Effects of Cash Management Practices on Operational Performance of Selected Public Hospitals in Kisii County, Kenya

Abstract

Cash management is necessary service mismatches between the timing of payments and the availability of cash may interfere with operations of a firm. Studies have noted that many hospitals have maintained large cash reserves and liquidity positions within their investment portfolios in an effort to partially accommodate unforeseen expenditure. However, inadequate cash management practices among the hospitals has led to slow rate of service delivery, accompanied with regular strikes of employees, insufficient medicines and other basic equipment for use in hospitals and employee strikes which are all linked to management of funds. The objectives of the study were to identify the effects of preparing cash budgets as cash management practice on operational performance of public hospitals, to determine the effects of operating bank accounts as cash management practice on operational performance of public hospitals and to establish the effects of Book Keeping as cash management practice on operational performance of public hospitals. The descriptive survey research design was adopted in the study. The study was undertaken in Kisii County. The target population was 99 respondents consisting of 34accountants, 30 Medical Superintendents and 35 assistant administrators of all public hospitals in Kisii County. The sample frame for the study was 31 public hospitals within Kisii County. The sample size was 99 respondents which was selected using census sampling technique. Primary data were collected using a questionnaire. The data were tabulated, then analyzed using descriptive and inferential statistics with the help of Social Sciences (SPSS) version 22 software. Descriptive statistics involved the use of weighted averages and percentages while inferential statistics involved the use of ANOVA and regression analysis. The findings revealed that cash budgets assist in making cash flow projections and ensures budgetary control and controls a hospital’s spending habits although and that it does not create competition of resources and politics; operating bank accounts ensured security of hospital funds besides helping keep track of hospital transactions; the hospitals keep records of all cash payment and receipts on daily basis, facilitating accountability that improves operational performance of public funds. The ANOVA results revealed that, at 5% level of significance, cash budget, operating bank account(s) and book keeping all have a significant influence in determining the operational performance of public hospitals. The findings from regression analysis realized that that cash budgeting account for 38.9% effect size in influencing operational performance, operating bank accounts account for 14.1% effect size in influencing operational performance while book keeping account for 49.3% effect size in influencing operational performance in public hospitals. The study findings are helpful to the County governments in understanding the importance of preparing cash budgets, operating bank accounts and Book Keeping to improve operational performance of public hospitals. The study will also be helpful to relevant stakeholders in the health sector and the management of these hospitals on having proper management practices in their institutions.

Keywords: Cash Management Practices, Operational Performance, Health institutions