 8 100

Source:-Questionnaire, 2017

From the above table’ 4.5 clearly shows that 62.5% of respondents are select
customer deposit as the source of short-term finance and 25% of each
respondents select capital reserve and12.5% of each respondent for other
source finance in the bank. From these the researcher conclude that the bank

16
have many customer that use deposit service. This indicates there is high cash
flow.

Table 4.6 Responses regarding to cash budget

Does the bank have cash Response Number of Percentage(%)

budget? employee

Yes 8 100

No - -

Total 8 100

Source: -questionnaire, 2017

As shown in the above table, the respondent show that all respondents of all of
them said that the bank have cash budget. In this case on e can conclude that
the advantage to know the bank have effective cash management procedure
and maintaining sufficient cash amount in operational activities.

Table 4.7 response regarding to terms of cash budget

If you say yes, in what Response No of employee Percentage (%)

terms? Monthly 5 62.5%

Semi annually 1 12.5%

Quarterly 1 12.5%

Annually 1 12.5%

Total 8 100%

Source: questionnaire, 2017

As it shown in the above table, the response of the respondent show that
62.5% monthly, and 12.5% each for semi-annually, quarterly and annually
each. One can conclude that this shows the bank have effective cash
management practice within timely.

4.1 Cash management practice

Cash management does not involve having the optimum or that means neither
excess nor deficit amount of cash on hand at the right time. In order to manage

17
 the cash of the company or the bank knows how much cash is needed in the
operation to mange cash appropriately the commercial bank of Ethiopia
generally and Michele branch particularly set primary goal.

Table 4.8 Response Regarding to 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 5 62.5%

Optimum 1 16.3%

Relatively Deficient 0 0%

Mostly Deficient - 100%

Total 6 100%

Source: - Questionnaire, 2017

From table 4.8 the researcher clearly identified that 62.5% of respondents that
the rate of the bank cash position was optimum and 37.5% says that the rate
of cash position was mostly excessive. From this the researcher concludes that
there is optimum cash position in commercial bank of Ethiopia in Michele
branch.

4.2 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.

4.2.1 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 managers of Michele bank
control cash receipts in different procedures, the bank prepares record of all
cash receipts as soon as cash is received, because most theft of cash occurs
before record is made. The bank designated cashiers are authorized to handle

18
cash receipts different individual receive cash record cash, receipts and deposit
and hold the cash.

4.2.2 Control over cash payments

Cash is paid for several reasons, such as to pay expense and liabilities or the
purchase asset. As the managers of Michele bank the paying teller is only
responsibility for making payment and required to check that the signature
and the cheque 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 cheques and vouchers are journalized and
be compared with the total submitted 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 4.9 Response regarding cash receipt and payment

Did the bank manage its Response No employee Percentage

cash Payment and cash (%)
receipts properly? Yes 8 100%

N0 - -

Total 8 100%

Source: - Questionnaire, 2017

As it is observed from the above table, the response of the respondents shows
that all of the 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 cheque.

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

19
 CHAPTER FIVE

5 CONCLUSIONS AND RECOMMENDATION

5.1 CONCLUSION

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

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

years between 3-5 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 practical 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 cheque.
 The bank of Michele branch have relatively enough (sufficient) short term
financing for its normal operation which come from different source like
customer deposit and capital reserve.

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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 company’s 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.
 Commercial Bank of Michele branch use effective and efficient
updated technology such as U.S debit card and third party draft
because it reduce cashier liability, provide timely payments, reduce
the risk of theft and fraud for the improvement of internal control
cash management practice is Advisable by the researcher.
 Although 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.
 Finally, the researcher suggests that because of cash is liquid 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.

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 REFERENCES

 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.

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 Appendix
DILL UNIVERSITY
Questionnaires
College of Business and Economics
Department of Accounting and Finance
Dear respondent

The purpose of this questionnaire is prepared to gather pertinent data from the

Commercial Bank of Ethiopia in Dilla Town Michele branch. For the

preparation of research entitled cash management practice in Commercial

bank of Ethiopia. The research was conducted in partial fulfillment of B.A

degree in accounting and Finance in Dilla University. then your genuine

response for the following question is extremely important for the successful

completion of this paper the information provide used for only academic

purpose and will be kept highly confidential.

I would like to thank you in advance for your cooperation and

scarification of your time!!

General direction

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  Please don’t write your name

 Please put “ or on the appropriate box

 You can choose more than one alternative

 Give your answer for open ended question in the blank space

Part one Background Information

1. Sex; - Male  Female 

2. Service year in the bank

1-3 year  3-5 year  above 5 year 

3. Educational Qualification

Diploma  degree  Master  others specify 

Part two Questions

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

Customer’s deposits  other (specified) 

Capital reserve 

2. Does the bank has cash budget

Yes  no 

3. If you say yes in what terms?

Monthly  semi annually 

Quarterly  annually 

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

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 Mostly excessive relatively deficit 

Optimum  mostly deficit 

5. Did the bank manage its cash payment and cash receipt properly?

Yes  No 

6. What is your responsibility in the bank?

Accountant  secretary  other specify 

Casher  manager 

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

______________________________________________________________________________

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