Thesis Sample 4

Document Code: DCAVRKMI-F-GRPF
MANUEL S. ENVERGA UNIVERSITY FOUNDATION

Lucena City Document Title: Undergraduate Research Proposal Form
An Autonomous University Page No.: Page 1 of 73
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DR. CESAR A. VILLARIBA RESEARCH AND Effectivity Date: January 2018
KNOWLEDGE MANAGEMENT INSTITUTE Prepared by: DCAVRKMI
Reviewed by: QMR
QUALITY FORM Approved by: President
Research Title: Cash Management Practices of MSME’s in the 2nd District of

Quezon Province: Impact to Profitability.
I. Name of Researcher :
Degree :
Specialization :
Researcher's Contact Details :
Name of Research Adviser : Dr. Flormando Baldovino
1. Abstract
The aim of this study was to determine the cash management practices of
small, micro and medium enterprises in the 2nd District of Quezon Province and its
impact to the profitability of the business. Data were collected from the different
micro, small and medium enterprises in the 2nd District of Quezon with their
respective managers, accountants, and accounting staff as respondents. A self-
structured questionnaire was formulated to determine the background characteristics
of the respondents in terms of age, sex, educational background, highest
educational attainment, position held in the enterprise and length of service. The
characteristics of the enterprises studied in terms of form of business, number of
years in business, nature of business, person responsible with cash management
and number of employees were determined also as well as the cash management
practices of MSMEs in the 2nd District of Quezon in terms of methods of financial
records keeping as to disbursement, information and communication, accountability,
and monitoring. Likewise, the records kept on cash transactions, and ways of
investing temporary cash surplus were also determined. In the same manner, the
significant difference on the cash management practices when respondents are
grouped according to background characteristics and the significant relationship
between cash management practices and the profitability of MSMEs in the 2 nd

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District of Quezon were likewise determined. The results of the study was used as
basis in the formulation of a cash management enhancement guide for the small,
micro and medium enterprises to manage their cash effectively and optimize their
resources.
Keywords: Cash management, micro-small-medium enterprises, business
profitability
2. Background
a. Rationale of the Research
Cash is the lifeblood of every business, big and small alike (Abioro, 2017). A
business may be profitable and yet without cash to meet its obligation as they fall
due will be forced to close down (Enow, 2016). By contrast, a loss making business
may still continue to operate if it has cash. Effective cash management does not only
increase chances of survival of a business, it also helps to attract investors who can
fund its expansion, as the first thing that investors look for when evaluating a
business is its cash flow, which, in turn, reflects its cash management practices
(Merchant Factors, 2017).
Cash necessitates proper monitoring, protection, control and better
management in order to safeguard the profitability of any business Marie (2015).
Efficient cash management practices are much more than prevention of bankruptcy
and entail reduction of the risk a company is exposed to Maness (2016). Good cash
management practices are greatly argued to an urgent need of Micro Small and
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Medium Enterprises. Every business is at risk of bankruptcy because timing is
important even if their business was profitable at that time, they ran into problems
because the payments from customers come in too slowly, and they had too many
outflows while they were waiting their customers to pay.
According to Maness (2016) ultimately, every business is about generating
and investing cash and managing cash flow, day-in and day-out. Managing cash is a
daily chore in MSMEs, and the manager or owner must get involved more often than
they usually do. The owner or manager cannot leave this to the controller alone. It
has been observed that too many MSMEs owners all but shut their eyes and cross
their fingers when paying out cash. As well, it has been noted that the owners and
managers of the enterprises hesitate to push when getting cash from customers is a
challenge. This will not happen if the MSMEs owners want to grow the company
through practice of proper cash management.
Because of the size of micro, small and medium enterprises, a simple cash
management mistake is likely to lead to closure of an enterprise as there is no
chance for management to learn from its past mistakes. Lack of planning, improper
financing and poor management have been cited as the main causes of failure of
some enterprises. Lack of credit has also been identified as one of the most serious
constraints facing MSMEs thus hindering their development.
Unlike their large counterparts, micro, small and medium enterprises that
have access to a variety of cash sources have to manage their cash effectively if
only to survive.
In consideration of the existence of micro, small and medium enterprises in
the 2nd District of Quezon Province, consists of Lucena City and the Municipalities of
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Sariaya, Candelaria, Tiaong and San Antonio, the researcher decided to conduct this
study in order to assist these enterprises on proper cash management and make
them profitable hence, continue to exist in the business arena. Many MSMEs also
take a passive approach to their cash management rely on manual processes or
simple accounting software to manage their cash even as their businesses grow
(Enow, 2015). Eventually, these businesses face liquidity problems that result in their
closure.
b. Purpose of the Research
The purpose of this research was to examine cash management practices of
MSMES research by determining its impact on the profitability of Micro, Small and
Medium Enterprises in the 2nd District of Quezon Province.
Specifically, it sought answers to the following:
1. What is the background characteristics of the respondents in terms of:
1.2. age;
1.3. sex;
1.4. highest educational attainment;
1.5. position held in the enterprise; and
1.6. length of service?
2. What are the characteristics of the enterprises being studied in terms of:
2.1. form of business;
2.2. nature of business;
2.3. person responsible with cash management; and
2.4. number of employees?

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3. What are the cash management practices of MSMEs in the 2 nd District of
Quezon in terms of:
3.1. methods of financial records keeping;
3.1.1. disbursement;
3.1.2. information and communication;
3.1.3 accountability; and
3.1.4. monitoring?
4. Is there a significant difference on the cash management practices when
respondents are grouped according to background characteristics?
5. Is there significant relationship between cash management practices and the
profitability of MSMEs in the 2nd District of Quezon.
c. Theoretical Framework
Since the study dealt about the impact of cash management practices on the
profitability of micro, small and medium enterprises in the 2 nd District of Quezon
Province, this is anchored with the accountability theory which has greatly expanded
its horizon. Yang (2016) introduced accountability theory stating that “accountability
is established by principal-agent relationship, which starts by entrusted behaviors,
and democratic relationships. When such relationship is established, the trustee has
responsibility in acting with greatest bona fides to meet rigorously the principals’
intention in the most economic and effective way, and this kind of responsibility is
known as “accountability”. After the agent completes the task, he should report to the
principal. The principal-agent relationship ends only when the principal approves."
His main points include: agents should obey principals’ intention strictly and act for
the best of it. They should take the most economic, effective and strict measure to
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maintain and use resources, establish necessary accounting and internal control
system and report to the principal the actual results of the cost and revenue that
attributed to the task.
In order to facilitate report and censorship, it is necessary to record status of
task, usage of resources and related cost and revenue. Evidence should be
documented to prove that accountability is completed. He further stated that the
history of human society is a kind of history that accountability develops, which is
reflected by the alternation of principals and agents position due to conventional
forces, the popularization of principal-agent relationship, the increasingly strict
supervision on accountability and the growing abundance of its content.
The form of accountability grows from unitary or chain mode, to crossing and
diversifying pattern. Along with the social progress, the organization becomes more
complex, so does the principal-agent relationship. Thus far, accountability covers at
least reporting responsibilities, property maintenance, law & regulation compliance,
economy, effectiveness, efficiency and social responsibility. Wang (2017) pointed out
that its content can be divided into financial accountability and management
accountability on the basis of classification of accountability. The former requires the
agent to act with the greatest kindness, ensure security and integrity of principal’s
asset and obey related legal, ethical, technical and social requirements. The latter
requires the agent must not only operate business legitimately, but also operate
effectively and fairly, which means that agent should use and manage resources
according to the principle of economy, efficiency, effectiveness, fairness and

Profitability
environmental-friendliness.
Financial
Disbursement
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Information and
Communication
Accountability
Monitoring
The success of any business depends on how the management has planned
and controlled its cash flows. Ineffective cash management will disrupt the firm’s
smooth operation and can even lead to insolvency. Thus, cash management
practices assume more significance than other current assets because cash is the
most important asset that a firm holds. Hence, proper financial disbursement,
financial information and communication, financial accountability and monitoring
need utmost consideration in order to ensure the profitability of the business.
The accountability theory is an important theoretical source of accounting for
which cash management is a crucial cornerstone that produces, develops and
changes the accounting theory. If there were no accountability, no auditing would
exist. People understand auditing only when they understand accountability. It
involves the following six components: the annual financial statements, report on
control structure, report on legislation and contract compliance, report on efficiency
and effectiveness of resources utilization, report on annual objectives and how target
has been realized, and report on prevention of error and fraud. He stated further that
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accountability is the soul of modern accounting and auditing and the essence of
modern accounting and auditing is accountability (Hightowe, 2016).
Above theories are of significance to the study as cash control serves as
fundamental factor that breath life to internal control, the very heart of accounting
and auditing.
d. Literature Survey
Overview of Small, Micro and Medium Enterprises
While the importance of the small, micro and medium sector and the informal
sector is acknowledged the world over, defining an SME is a challenging task. The
issue of what constitutes a small or medium enterprise is a major concern in the
literature. Searching for a definition of SME can be frustrating as there are as many
definitions as there are authors on the subject. Over the years there have been many
attempts at defining what constitutes small and medium enterprises. Researchers
and policymakers have used a variety of criteria including; total worth; relatively size
within industry; number of employees; value of products; annual sales or receipts;
and net worth (Cochran, 2015 ).
The United Nations Industrial Development Organization (UNIDO) also used
number of employees to define SMEs by giving different classifications for
industrialized and developing countries (Elaian, 2016). The definitions for
industrialized countries are given as follows: Large firms with 500 or more workers;
Medium firms with 100-499 workers and Small firms with 99 or less workers. For the
sake of emphasis, the Ghana Statistical Service (GSS) considered firms with fewer
than 10 employees as small-scale enterprises. Ironically, the GSS in its national
accounts considered companies with up to 9 employees as SMEs (Kayanuala &

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Quartey, 2016). The National Board for Small Scale Industries (NBSSI), defines
SMEs as an enterprise which employs not more than 29 workers with an investment
(excluding land, building and vehicles) not exceeding GHC 96,000. It is evidenced
from the above that small businesses defy specific definition hence; there is no
generally accepted definition for the concept. Whatever the definition and regardless
of the size of the economy, the growth of the SMEs throughout the country is crucial
to its economic growth. This study therefore defines SMEs as firms employing less
than 20 employees. Quezon is a province of the Philippines in the CALABARZON
region of Luzon Island which joins NCR and region 3 as the top three regions with
the biggest shares of total income generated from local sources, mostly from tax
revenues which are eventually brought by enterprises in the region. Micro, Small,
and Medium Enterprises (MSMEs) comprise 99.6% or 816,759 of all registered
business enterprise in the Philippines and employ 70% of the workforce. Out of
816,759M SMEs in the country 91% or 743,250 accounts for Micro, 8.6% for Small
Enterprises and .4% or 3,287 is for Medium Enterprises. This data showed that
micro businesses mostly constitute the overwhelming source of employment. The
recent trends in value added by MSMEs in the country and their sales indicate a
growing share. MSMEs as a whole have been steadily growing year after year with
the overall industrial growth, as indicated by relevant factors, including the number of
establishments and the number of employees. Based on Republic Act 6977 enacted
in 1991 as amended by RA 8289 and further amended by RA 9501(the Magna Carta
for Micro, Small and Medium Enterprises) defined MSMEs as any business activity
or enterprise engaged in industry, agribusiness and/or services, whether single
proprietorship, cooperative, partnership or corporation whose total assets, inclusive

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of those arising from loans but exclusive of the land on which the particular business
entity’s office, plant and equipment are situated must have value falling under the
following categories (Esmeralda, 2017)
Review of literature shows that cash management is premised on the internal
control system which is designed to assure that all businesses promote performance
leading to effective accomplishment of objectives and goals, safeguard assets,
check the accuracy and reliability of financial and other key data, promote
operational efficiency and economy, and encourage adherence to applicable laws,
regulations and prescribed managerial policies and practices.
Cash management
Managing cash is becoming ever more sophisticated in the global and
electronic age of the 1990s as financial managers try to squeeze the last dollar of
profit out of their cash management strategies (Block and Hirt, 2017). Abel (2017)
argues that cash is crucial in every business in terms of enhancing its survival and
prosperity. Marfo (2016) also noted that cash is the hub and most coveted of all the
assets of any business. Good cash management can have a major impact on overall
working capital management. It is objectively used to manage and determine the
optimal level of cash required for the business operation and invested in marketable
securities, which is suitable for the nature of the business operation cycle (Gitman,
2015). According to Mclaney (2016), cash is much more than just one element of
working capital. As the medium of exchange and store of value, cash provides the
linkage between all financial aspects of the firm. More specifically it links short-and
long-term financing decisions with one another, with decisions involving investment
both in fixed assets and working capital. The term cash refers to the most liquid of
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assets, including demand deposits, money market accounts and currency holdings.
Moyer (2016) observed that cash and marketable securities are the most liquid of the
company’s assets. Cash is the sum of currency a company has on hand and the
funds on deposit in bank checking accounts. Cash is the medium of exchange that
permits management to carry on the various functions of the business organization.
According to Keynes (2016), positions on the motive for holding cash are
merely transaction, precautionary and speculative motives. Companies hold cash in
order to bridge the interval between the time of incurring business cost and that of
the receipt of the sale-proceeds. In other words, companies hold a certain amount of
cash in order to meet the regular expenses of their activity. Therefore, the higher the
firm’s ability to schedule its cash flows (depending on their predictability), the weaker
the transactions-motive for holding cash would be. The transaction motive illustrates
the cash holding of firms and therefore more applicable to SMEs. Weston and
Copeland (2017) stated that companies need a cash reserve in order to balance
short term cash inflows and outflows since these are not perfectly matched. This
they referred to as the transactions motive for holding cash, where the approximate
size of the cash can be estimated by forecasting cash inflows and outflows and by
preparing cash budgets. In addition to the cash reserve held for day-to-day
operational needs, cash may be built up to meet
Cash management requires business owners such those of micro, small and
medium enterprises to establish clear, firm financial management policies in order to
maximize cash balances at the optimum level.
While the overall purpose of cash management is to help micro, small and
medium enterprises achieve their respective missions, and help them promote
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orderly, economical, efficient and effective operations, and produce quality products
and services consistent with the business’ mission; safeguard resources against loss
due to waste, abuse, mismanagement, errors and fraud; promote adherence to laws,
regulations, contracts and management directive; and develop and maintain reliable
financial and management data, and accurately present that data in timely reports.
The purpose of cash management is to monitor and evaluate how effectively
and efficiently the cash management activities are carried out within a business
organization. In addition, the implemented systems need to be in aligned with the
objectives that have been set Mendeja (2011).
In all business entities, cash is a high risk asset and vulnerable to fraud.
Having effective cash management in place and ensuring their compliance is of top
priority. All cash processes, manual or automated, must meet the objectives to
safeguard the asset against risk of loss, and prevent, deter, and detect errors and
fraud. The key controls are segregation of duties and independent verification.
Separating the custodial duties from the recording duties is the key. The bank
accounts reconciliation is an independent verification control which has been
underutilized and underappreciated as a detective and deterrent control. It has
become a mere bookkeeping routine and mathematical exercise to make book
balance = bank balance. The person who performs the bank accounts reconciliation
should not be the same person who has access to, and control over, the cash.
Verification procedures must include tracing all cash receipts to the bank record,
supporting all bank debits with approved internal records, and examining all
cancelled checks for signs of alteration. The deployment of a two-person team in the
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cash receipts process is recommended. The implementation of an independent
verification step prior to disbursing cash, or transferring funds, is recommended.
Cash will remain as a high risk area and vulnerable to fraud. Stringent
controls must be in place and deployed to mitigate the risk of loss for better cash
management. For controls to be effective there must be diligent oversight.
Cash will always be a high-risk area of vulnerability when it comes to fraud.
Temptations are great, and controls are often insufficient — leading to an abundance
of opportunity for would-be fraudsters. Stringent controls must be in place and
deployed to mitigate the risk of loss. However, there must be diligent oversight for
controls to be effective. It is imperative for today’s anti-fraud professional to
understand how to implement a proper cash control system and monitor its success
(Yngreso, 2016).
With the above concepts, it is evident that cash control serves as vital
component of financial accountability of business. By knowing what their
responsibilities are, they can help to provide reasonable assurance that the business
cash control activities are adequate and operating in an efficient manner.
Cash Management Practices
Cash management is the business strategy in managing cash for the purpose
of optimizing liquidity. Dey and Shil (2016) specifically defined cash management as
the managing of cash flows into and out of the firm, cash flows within the firm, and
cash balances held by the firm at a point of time. Each business needs to have
proper cash management to achieve the targeted goals and objectives by enhancing
their allocation and planning in the cash. From that, a good cash management will
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ensure that the business can achieve their main objectives in the long term period
and plan for a good strategy. Although cash management is a good and important
practice, many of micro and small businesses do not practice it (Burani and Eliabu,
2017), among the serious issue in cash management practices is that some of the
businesses do not have bank account to track and control their business income and
expenses. If they have the bank account, the business would be able to reduce the
tendency of cash shortage, set minimum cash balance and have monthly
reconciliation of cash book with the bank to monitor their cash.
According to Avika (2014), one of the reasons for failure in cash management
is the reluctance among entrepreneurs to prepare cash statements, such as cash
inflow and cash outflow, due to the time constraint that they face. Another issue in
cash management failure is that some businesses do not control and monitor their
sales and income. These problems will cause businesses to have insufficient money
to cover their expenses. Moreover, due to this issue, statistics have proven that 40%
of small businesses fail within the first ten years as the businesses fail to stand and
sustain for a long period. As revealed in the statistics, most businesses fail in cash
management because they find it difficult to improve their performance and growth.
For that case, only 9% out of 60% have a chance to recover their businesses. Cash
management is seen as one of the key aspects of efficient working capital
management. Cash management involves planning and controlling cash flows into
and out of the business, cash flows within the business, and cash balances held by a
business at a point in time (Pandey, 2004). According to Wetson and Copeland
(2008), cash management is concerned with optimizing the amount of cash

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available, maximizing the interest earned by spare funds not required immediately
and reducing losses caused by delays in the transmission of funds. Holding cash to
meet short term- needs incurs an opportunity cost equal to the return which could
have been earned if the cash had been invested or put to productive use. However,
reducing this opportunity cost by operating with small cash balances will increase the
risk of being unable to meet debts as they fall due, so an optimum cash balance
should be found.
Efficient cash management involves the determination of the optimal cash to
hold by considering the trade-off between the opportunity cost of holding too much
cash and the trading cost of holding too little (Ross, 2016) and as stressed by Atrill
(2003), there is the need for careful planning and monitoring of cash flows over time
so as to determine the optimal cash to hold. Good cash management can have a
major impact on overall working capital management. It is objectively used to
manage and determine the optimal level of cash required for the business operation
and the investment in marketable securities, which is suitable for the nature of the
business operation cycle. Gitman (2017) explains that “cash management” involves
planning for cash inflows and outflows, and determining the optimal balances of cash
and near-cash accounts such as marketable securities. Marketable securities are
Short-term interest-earning financial claims that can be quickly converted to cash
without any significant loss of value.
Forms of business organization
A business can be organized in one of several ways, and the form its owners
choose will affect the company's and owners' legal liability and income tax treatment.
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Here are the most common options and their major defining characteristics.
Sole Proprietorship
The default option is to be a sole proprietor. With this option there are fewer
forms to file than with other business organizations. The business is structured in
such a manner that legal documents are not required to determine how profit-sharing
from business operations will be allocated. This structure is acceptable if you are the
business's sole owner and you do not need to distinguish the business from yourself.
Being a sole proprietor does not preclude you from using a business name that is
different from your own name, however. In a sole proprietorship all profits, losses,
assets and liabilities are the direct and sole responsibility of the owner. Also, the sole
proprietor will pay self-employment tax on his or her income. Sole proprietorships are
not ideal for high-risk businesses because they put your personal assets at risk. If
you are taking on significant amounts of debt to start your business, if you've gotten
into trouble with personal debt in the past or if your business involves an activity for
which you might potentially be sued, then you should choose a legal structure that
will better protect your personal assets. Nolo, a company whose educational books
make legal information accessible to the average person, gives several examples of
risky businesses, including businesses that involve child care, animal care,
manufacturing or selling edible goods, repairing items of value, and providing
alcohol. These are just a few examples. There are many other activities that can
make your business high risk. If the risks in r line of work are not very high, a good
business insurance policy can provide protection and peace of mind while allowing to
remain a sole proprietor. One of the biggest advantages of a sole proprietorship is
the ease with which business decisions can be made.

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Ways of investing temporary cash surplus
Once the business has improved its cash flow, it will likely encounter a lovely
problem: a cash surplus for the business. Before paying down debt or investing with
extra capital, learn the pros and cons of each.
A cash surplus is the cash that exceeds the cash required for day-to-day
operations. How the business handle the cash surplus is just as important as the
management of money into and out of the cash flow cycle. Two of the most common
uses of extra cash are: paying down debt and investing the cash surplus. Like so
many other things they do for business, deciding where to use cash surplus requires
some planning and r better judgment.
Paying Down Debt
Paying down any debt a business may have is generally the first option
considered when deciding what to do with cash surplus. Rightfully so because a
short-term investment of cash surplus is not likely to yield a return equal to or greater
than the rate of interest they are paying on any of debt. It does not, for example,
make any sense to invest a cash surplus at 5 percent when they can pay down a
bank loan that is charging interest at 12 percent. However, the decision to
automatically pay down debt may not be correct in all cases. One of the key
advantages of managing r cash flow is the ability to predict the future cash
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requirements for the business. That is, it should help determine when the business
may need to rely on external financing as a source of cash. The need for external
financing may be the result of expanding business, purchasing new property or
equipment or just getting through a normal seasonal down period.
Whatever the reason, preparing a cash flow budget is the best way of
predicting these future needs for cash. With at least some indication of future cash
needs, the managers can then make some decisions regarding the best way to
finance those needs. For example, they may feel that interest rates are relatively low
at this time and that they look for them to rise in the near future. Therefore, instead of
using r cash surplus to pay off a two-year loan at 10.5 percent, it may be beneficial to
invest the surplus temporarily, and avoid a much higher interest rate on a bank loan
one year from now.
Investing the Cash Surplus
When investing a cash surplus, it is only natural to seek the highest rate of
return for investment. Four factors must be considered when making investment
decisions: risk, liquidity, maturity and yield.
Each factor plays an important role in determining the rate of return they
receive on invested cash surplus. These factors can also help determine how much
to invest and when to invest surplus. There are many investment opportunities
available for cash surplus. They must consider the advantages and disadvantages
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as well as the levels of risk, maturity, liquidity and the yields of each of r investment
opportunities. The following are just a few of the investment opportunities the
business may have checking accounts with interest, sweep accounts, treasury bills
and notes and certificates of deposit (CDs) and money market funds.
Financial or cash disbursements, also called cash payments, in accounting
refer to payments made by a company during a specified period, such as quarter or
year. It includes payments made by cash, but also by cash equivalents like checks or
electronic fund transfers. Each entry on the cash disbursements page should include
the date, amount, payment method and purpose of the transaction.
Vans (2017) which emphasized the importance of cash disbursements in
measuring the amount of money that's actually flowing out of a company, which
may be very different from the company's actual profit or loss. If business uses the
accrual method of accounting, report expenses is made when incur them, not
when the business pay them.
Moreover, Rimes (2016) in consideration of the important role of cash
disbursement in the liquidity of the business, the business should issue receipts to
customers to validate the amount of sales made. Similarly, income is reported
when it is earned, not when actually paid. Cash would also be safeguarded
through verification of cash collection and daily balancing report. But, if earnings
aren't coming through as quickly as like but paying expenses, profit could be
reported, but run out of cash. In the Cash Disbursements journal, the Cash
account is always the credit, and the debits vary depending upon the outstanding
debts to be paid. The example shows what a series of transactions look like when
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they are entered in a Cash Disbursements journal. The cash disbursement journal,
sometimes referred to as the cash payments journal, is a special journal used to
record the payment of cash by a business. The journal is simply a listing of all
payments including both cash and checks, and is used to save time, avoid
cluttering the general ledger with too much detail, and to allow for segregation of
duties. In some businesses, the cash disbursement journal is combined with
the cash receipts journal and is referred to as the cash book. The information
recorded in the cash disbursement journal is used to make postings to the
subsidiary ledgers and to relevant accounts in the general ledger. The cash
disbursement journal is a book of prime entry and the entries in the journal are not
part of the double entry posting (retrieved September 8, 2018 from
www.bookkeeping.com).
The information listed in the cash disbursement journal is as follows under a
format, which is usually multi-column. The information in the journal is taken from
source documents such as check stubs, cash payment vouchers etc., and typically
includes the following: transaction date, description, check number, amount, cash
payment type columns (accounts payable, cash purchases, taxes etc.) The cash
payment type columns will depend on the nature of business. Some businesses
simply have one column to record the cash amount whereas others need additional
columns for accounts payable, discounts received, cash purchases etc. The cash
disbursement journal should always have an ‘other’ column to record amounts which
do not fit into any of the main categories.
In ensuring cash control, some businesses also use the following: journal;
general ledger; and cash receipt book. In addition to the aforementioned, some
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businesses maintain the following books: sales book, purchases book and subsidiary
ledgers for receivables and payables. The Journal is a chronological record of
transactions reflecting the following information – names of accounts to be debited or
credited, the amounts, and any additional information about the transaction (can be a
brief explanation of the transaction). A reference to the account code is also
sometimes the General Ledger reclassifies and summarizes, by account, information
originally recorded in the Journal. Thus, each item on the balance sheet and income
statement covering assets, liabilities, owner’s equity, revenue and expenses is
included in the General Ledger. A ledger is used to record every transaction twice
based on the idea that each transaction affects at least two accounts. For example,
in a transaction involving the purchase of an asset, the increase in fixed assets
(debit) is matched with an entry reflecting a decrease in cash (credit). The Cash
Receipts Book is used to record all transactions involving the inflow of cash into the
business, whether from revenues or other sources. Information recorded includes
date of transaction, official receipt no., amount, and nature of transaction. The sales
book records all transactions involving the sale of goods or services. Information
recorded include date, invoice no., amount, customer name and type of transaction –
whether cash or credit. The Purchases Book records all transactions related to the
acquisition of raw materials or inventory. Information recorded include date of
purchase, purchase order No., stock number of item purchased, purchase price, and
whether bought on credit or cash. Separate accounts for individual customers and
suppliers can be maintained in subsidiary ledgers. These subsidiary ledgers provide
the details of the amounts posted in the General Ledger. The Accounts Receivable
ledger is useful for monitoring the level of receivables for each customer. The
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Accounts Payable ledger, on the other hand, keeps track of amounts owed to
suppliers/creditors. Knowing the level of the accounts payable and when these are
due makes for better cash control and also contributes to establishing a good credit
standing with your suppliers and creditor cash disbursements and lower purchasing
costs. Effective management of payables has a direct impact on profitability. With
proper controls in place, such as scheduled payments, you can take advantage of
supplier discounts and significantly lower purchasing costs. Accounts payable can be
used in both centralized and decentralized operations. The system handles
chargeable material supply items, vouchering, and the direct allocation of supplier
charges to work orders. An invoice approval process allows to approve invoices
either by batch or on an individual basis. Disbursements can be made via electronic
funds transfer or check. To optimize the effects of cash disbursements on
profitability, the system provides a payment-scheduling capability to ensure full
advantage of all supplier discounts. Visibility of invoice disbursements is achieved
through integration with the requisition and purchase order approval capabilities.
Payable invoice entries are matched with purchase order receiving to facilitate the
update of purchasing, inventory, and work-in process records. Online invoice
processing facilitates the full distribution of costs for material and services to multiple
general ledger accounts. The system is fully integrated to support direct charge
posting to work-in-progress accounts. Automatic amount balancing during invoice
entry ensures complete and accurate ledger updating (Ward, 2011).
Another important determinant of cash management is information and
communication. This is essential to effecting effective cash management;
information about an organization's plans, control environment, risks, control

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activities, and performance for these must be communicated up, down, and across
an organization. Reliable and relevant information from both internal and external
sources must be identified, captured, processed, and communicated to the people
who need it - in a form and time frame that is useful. Information systems produce
reports containing operational, financial, and compliance-related information that
make it possible to run and control an organization. Information and communication
systems can be formal or informal. Formal information and communication systems -
which range from sophisticated computer technology to simple staff meetings -
should provide input and feedback data relative to operations, financial reporting,
and compliance objectives; such systems are vital to an organization's success. Just
the same, informal conversations with customers, suppliers, regulators, and
employees often provide some of the most critical information needed to identify
risks and opportunities.
Randall (2011) said that pertinent financial information must be identified,
captured and communicated in a form and time frame that enables people to carry
out their responsibilities. Effective communication must occur in a broad sense,
flowing down, across and up the organization. All personnel, particularly the
management, must receive a clear message from the accounting department that
control responsibilities must be taken seriously. They must understand their own
role in the internal control system, as well as how individual activities relate to the
work of others. They must have a means of communicating significant information
upstream. On-going evaluations, separate evaluations, or some combination of the
two are used to ascertain whether each of the five components of internal control,
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including controls to affect the principles within each component, is present and
functioning.
On-going evaluations, built into business processes at different levels of the
entity, provide timely information. Separate evaluations, conducted periodically, will
vary in scope and frequency depending on assessment of risks, effectiveness of on-
going evaluations, and other management considerations. Findings are evaluated
against criteria established by regulators, recognized standard-setting bodies or
management and the board of directors, and deficiencies are communicated to
management and the board of directors as appropriate.
Effective information and communication identified, captured and
communicated pertinent financial information in a form and timeframe than enables
people to carry out their responsibilities. This component of internal control is critical.
It not only includes information systems produced reports of operational, financial
and compliance-related information, but it also includes the day-to-day
communication processes among employees, supervisors and Senior Management.
It is also important that the information and communication flows up and down the
organizational structure and flows across departments and divisions. Information and
communication are necessary for the entity to carry out internal control
responsibilities to support the achievement of its objectives. Management obtains or
generates and uses relevant and quality information from both internal and external
sources to support the functioning of internal control. Communication is the
continual, iterative process of providing, sharing, and obtaining necessary
information. Internal communication is the means by which information is
disseminated throughout the organization, flowing up, down, and across the entity. It
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enables personnel to receive a clear message from senior management that control
responsibilities must be taken seriously. External communication is twofold: it
enables inbound communication of relevant external information and provides
information to external parties in response to requirements and expectations.
Ongoing evaluations, separate evaluations, or some combination of the two
are used to ascertain whether each of the five components of internal control,
including controls to effect the principles within each component, is present and
functioning. Ongoing evaluations, built into business processes at different levels of
the entity, provide timely information. Separate evaluations, conducted periodically,
will vary in scope and frequency depending on assessment of risks, effectiveness of
ongoing evaluations, and other management considerations. Findings are evaluated
against criteria established by regulators, standard-setting bodies, or management
and the board of directors, and deficiencies are communicated to management and
the board of directors as appropriate.
Mijares (2010) said that the organization obtains or generates and uses
relevant, quality information to support the functioning of internal control. It internally
communicates information, including objectives and responsibilities for internal
control, necessary to support the functioning of internal control, and communicates
with external parties regarding matters affecting the functioning of internal control.
Also, the organization selects, develops, and performs ongoing and or separate
evaluations to ascertain whether the components of internal control are present and
functioning, and evaluates as well as communicates internal control deficiencies in a
timely manner to those parties responsible for taking corrective action, including
senior management and the board of directors, as appropriate.

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Financial accountability as one of the important determinants of effective
cash control appears to be a rather sensitive area for business and reports on
financial scandals and rumors of misappropriation of funds continue to elicit
skepticism, fear, doubt and mistrust in the minds of some. This is unfortunate, as
according to White (2011), financial accountability is crucial to every business. For it
to be effective, each one needs to be challenged to adopt an attitude of honesty,
transparency, and submissiveness concerning the financial dealing of the business.
Financial accountability serves as a determinant of effective cash control. People
used to think about financial accountability only in terms of safeguarding the
institution’s financial and physical assets. Accountability, however, has taken on a
much larger meaning today. As internal and external forces demand more
accountability from institutions, the meaning of financial accountability has expanded
significantly. Financial accountability was fairly straightforward. Business managers
and employees are accountable to one another. They are expected to protect the
business assets from theft or misuse, and produce accurate, reliable financial
information. The key words here are control, authority, delegation, process,
procedures, approval, and verification. Businesses can find it challenging to balance
their budgets, comply with accounting and legal requirements, prepare accurate and
up-to-date financial statements, and implement systems of cash control to reduce
the risk of theft or fraud. There are plenty of examples of individuals and businesses
that failed in the performance of one or more of these basic aspects of being
financially accountable. The consequences (legal, monetary, and reputational) for
these failures can be severe. The remedies for such breaches of institutional control
(better internal controls, removing the incentive and opportunity to commit fraud,
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better training and screening of employees, audit committees and auditor rotation,
etc.) are both well-known and mostly noncontroversial.
Accountability today, however, has come to mean more than just avoiding
financial mismanagement and staying on the right side of the law, as crucial as those
two things are. Broadly speaking, accountability, as defined by Merriam-Webster’s
dictionary, means “being responsible for one’s actions.” According to author Burke
(2011), this places six demands on business managers and accountants. They must
demonstrate that delegated power and authority has been used properly, show that
the mission and priorities of the school are being achieved, report regularly on
institutional and individual performance, demonstrate that institutional resources are
being used both efficiently and effectively, ensure the quality of the business
programs and services, and answer the needs of the clients.
The interest in “accountability, metrics, and outcomes” for the restaurant
business is no longer new and has been increasing for many years now. This trend
is already in the process of changing understandings and expectations regarding
financial accountability. Financial accountability in every business organization
demands quality, efficiency/ effectiveness, and meeting the client needs. Financial
accountability means bringing to bear the full power of the business’ most valuable
and important asset: its employees. It is believed that being financially accountable
for the good financial standing of the business in the future will require a more
thoughtful approach to deciding when and how to use different kind determinants to
work on crucial issues of service quality and, when and where appropriate.
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Financial accountability ensures that there is limited opportunity for any
person to embezzle, squander or otherwise misuse funds. In order for a business
like restaurant to succeed, it needs to ensure that the organization and the people
who are working with its finances are not exposed to doubt, criticism, question and
suspicion which discredits themselves and the organization.
Financial accountability results from holding an individual accountable for
effectively performing a financial activity, such as a key control procedure within a
financial transaction process. A well-defined financial accountability structure serves
as the foundation for establishing effective financial processes. An individual
accountable for the successful completion of a key control procedure may, as policy
allows, assign the responsibility, but not the accountability, for completing the
procedure to another qualified individual. A delegation of authority enables an
individual to perform a particular activity, or procedure, at a key stage of a financial
process. Different individuals are usually delegated the authority to handle different
activities in a financial process. Each individual is accountable for successfully
completing his or her assigned activity.
Most financial activities involve processing a financial transaction in
conformity with the seven cash control standards.
The examples of financial transactions in restaurants include purchase
requisitions/requests, purchase orders, invoice payments, expense reimbursement
requests (direct payments), equipment inventory modification requests, and transfer
of expenses or funds. Accurately initiating a financial transaction through an
automated system; reviewing and approving a transaction for appropriateness,
validity, reasonableness, adequate funding, accurate accounting coding, and

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appropriate supporting documentation; certifying that the approval provided on a
transaction form is that of an authorized approver; and certifying that a processed
financial transaction appearing in the business financial record is appropriate, valid,
reasonable, adequately funded, and accurately coded.
According to Conrado (2017), in terms of financial accountability the
restaurants implements restricted access to cash registers, reconciles daily
receipts to the cash registers totals, and performs random cash and inventory
counts. Each financial transaction must have an audit trail, enabling the
identification of the specific individual handling the transaction at different stages
of the process. Each transaction must be traceable from its appearance in official
business financial records back to source documents, paper or electronic,
originating the transaction. The individual accountable for processing the
transaction at each key stage of the process must be identifiable and that
individual accountability must be documented.
Cash is king as they say … and in the restaurant industry it’s queen also.
Owners and managers must pay critical attention to cash accountability and security
as they do to food quality and customer service. All the hard work making and
serving great food can very quickly vanish and put your restaurant out of business if
cash and credit are not controlled down to the penny. So what systems and controls
need to be in place? Here are some of the major controls used in most restaurants:
written cash handling policies and procedures to use for training and holding the
team accountable. Without clear rules, money will be walking out with employees at
a fast pace; management must follow and enforce the policies as well; operating
cash in safe must have a constant value and have a system of accountability in
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which one person has control and owns it for the shift. At the end of the shift that
accountability is transferred to the incoming manager with a verification count.
Financial Monitoring is another important determinant of cash control.
Monitoring is an essential process to assess the quality of cash control over time.
This can be accomplished through ongoing monitoring activities, separate
evaluations or a combination of the two. Ongoing monitoring activities include
management and supervisory activities that take place every day. Either
management or Internal Audit may undertake separate evaluations. Cash controls
need to be monitored - a process that assesses the quality of the system's
performance over time. On-going monitoring occurs in the ordinary course of
operations, and includes regular management and supervisory activities, and other
actions personnel take in performing their duties that assess the quality of internal
control system performance. The scope and frequency of separate evaluations
depend primarily on an assessment of risks and the effectiveness of on-going
monitoring procedures. Internal control deficiencies should be reported upstream,
with serious matters reported immediately to top administration and governing
boards. Internal control systems change over time. The way controls are applied
may evolve. Effective monitoring procedures can become less effective due to the
arrival of new personnel, varying effectiveness of training and supervision, time and
resources constraints, or additional pressures. Furthermore, circumstances for which
the internal control system was originally designed also may change. Because of
changing conditions, management needs to determine whether the internal control
system continues to be relevant and able to address new risks.

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According to Bragg (2017), financial monitoring ensures that internal control
continues to operate effectively. Monitoring should forecast and budget based on
actual sales, initiates review of monthly accounts payable and receivables and
maintains a ledger to verify amount of sales. When monitoring is effective, it
provides the necessary support for management — and others who are charged
with finances — to be confident that internal control is operating effectively at any
given point in time, including at the end of the year when formal assertions by
management may be required. Monitoring controls are actions performed at the
management level designed to provide assurance that information on the
operations is appropriate, appears reasonable, and is consistently prepared. There
are some monitoring controls: comparing monthly or quarterly financial activity to
budgeted activity and investigating any unexpected variances. Management and
the board have certain expectations of revenues and expenses, in addition to how
they should fall out in comparison to the budget. Monitoring this financial activity
on a more frequent basis will help identify potential financial problems. Review
monthly accounts payable receivable and accounts payable aging reports for stale
items. The more familiar management is with the high level financial activities of
an organization, the more likely it is to be financially successful (retrieved
September 5, 2018 from www.blueandco.financialmonitoringprocedures.com).
The purpose of the financial monitoring is to provide direction for departments
in the collection of funds by clearly defining the responsibilities in the cash handling
process. Internal control requirements have been established for each business
organization to ensure the protection of the business’ assets. According to Villorente
(2010), the management needs to continually review cash handling processes to

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ensure they are being followed, train staff, and investigate unusual activity. The
following reviews should be done on a regular basis: review cash over/short account
and investigate large or unusual amounts; analyse sales forecasts and budgets to
actual sales and investigate variances (and margins where applicable); review cash
receipts ledger for unusual items or tampering; review and approve returns, refunds
and void transaction logs; review system security access; train and monitor new staff
and provide continual training to existing staff on a regular basis, i.e. at least
annually; provide customer statements on a regular basis.
Synthesis
Since above literature and studies discussed the cash management practices
of micro, small and medium enterprises and how the same affect the profitability of
business, they are of relevance to the present study as it focused on the cash
management practices of micro, small and medium enterprises in the 2 nd District of
Quezon Province and its impact to profitability.
The related literature and studies disclosed that cash management practice is
the business strategy in managing cash for the purpose of optimizing liquidity of the
business. Effective managing of cash flows into and out of the firm, cash flows within
the firm, and cash balances held by the firm at a point of time would surely ensure
the profitability of the business. It was also brought up in the review of related
literature and studies that each business needs to have proper cash management to
achieve the targeted goals and objectives by enhancing their allocation and planning
in the cash. From that a good cash management would ensure that the business
could achieve their main objectives in the long term period and plan for a good
strategy hence remain profitable all throughout.

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The information given about cash management practices of micro, small and
medium enterprises served as strong support to the findings of the study in the
results and discussion of data. It not only supported the findings of this study but it
also appraised, encapsulated, compared and contrasted, and correlated various
scholarly books, researcher articles, and other relevant sources that are directly
related to the current study.
Significance of the Research
This study would be of benefit to the following:
This will provide insights and knowledge to the concerned owners/managers
of micro, small, and medium enterprises in the 2 nd District of Quezon Province in
redefining their respective cash management practices to safeguard the business
operation against fraud and mitigate the risk of loss for better cash management.
This study will also be beneficial to the employees of the Accounting
Department of the micro, small and medium enterprises in the 2 nd District of Quezon
Province for it will serve as a fruitful and meaningful guide for them to better
understand the concept of cash management as a significant component of financial
accountability of the business.
Through this study, the colleges/universities offering business administration
courses would be able to formulate relevant curriculum in management accounting
subjects.
The students will also benefit from this study because it will serve as a fruitful
reference in being informed as to the importance of cash management in the smooth

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operation of the business. Through this, they will also gain adequate knowledge on
the value of effective cash management in ensuring the profitability of the business.
The researcher will also benefit from this research through better
understanding of cash management in safeguarding the welfare of the business This
will also be his contribution to the improvement of cash management practices in
various small, micro and medium enterprises in the 2 nd District of Quezon Province
This will serve as a reliable and current reference material for future
researchers who will conduct similar study.
a. Statement of desired outcomes
This proposed study provided significant data which are vital in assisting the
owners and managers of the different micro, small and medium enterprises in
Quezon Province for better cash management through the use of the proposed
enhancement guide on effective cash management, which in the long run assures
MSMEs business sustainability. Such guide could be used as reference material
when the management of the micro, small and medium enterprises in the 2 nd District
of Quezon Province decided to conduct a seminar among employees about the
significance of cash management.
b. Expected Outputs and Deliverables
The expected output of the study is the enhancement guide on effective cash
management of micro, small and medium enterprises.
c. Target beneficiaries of Research Results:
The 340 owners and managers of the micro, small and medium enterprises in
the 2nd District of Quezon Province were the target beneficiaries of research results.
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1. Description of method or approach
a. Research design
In this study the researcher made use of the descriptive method of research for it
is the appropriate method in determining the cash management practices of 170 small,
micro and medium enterprises in the 2nd District of Quezon province per data taken from
the Department of Trade and Industry Regional Office IV-A. Descriptive studies have
their main objective as the accurate portrayal of the evaluation of cash management
practices. This method was employed in this study because it is a fact – finding scheme
and designed to enable the researcher to adequately and accurately interpret the data
to be collected.
b. Respondents/Unit of Analysis
The owners/managers, accounting staff and the person responsible for cash
management of the enterprise were the respondents and/or point of analysis of the
study. The respondents from these small, micro and medium enterprises in the 2nd
District of Quezon Province were chosen due to their accessibility and that the
researcher believed that the respondents from said enterprises would give him credible
and reliable data needed in the successful completion of this study.
Their responses on questions about the cash management practices in
terms of methods of financial records keeping as to disbursement, information
and communication, accountability and monitoring were analyzed and evaluated.
The determination of significant difference between on the cash management

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practices when respondents are grouped according to background characteristics
and the significant relationship between cash management practices and the
profitability of MSMES in the 2nd District of Quezon Province were also done.
c. Sampling Procedures
The researcher employed the questionnaire as the main instrument for data
gathering among owners/managers, accounting staff and person responsible for
cash management of the small, micro and medium enterprises in the, who were
selected through purposive sampling as all the identified owners/managers,
accounting staff and person responsible for cash management of the micro, small
and medium enterprises in the 2nd District of Quezon Province were used as
respondents. The questionnaires were collated in groups and ranked on a four-point
type scale to determine the cash management practices of the micro, small and
medium enterprises in the 2nd District of Quezon Province terms of methods of
financial records keeping as to disbursement, information and communication,
accountability and monitoring.
In purposive sampling technique, the researcher relied on his own judgment
when choosing members of population to participate in the study. It is a non-
probability sampling method and it occurs when the elements selected for the
sample were chosen by the judgment of the researcher, which resulted in saving
time and resources in the conduct of the study.

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The researcher adopted the rating scale below and its descriptive/ qualitative
interpretation for the questionnaire used in the survey. The qualitative description
depicted the cash management practices of the small, micro and medium
enterprises in the 2nd District of Quezon Province.
Interpretation of Ratings
Scale Range Qualitative Description
Interval
4 3.51– 4.00 Strongly Agree (SA)
3 2.51– 3.50 Agree (A)
2 1.51– 2.50 Disagree (D)
1 1.00– 1.50 Strongly Disagree (SD)
d. Hypotheses
This study will deal with the following hypotheses:
H1 = There is significant difference between the cash management practices
when respondents are grouped according to background characteristics
H2 = There is significant relationship between cash management practices
and the profitability of MSMES in the 2nd District of Quezon Province.

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e. Data Analysis Plan
Data collected were tallied and presented in a matrix. The variables for
determining the cash management practices of the micro, small and medium
enterprises in the 2nd District of Quezon were analyzed using the statistical treatment
enumerated as follows:
Formula:
Percentage (%)
f
P .100
N
where: P = Percentage distribution; f = frequency; X = scale

N = Total number of respondents
Weighted Arithmetic Mean
f x  f x  ...  f k xk 
fi xi
X 1 1 2 2  i 1k
f1  f 2  ...  f k
f
i 1
i
where: X = Weighted Arithmetic Mean

k
fx
i 1
i i = sum of all the products of f and x, where f is the
frequency of each option and x is the weight of each option
k
f
i 1
i = sum of all the subjects
To determine the profile of the background characteristics of the respondents in
terms of age, sex, highest educational attainment, position held in the enterprise and
length of serve, as well as the characteristics of the enterprises in terms of form of

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business, nature of business, person responsible with cash management and
number of employees, the records kept on cash transactions and ways of investing
temporary cash surplus, the percentage distribution was used. Weighted mean was
utilized in order to find out the cash management practices of MSMEs in the 2 nd
District of Quezon Province in terms of methods of financial records keeping as to
disbursement, information and communication, accountability and monitoring as well
as records kept on cash transactions and ways of investing temporary cash surplus.
To determine the significant difference on the cash management practices
when the respondents are grouped according to background characteristics, one-
way analysis of variance (ANOVA) was used.
However, in determining the significant relationship between cash
management practices and profitability of MSMEs in the 2 nd District of Quezon
Province, the Pearson correlation coefficient was used with the following formula:
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f. Research Paradigm
INPUT PROCESS OUTPUT
Background
characteristics of Assessment on
the respondents cash Enhancement
and management Guide on Effective
characteristics of practices of Cash Management
the enterprises as micro, small and for Micro, Small
well as the medium
cash management enterprises and
and Medium
practices of small evaluation of the Enterprises
micro, and medium data gathered
enterprises
Figure 1
Research Paradigm
As shown in the research paradigm, the input of the study was the
determination of the background characteristics of the respondents, the
characteristics of the enterprises being studied and the cash management practices
of the small, micro and medium enterprises. Such data were used in determining the
cash management practices of the micro, small and medium enterprises in the 2 nd
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District of Quezon Province in order to come up with the output of the study an
enhancement guide on effective cash management of micro, small and medium
enterprises.
3. Results and Discussions
This part shows the background characteristics of the respondents in terms of

age, sex, highest educational attainment, position held in the enterprise and length of
service.
This part shows the characteristics of the enterprises in terms of form of

business, nature of business, person responsible with cash management and
number of employees
This part shows the cash management practices of small micro, and medium
enterprises in terms of financial records keeping as to disbursement, information and
communication, accountability and monitoring as well as records kept on cash
transactions and ways of investing temporary cash surplus
Background Characteristics of Respondents
The following details the background characteristics of respondents in terms
of age, sex, educational attainment, position held, and length of service.
Table 1
Background Characteristics of Respondents
Profile Frequency (n = 145) Percentage

Age 21 – 30 years old 77 53.1%
31 – 40 years old 46 31.7%
41 – 50 years old 22 15.2%
Sex Male 108 74.5%
Female 37 25.5%
Education College Level 37 25.5%
College Graduate 96 66.0%
Master’s Degree 12 8.3%
Position Held Owner 72 49.7%
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Cashier 13 8.9%
Manager 39 26.9%
Accounting Staff 21 14.5%
Length of Service 5 years and below 84 57.9%
6 – 10 years 33 22.8%
11 – 20 years 20 13.8%
Over 20 years 8 5.5%
Table 1 reveals the frequency and percentage distribution of the respondent’s
background characteristics.
The table shows that majority of the respondents are 21-30 years old with 77
or 53.1%, and male with 108 or 74.5%. These respondents are all educated, since
they have reached at least college level or better with 96 or 66% who have finished
college courses, 49.7% of these respondents are owners of the enterprises, hence
hands on in managing the day to day operations of the business.
According to Keynes (2016) in most enterprises, the owner is also the
manager who serves as the driving force behind the business, and as such can be
the catalyst for change in the business that occurs through or around the enterprises.
However, in some businesses, the positions of owner and manager are separated.
Mannes (20160 added that a successful entrepreneur is usually young blood and
has earned a college degree in business. He needs to be a responsible person as he is
accountable for the success or the failure of his venture, and he takes this responsibility
very seriously. And since he is the only person in-charge he is automatically the leader.
In fact, leadership qualities are one of the main aspects of an entrepreneur.
Table 2
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Background Characteristics of Enterprises
Profile Frequency (n = 138) Percentage

Form of Business Sole Proprietorship 116 80.0%
Partnership 7 4.8%
Corporation 22 15.2%
Nature of Business Manufacturing 13 9.0%
Service 80 55.2%
Merchandizing 8 5.5%
Retailer 35 24.1%
Wholesaler 9 6.2%
Number of Less than 10 83 57.2%
Employees (Micro)
10 -99 (Small) 39 26.9%
100 – 199 23 20%
(Medium)
Person Responsible Full-Time Account 21 14.5%
for Cash Staff
Owner / Manager 111 76.6%
Management
Part-Time Account 6 4.1%
Staff
Do Not Keep 7 4.8%
Records
Table 2 reveals the frequency and percentage distribution of the enterprises’
background characteristics, wherein 116 or 80% are sole proprietorship, with
service as the nature of business with 80 or 55.2%. As to number of employees
majority has less than 10 being micro enterprises with 83 or 57.2% and the person
responsible for cash management is the owner/manager with 111 or 76.6%. Seven
(7) or 4.8% do not keep financial records.
A total of thirty-six enterprises were surveyed for this study.
Based on the findings, the enterprises in the 2 nd District of Quezon Province
are sole proprietorship, has service as the nature of business with less than 10
employees and the owner/manager is the person responsible for cash management.
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They have this particular set up as they do not hire accountant or a person who is
knowledgeable of accounting procedures.
Above findings were supported by the research of Marfo (2016), which draws
upon an annual survey of small to medium sized enterprises (SMEs) undertaken by
the University of Waikato. It comprised a final sample of 10,162 small firms with
longitudinal data of their financial practices over the period 2003 to 2005. The data
was supplied by accounting firms. Firms from all industry sectors were included in
the sample and just over half (57.6%) were micro-businesses with less than 10
employees. A key variable in their analysis was the person responsible for cash
management. The study revealed that the owner/manager of the enterprises serve
as the person responsible for cash management.
Because of the high level of decision-making involved in cash management of
an enterprise, the business’ highest financial manager is usually the owner/manager.
He oversees the financial condition of the business and assist with the management
of and decision-making with regard to the cash management. The cash budget plays
an instrumental role in overall cash management by enabling the financial manager
of the business to look ahead and predict cash shortages well in advance of their
occurrence.
Methods of Financial Records Keeping
The following details the financial records keeping practices of MSMEs in the
2nd district of Quezon Province with respect to disbursement, information and
communication, accountability, and monitoring.
Table 3.
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Cash management practices of small micro, and medium enterprises in terms of

financial records keeping as to financial disbursement
CRISS
Indicators Weighted Std.
Mean Deviation Descriptive Rating
We follow the prescribed accounts payable 2.93 1.23 Extensively
policies and procedures Applied
We prepare the vouchers and necessary 3.23 1.08 Extensively
documents before the payment of Applied
accounts payable
We check and verify all supporting 2.55 1.27 Extensively
documents before the final approval of Applied
voucher
There are authorized signatories for the 2.52 1.20 Extensively
approval of vouchers and checks Applied
There are other individuals authorized to 2.09 1.03 Moderately
process accurate payable transactions Applied
We follow procurement policy that includes 2.99 1.11 Extensively
policies and procedures for acquiring Applied
capital items
General Weighted Mean 2.72 (Strongly Agree)
Likert Scale: 1.00 – 1.74 (Not Applied)
1.75 – 2.49 (Moderately Applied)
2.50 – 3.24 (Extensively Applied)
3.25 – 4.00 (Very Extensively Applied)
The table amplifies the level of practice on financial records keeping with
respect to financial disbursement as perceived by the respondents of this study. The
indicator “We prepare the vouchers and necessary documents before the payment of
accounts payable” is rated highest with a weighted mean of 3.23 (extensively
applied). This is followed by “We follow procurement policy that includes policies
and procedures for acquiring capital items” with a weighted man of 2.99 (extensively
applied). While the least rated indicator is “There are other individuals authorized to
process accurate payable transactions” with a weighted mean of 2.09 (moderately
applied).
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Overall, the financial disbursement aspect of financial record keeping is rated
2.72 or extensively applied.
The data indicate that the enterprises in the 2 nd District of Quezon extensively
applied financial records keeping in terms of financial disbursement as they want to
ensure that the cash flow of the business is well-managed.
In business so many transactions take place. To record any transaction in
account books, first of all a voucher is prepared by the accountant. Therefore, the
vouchers serve as the base of the accounting system. Voucher is prepared by the
accountant with the help of source document. Source document means any proof
relating to the business transactions. These documents include: bills, cash memos,
receipts, bank deposit slips, cheque book and other details which show the
happening of any transaction in a business firm.
Above findings were supported by Ross (2016) the preparation of forecast of
cash receipts, vouchers and necessary documents before the payment of accounts
payable give out an idea of future financial requirements. Therefore, the
management of business needs to determine the schedules of monthly
disbursements and collection schedules of creditors to ensure efficient cash planning
and the financial needs of the business will be meet with reduced possibility of the
cash balances which lowers the business profitability and cash deficits which can
lead to business failure.
Moreover, Rimes (2016) in consideration of the important role of cash
disbursement in the liquidity of the business, the business should issue receipts to
customers to validate the amount of sales made. Similarly, income is reported
when it is earned, not when actually paid. Cash would also be safeguarded
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through verification of cash collection and daily balancing report. But, if earnings
aren't coming through as quickly as like but paying expenses, profit could be
reported, but run out of cash. In the Cash Disbursements journal, the Cash
account is always the credit, and the debits vary depending upon the outstanding
debts to be paid. The example shows what a series of transactions look like when
they are entered in a Cash Disbursements journal. The cash disbursement journal,
sometimes referred to as the cash payments journal, is a special journal used to
record the payment of cash by a business. The journal is simply a listing of all
payments including both cash and checks, and is used to save time, avoid
cluttering the general ledger with too much detail, and to allow for segregation of
duties. In some businesses, the cash disbursement journal is combined with
the cash receipts journal and is referred to as the cash book. The information
recorded in the cash disbursement journal is used to make postings to the
subsidiary ledgers and to relevant accounts in the general ledger. The cash
disbursement journal is a book of prime entry and the entries in the journal are not
part of the double entry posting (retrieved September 8, 2018 from
www.bookkeeping.com).
Table 4.

financial records keeping as to Financial Information and Communication
CRISS
We ensure all financial transactions are 3.05 1.03 Extensively Applied
properly recorded
We prepare weekly report of financial 2.95 1.45 Extensively Applied
transactions
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We provide input and feedback data 2.85 1.26 Extensively Applied

relative to financial operation
We identify and communicate financial 2.99 .98 Extensively Applied
inform
We ensure completeness and accuracy of 3.34 .90 Very Extensively
financial records Applied
We keep the management well-informed of 2.89 .57 Extensively Applied
the business financial standing
General Weighted Mean 3.013 (Extensively Applied)
The table shows the level of practice on financial records keeping with respect
to financial information and communication as perceived by the respondents of this
study. The indicator “We ensure completeness and accuracy of financial records” is
rated highest with a weighted mean of 3.34 (very extensively applied). This is
followed by “We ensure all financial transactions are properly recorded” with a
weighted man of 3.04 (extensively applied). While the least rated indicator is “We
provide input and feedback data relative to financial operation” with a weighted mean
of 2.86 (extensively applied).
Overall, the financial information and communication aspect of financial
record keeping is rated 3.013 or extensively applied.
The data implied that the enterprises in the 2nd District of Quezon Province
truly practice cash management such as financial information and communication in
order to safeguard the liquidity of the business.
Above findings are supported by Hightowe (2016) that for any business
enterprise and for the people who run it , the importance of accurate financial
records cannot be underestimated as even the smallest number in the balance sheet
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for example could have a huge impact on the business. Accurate financial records
are also essential to catch costly mistakes or internal wrongdoing early on the
process. If any illegal activity is taking place, there is no better way to catch it than
through discrepancies in the numbers. If an error has been made, reconciliation
activities can find them.
Likewise, Gitman (2017) more than anything else accurate financial records
induce trust in the business. Investors need a sign that a business is doing well and
they could put their hard-earned money in its business. Besides, financial records
open a window for educated decision-making and strategic planning. The working
capital statements, fund flow statements, cash flow statements and trading account
all have to be consulted every day for evaluating how much money the business is
making, how much money they need, the reserves that they need to set aside and
how they propose to increase sales and boost financing.
With the above, it is imperative that business should strive to maintain the
accuracy of its financial records as it is a critical factor for ensuring that it presents
the actual financial picture of the business to management and external
stakeholders.
Table 5.

financial records keeping as to Financial Accountability
CRISS
We reconcile daily receipts to the cash 3.41 .909 Very Extensively
registers Applied
We reconcile and verify the register 3.43 .864 Very Extensively
beginning and ending balances Applied
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We analyze the total number of sales 3.63 .633 Very Extensively

Applied
We implement restricted access to cash 3.36 .910 Very Extensively
registers Applied
We hold an individual accountable to any 3.26 .889 Very Extensively
financial activity Applied
We perform random cash and inventory 3.18 .977 Extensively Applied
counts
General Weighted Mean 3.38 (Very Extensively Applied)
to financial accountability as perceived by the respondents of this study. The
indicator “We analyze the total number of sales” is rated highest with a weighted
mean of 3.6345 (very extensively applied). This is followed by “We reconcile and
verify the register beginning and ending balances” with a weighted man of 3.4276
(very extensively applied). While the least rated indicator is “We perform random
cash and inventory counts” with a weighted mean of 3.1793 (extensively applied).
Overall, the financial accountability aspect of financial record keeping is rated
3.3793 or very extensively applied.
practice financial accountability so as to protect the business physical and financial
assets from misuse and produce reliable financial information.
Said findings are supported by White (2011), who disclosed that financial
accountability is crucial to every business. For it to be effective, each one needs to
be challenged to adopt an attitude of honesty, transparency, and submissiveness
concerning the financial dealing of the business. Financial accountability serves as a

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determinant of effective cash control. People used to think about financial
accountability only in terms of safeguarding the institution’s financial and physical
assets. Accountability, however, has taken on a much larger meaning today. As
internal and external forces demand more accountability from institutions, the
meaning of financial accountability has expanded significantly. Financial
accountability was fairly straightforward. Business managers and employees are
accountable to one another. They are expected to protect the business assets from
theft or misuse, and produce accurate, reliable financial information. The key words
here are control, authority, delegation, process, procedures, approval, and
verification. Businesses can find it challenging to balance their budgets, comply with
accounting and legal requirements, prepare accurate and up-to-date financial
statements, and implement systems of cash control to reduce the risk of theft or
fraud. There are plenty of examples of individuals and businesses that failed in the
performance of one or more of these basic aspects of being financially accountable.
The consequences (legal, monetary, and reputational) for these failures can be
severe. The remedies for such breaches of institutional control (better internal
controls, removing the incentive and opportunity to commit fraud, better training and
screening of employees, audit committees and auditor rotation, etc.) are both well-
known and mostly noncontroversial.
Accountability today, however, has come to mean more than just avoiding
financial mismanagement and staying on the right side of the law, as crucial as those
two things are. Broadly speaking, accountability, as defined by Merriam-Webster’s
dictionary, means “being responsible for one’s actions.” According to author Burke
(2011), this places six demands on business managers and accountants. They must
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demonstrate that delegated power and authority has been used properly, show that
the mission and priorities of the school are being achieved, report regularly on
institutional and individual performance, demonstrate that institutional resources are
being used both efficiently and effectively, ensure the quality of the business
programs and services, and answer the needs of the clients.
Enow (2016) in 2008, Lehman Brothers, a global financial services company,
went bankrupt. This came as a huge shock to shareholders and the general
community who falsely believed that the multi-billion dollar company was financially
solid. The company's stocks declined sharply when people started to hear of its
troubles. The subprime mortgage crisis was a major factor in the failure of Lehman
Brothers as was poor financial management and accountability on the part of
Lehman Brothers management. Managers refused to forgo multi-million dollar
bonuses even as the company was tanking. The business managers at Lehman
managed the company's finances very poorly. The whole situation was a testament
to the need for financial accountability and management in major corporations.
Table 6.

financial records keeping as to Financial Monitoring
CRISS
We verify the issuance of pre-numbered 3.45 .76 Very Extensively
official receipts to customers upon receipt Applied
of payment
We verify cash collections and daily cash 3.45 .76 Very Extensively
position report Applied
We review official receipts, deposit slip and 3.39 .82 Very Extensively
bank statements regularly Applied
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We perform monthly bank reconciliations 3.09 1.06 Extensively Applied

regularly
We initiate review of monthly accounts 3.28 1.04 Very Extensively
payable and receivables Applied
We analyze sales forecasts and budgets to 3.36 .91 Extensively Applied
actual sales.
General Weighted Mean 3.34 (Very Extensively Applied)
to financial monitoring as perceived by the respondents of this study. The indicators
“We verify the issuance of pre-numbered official receipts to customers upon receipt
of payment” and “We verify cash collections and daily cash position report” are rated
highest with a weighted mean of 3.4552 (very extensively applied), respectively.
This is followed by “We review official receipts, deposit slip and bank statements
regularly” with a weighted man of 3.3931 (very extensively applied). While the least
rated indicator is “We perform monthly bank reconciliations regularly” with a
weighted mean of 3.0966 (extensively applied).
Overall, the financial monitoring aspect of financial record keeping is rated
3.3414 or very extensively applied.
practice financial record keeping as they know that they need to monitor the financial
performance of business for a healthier business operation and faster growth.
Above findings are supported by Esmeralda (2017), who revealed that cash is
the most liquid of assets and is susceptible to loss if not properly controlled.
Therefore, it is extremely important that a person handling cash implement and

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adhere to strong internal control such as verifying the issuance of official receipts to
customers upon receipt of payment and verifying cash collections and daily cash
position reports. The need to control cash is clearly evident and has many aspects.
Without the proper timing of cash flows and the protection of idle cash a business
cannot survive.
Moreover, Skinner (2007) disclosed that monitoring the financial performance
of business therefore creates more certainty and confidence in making both short
and long term decisions. This in turn leads to a healthier business and faster growth
rate. It also allows the business to outperform and out maneuver the competitors
who fail in this regard. By capturing data and monitoring their performance, the
business has a consistent and effective platform for making decisions; something
rivals do not possess. Management could then use this business intelligence to
navigate the business through both good times as well as the more uncertain and
volatile periods.
Table 7.
Summary Table (Methods of Financial Records Keeping)
Aspects Weighted Mean Descriptive Rating

Financial Disbursement 2.72 Extensively Applied
Financial Information and Communication 3.01 Extensively Applied
Financial Accountability 3.38 Very Extensively
Applied
Financial Monitoring 3.34 Very Extensively
Applied
General Weighted Mean 3.11 (Extensively Applied)
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The above summarizes the findings on the level of practice of financial
records keeping with respect to financial disbursement, financial information and
communication, financial accountability, and financial monitoring. It can be inferred
from the results that the “financial monitoring” aspect of financial records keeping is
rated highest which has a verbal description of very extensively applied, while rated
least is the financial disbursement with a verbal interpretation of extensively applied.
Such findings implied that there should be a greater focus on the disbursing policies
and procedures of the business organization as they affect the overall performance
of the business.
According to Moyer (2016) keeping the records organized and sorted ensures
that the business can retrieve information when it is needed the most. Even though
people in business don’t often refer back to invoices from several years ago,
situations might come up that require referencing to the paperwork. For example, if
they are audited, then they need to be sure that they know where to gather the
requested information. It can be a mess to sort through the information if the
business does not have a good system in place. As a result, it could be facing fines
or penalties because it can’t show documentation for the tax filings. Additionally,
these details are essential so that the people in business can understand the growth
and progress of the business. If they don’t measure the financial progress, then it
can be hard to determine the systematic changes that need to happen to help the
business reach higher levels of success.
Record Kept on Cash Transactions

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The following details the records of cash transactions kept by MSMEs in the
2nd district of Quezon Province.
Table 8.
Records of Transactions
Type of Transaction Records Yes Percentage

Cash receipt book / Cash disbursement book 135 93.1%
Bank Statement 102 70.3%
Official Receipt 122 84.1%
Notebook / Journal 90 62.1%
Cheque Book 48 33.1
Payslip 79 54.5%
Table 8 shows the type of transaction records kept by MSMEs in the 2 nd
District of Quezon Province, wherein majority of the respondents kept their cash
transactions through cash receipt book/cash disbursement book with 135 or 93.1@,
followed by official receipt with 122 or 84.1% and notebook/journal with 90 or 62.1%.
While rated least is cheque book with 48 or 33.1%.
The importance of keeping transaction records in the form of cash receipt
book / cash disbursement book, bank statement, official receipt, notebook / journal,
cheque book, and pay slip is paramount to meeting financial audit and financial
evaluation standards
As revealed on the table, no enterprise was surveyed in which they are one
hundred percent maintaining transaction records. Cash receipt book and official
receipt are the mostly maintained records of transactions. This implies that there is
indeed a poor practice of maintaining transaction records.

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maintain records of financial transactions to ensure control of cash flow.
Cash Surplus Investments
The following details the ways of investing temporary cash surplus by MSMEs
in the 2nd district of Quezon Province.
Table 9.
Cash Surplus Investment
Type of Investment Yes Percentage

Bank Deposit (Savings and Time Deposit) 118 81.4%
Bonds 15 10.3%
Business Expansion 61 42.1%
Stocks 27 18.6%
Mutual Funds 8 5.5%
Table 9 shows the cash surplus investment of MSMEs in the 2nd District of
Quezon Province, wherein majority of the MSMEs in the 2nd District of Quezon
Province invest cash surplus in bank deposit (Savings and Time Deposit) with 118 or
81.4%, followed by Business expansion with 61 or 42.1%, while rated least is mutual
funds with 8 or 5.5%.
As revealed on the above table, a greater majority of respondents are into
bank savings and time deposit as a way of putting enterprise’s money classified as
cash surplus, accounting to eighty-one percent. However, other investment types
are not so popular with the respondents.
This finding supports the pronouncement by Waweru (2016), that majority of
businesses do not invest their surplus cash in marketable securities but in bank
deposits like savings and time deposit. It also confirms Kwame (2017) decree that
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most enterprises have problems on how to invest temporary cash for profitable
purposes. Furthermore, the study concurred the findings of Nyarko and Anuwa-
Amarh (2015) that micro, small and medium enterprises are generally known to hold
various types of accounts with financial institutions as banks part of cash surplus
management depending upon the purpose of account largely driven by the type of
financial products they enjoy from these banks. Having a very good banking and
financial culture by MSE operators will directly impact their cash management and
control systems. Regular and periodic bank deposits made by MSEs help improve
their financial controls by reducing the risk of embezzlement by their employees.
Majority (about 60%) of the 106 MSEs that operated accounts with financial
institutions operated only savings accounts with just about 19% of them operating
only current account. It is interesting to note that one in every five of the MSEs
studied operated both savings and current accounts. This indicates that over 80% of
the MSEs in the study area operated savings accounts, further emphasizing the
popularity of savings accounts among MSEs in the area.
Significant Difference on Cash Management Practices
The following details the significant difference of cash management practices
when respondents are grouped according to background characteristics, particularly
when they are grouped by sex, form of business and nature of business.
Sex
Ho1: There is no significant difference on the cash management practices
when grouped by sex.
Table 10.
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Significant difference on cash management practices when grouped by sex
Cash Management Practices Sum of p- Conclusion Interpretation

(Aspect) Squares value
Disbursement Between .407 .605 Accept Ho There is no significant
Groups difference on the cash
Within 216.903 management practices when
Groups grouped by sex
Information and Between 3.449 .071 Accept Ho There is no significant
Communication Groups difference on the cash
Accountability Between 2.128 .109 Accept Ho There is no significant
Monitoring Between 3.082 .021 Reject Ho There is a significant
To assess the significant difference of perceptions, the ANOVA was employed.
It was revealed that there is no significant difference on the cash management
practices between male and female, particularly on disbursement, information and
communication, and accountability aspects.
However, a significant difference is revealed on the monitoring aspect of cash
management practices when grouped by sex, since the p-value (0.021) is less than
the 0.05 level of significance. Such finding implies that when it comes to financial
monitoring, the practice is different between male and female.
This finding is supported by Yang (2016) whose objective of the study was to
examine the effect of owners’ demographic characteristics on the financial
management behavior of rural entrepreneurs. The owners’ demographic
characteristics focused on were gender, education and age. Factor analysis

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categorized financial management behavior into four factors: savings and
investment, cash management, credit management and insurance management.
The t-test results showed that there is no gender difference in the financial
management behavior of rural entrepreneurs. Considering all the scales, the
significant level is above the desired significant level of 0.05. This means that gender
is not a determinant of financial management behavior among rural entrepreneurs.
Being a male or female does not determine how people handle financial issues in
their lives.
Form of Business
when grouped by form of business.
Table 11.
Significant difference on cash management practices when grouped by form of
business

Disbursement Between 13.503 .011 Reject Ho There is a significant
Groups grouped by form of business
Information and Between 14.449 .001 Reject Ho There is a significant
Communication Groups difference on the cash
Accountability Between 8.330 .006 Reject Ho There is a significant
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Monitoring Between 4.535 .019 Reject Ho There is a significant
It was revealed that there are significant differences on the cash management
practices when respondents are grouped according to form of business, particularly
on disbursement, information and communication, accountability, and monitoring
aspects since all their p-values are less than the 0.05 level of significance.
Such finding implies that cash management practices among sole
proprietorship, partnership, and corporation enterprises differ.
According to Yang (2016) the goals of cash management practices is to manage
the cash balances of an enterprise in such a way as to maximize the availability of cash not
invested in fixed assets or inventories and to do so in such a way as to avoid the risk of
insolvency. However, different businesses have different cash management practices as
they consider the business’ level of liquidity, the management of cash balances, and the
short-term investment strategies.
Nature of Business
when grouped by nature of business.
Table 12.
Significant difference on the cash management practices when grouped by nature of
business

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Disbursement Between 5.066 .505 Accept Ho There is no significant difference
Groups on the cash management
Within 212.245 practices when grouped by
Groups nature of business
Information and Between 4.434 .385 Accept Ho There is no significant difference
Communication Groups on the cash management
Accountability Between 6.014 .121 Accept Ho There is no significant difference
Monitoring Between 6.080 .031 Reject Ho There is a significant difference
It was revealed that there is no significant difference on the cash management
practices when respondents are grouped according to nature of business,
particularly on disbursement, information and communication, and accountability
aspects.
However, a significant difference is revealed on the monitoring aspect of cash
management practices when grouped by nature of business, since the p-value
(0.031) is less than the 0.05 level of significance. Such finding implies that when it
comes to financial monitoring, the practice is different amongst the different nature of
businesses.
Above findings were supported by Keynes (2016) who disclosed that different
business adopt different financial monitoring system in order to address the
company’s optimal cash balance, hence ensure liquidity.
Significant Relationship between Cash Management and Profitability

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The following assesses the significant relationship between cash
management and profitability of the enterprise.
H4: There is no significant relationship between cash management and
profitability.
Table 12.
Significant relationship between cash management and profitability
Profitability r Decision Interpretation

(p-value)
Financial .036** Reject Ho There is a significant
Disbursement (.671) relationship between cash
management and
profitability.
Financial Information .417*** Reject Ho There is a significant
and Communication (.000) relationship between cash
management and
profitability.
Financial .404** Reject Ho There is a significant
Accountability (.005) relationship between cash
management and
profitability.
Financial Monitoring .234** Reject Ho There is a significant
(.005) relationship between cash
management and
profitability.
** Correlation is significant at the 0.05 level (2-tailed)
*** Correlation is significant at the 0.01 level (2-tailed)
The above table manifests the results of the correlation analysis between the
variables of interest. Results revealed that there are significant relationships
between profitability and all the aspects of cash management; particularly with
financial disbursement, financial information and communication, financial
accountability, and financial monitoring. Such findings imply that sound cash
management practice would positively impact enterprise’s profitability.
Cash management practices are adopted by business enterprises in order to
ensure effective investment of cash and to achieve profitability and sustainability of

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the business (Abioro, 2017). Some businesses ran bankrupt to the extent that some
are even closed due to poor cash management practices. Cash management
represent an important component of working capital management. Small, micro and
medium enterprises cannot be the platform of growth and development if they are
not profitable and sustainable, hence effective cash management practices are
significant tools to increase profitability of the business (Abel, 2017).
4. Conclusions
Based on the findings of the study, the following conclusions are drawn:
1. On background characteristics of respondents, many of them are between the
ages of twenty-one and thirty years old, male, college graduate and owners of the
enterprises.
2. On characteristics of business, the enterprises in the 2nd District of Quezon
Province are sole proprietorship, has service as the nature of business with less
than 10 employees and the owner/manager is the person responsible for cash
management.
3. On cash management practices of micro, small and medium enterprises in the 2 nd
District of Quezon Province in terms of financial records keeping with respect to
financial disbursement , the enterprises in the 2nd District of Quezon Province
extensively applied the preparation of vouchers and necessary documents before
the payment of accounts payable; they also follow procurement policy that includes
policies and procedures for acquiring capital items, however there are other
individuals authorized to process accurate payable transactions; in terms of financial
information and communication the enterprises in the 2 nd District of Quezon Province
very extensively applied that they ensure completeness and accuracy of financial
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records; ensure all financial transactions are properly recorded, however they
provide input and feedback data relative to financial operation
In terms of financial accountability, the enterprises in the 2 nd District of Quezon
Province analyze the total number of sales; reconcile and verify the register
beginning and ending balances, however perform random cash and inventory counts
obtained the lowest number of responses as the effectiveness of this method
depends on the firm’s method of collecting payments.
In terms of financial monitoring, the enterprises in the 2 nd District of Quezon Province
very extensively applied the verification of the issuance of pre-numbered official
receipts to customers upon receipt of payment and verification of cash collections
and daily cash position report ; they also review official receipts, deposit slip and
bank statements regularly, the least is they perform monthly bank reconciliations
regularly
There are type of transaction records kept by MSMEs in the 2 nd District of Quezon
Province, such as cash receipt book/cash disbursement book; official receipt and
notebook/journal. While rated least is cheque book.
There are cash surplus investment of MSMEs in the 2nd District of Quezon Province,
as they invest cash surplus in bank deposit (Savings and Time Deposit) and
business expansion while the least is mutual funds
4. In finding the significant difference, there is a significant difference on the monitoring
aspect of cash management practices when grouped by sex, likewise there are
significant differences on the cash management practices when respondents are
grouped according to form of business, particularly on disbursement, information and
communication, accountability, and monitoring. However, there is no significant

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difference on the cash management practices when respondents are grouped
according to nature of business, particularly on disbursement, information and
communication, and accountability aspects.
5. There are significant relationships between profitability and all the aspects of cash
management; particularly with financial disbursement, financial information and
communication, financial accountability, and financial monitoring. Such findings
imply that sound cash management practice would positively impact enterprise’s
profitability
3. Recommendations
Based on the foregoing conclusions, the following recommendations are

offered:
1. To help raise the standard of financial reporting in MSMEs in the 2 nd District of
Quezon Province, it is recommended that owners/managers should make good use
of available computerized accounting packages. Computer spreadsheets are
essential to modern organizations, as they allow managers to prepare a lot of
financial reports. For example, cash budgets are vital to the management of cash.
Management often makes use of cash budgets in determining cash surpluses or
deficits. The availability of computer spreadsheets help in preparing several cash
budgets based on possible future situations.
2. The MSMEs in the 2nd District of Quezon Province should consider other means of
temporary cash surplus other than depositing in the bank. The MSMEs managers
should invest their cash surpluses in ventures that yield high returns such as
treasury bills or in overnight call accounts which yield high returns. This will help
avoid keeping large cash balances in non-interest yielding current accounts.

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3. Owners/managers of the MSMEs in the 2nd District of Quezon Province should
avail themselves with the various training programs to increase trust, honesty,
transparency in doing cash dividend to avoid loose threads and polish their
knowledge in financial management and other managerial topics. This will help
improve their trading activities as poor managerial skills have commonly been
associated with MSMEs failure.
4.There should be will power on the part of MSME owners to embrace adherence to
basic cash control procedures towards better cash management practices hence,
ensure profitability.
g. References
Abel, J. (2017). Effective working capital management in small and medium

scale enterprises (SMEs). International Journal of Business and Management,
6(9), 271. United Nations Conference on Trade and Development [UNCTD]
(2000). Trade And Development Report, Retrieved October 4, 2018, from
http://unctad.org/en/docs/tdr2000_en.pdf
Abioro, T. (2017). Cash Management Practices in Small and Medium Enterprises

in Selected Districts in Western Uganda. Research Journal of Finance and
Accounting, 4(2), 34.
Avika, L. (2014). Cash Management of Enterprises: Global perspectives, John

Wiley and Sons, USA
Block, R.H. and Hirt, S.C. (2017). Restoring Competitive Edge through Better Cash
Management. New York: John Wileys & Sons
Bragg, Z. (2017). Micro, small and medium-sized enterprises development in the

Kingdom of Saudi Arabia: Problems and constraints. World Journal of
Entrepreneurship, Management and Sustainable Development, 8(4), 217–
232
Burani, S.and Eliabu, T. (2017), Current State of SMEs in the Philippines, oecd.org,
July 24, 2017
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Cochran, J. (2015). The value of operating cash flow in modeling credit risk for
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XI. Research Instrument
QUESTIONNARE
RESEARCH TITLE: CASH MANAGEMENT PRACTICES OF SMALL, MICRO AND

MEDIUM ENTERPRISES IN THE 2ND DISTRICT OF QUEZON PROVINCE
QUESTIONNAIRE FOR THE RESPONDENTS
Part I: A) Background characteristics of Respondents
Instructions: Put a check (/) on the appropriate space allotted for your
responses.
AGE
____ 21-30 years old ______51-60 years old
____ 31-30 years old ______61 years old and above
____ 41-50 years old
SEX
____Female ______Male
EDUCATIONAL BACKGROUND
____College Level _____Master’s Degree

____College graduate _____Doctorate Degree
POSITION HELD IN THE ENTERPRISE
____Owner _____Manager
____Accountant _____ Accounting Clerk
____Cashier
LENGTH OF SERVICE
____ 1-5 years ______ 21-25 years
____6-10 years ______26 years and above
____11-20 years
B) CHARACTERISTICS OF ENTERPRISES BEING STUDIES
FORM OF BUSINESS
____ Sole Proprietorship ______ Limited liability
____ Partnership
____ Corporation
Revision No.: 3
Reviewed by: QMR
NATURE OF BUSINESS
____Manufacturing _______Tailoring and Dressmaking

____Trading _______Hairstyling
____Carpentry _______Clothing, Handbags and Footwear Shop
____Health and Social Services
____Bookshops _______Computer and IT Services
____Boutique _______Printing Services
____Laundry shops _______General Household Items
PERSON RESPONSIBLE OF CASH MANAGEMENT
______Full time account staff ______Part time accounts staff

______ Owner/Manager ______ Do not keep records
NUMBER OF EMPLOYEES
_____ less than 5 employees ______11-15 employees

_____ 6-10 employees ______16 employees above
PART II-CASH MANAGEMENT PRACTICES OF SMALL, MICRO AND MEDIUM

ENTERPRISES
Instruction: Please identify the cash management practices of your

enterprise in terms of financial disbursement, information and communication,
accountability and monitoring. Check the appropriate spaces that correspond
to your answers. Please follow the rating scales below:
4- Strongly Agree (SA)

2 – Disagree (D)
3- Agree (A)
1 – Strongly Disagree (SD)
Indicators 4 3 2 1
Financial Disbursement
1. We verify cash collection and daily balancing reports
1. We secure all funds properly like keeping it inside vault
2. We review cash disbursements weekly
3. We issue receipts to customers
4. We review deposit slip and bank statement regularly
5. We limit the number of staff authorized to sign checks
6. We maintain cash disbursement journals, ledger and
cash receipt book
Revision No.: 3
Reviewed by: QMR
Financial Information and Communication

1. We ensure that all financial transactions are properly
recorded
2. We prepare weekly report of financial transactions
3. We provide input and feedback data relative financial
operation
4. We identify and communicate financial information to the
management
5. We ensure completeness and accuracy of financial
records
6. We keep the management well-informed of the
restaurant’s financial standing
Financial Accountability
1. We reconcile daily receipts to the cash registers totals
2. We reconcile and verify the register beginning and
ending balances
3. We analyze the total number of sales per waiter
4. We implement restricted access to cash registers
5. We hold an individual accountable to any financial
activity
6. We perform random cash and inventory counts
Financial Monitoring
1. We issue receipts to customers
2. We perform surprise cash counts on a quarterly basis or
during staff changes
3. We maintain a restaurant meal sheet for each meal
period to verify amount of orders
4. We perform monthly bank reconciliations timely and
without fail
5. We initiate review of monthly accounts payable and
receivables
6. We analyze sales forecasts and budgets to actual sales
PART III-RECORDS KEPT ON TRANSACTIONS
Instruction: Please identify the records you kept on transactions. Check the
appropriate space that corresponds to your answer.
Records kept on transactions Response

1. Cash book
2. Bank statement
3. Payment Voucher
4. Notebook
5. Cheque
Revision No.: 3
Reviewed by: QMR
6. Pay in slip
A) WAYS OF INVESTING TEMPORARY CASH SURPLUS
Ways of investing temporary cash Response

surplus
1. Bank Deposit
2. Financial Markets
3. Business Expansion
4. Checking accounts with interest
5. Sweep accounts
6. Treasury bills and notes
7. Money markets
8. No cash surpluses
9. Nowhere
PART IV-IMPACT OF CASH MANAGEMENT PRACTICES ON PROFITABILITY
Instruction: Please identify the impact of cash management practices on

the profitability of your enterprise. Check the appropriate spaces that
correspond to your answers. Please follow the rating scales below:
4- Great Extent (GE)

3- Moderate Extent (ME)
2- Less Extent (LE)
1- Least Extent (LSTE)
Indicators 4 3 2 1
1.Sound practice of financial disbursement
2.Sound practice of financial information and communication
3.Sound practice of financial accountability
4.Sound practice of financial monitoring
Thank you for your cooperation.

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Document Code: DCAVRKMI-F-GRPF

MANUEL S. ENVERGA UNIVERSITY FOUNDATION

Research Title: Cash Management Practices of MSME’s in the 2nd District of

respective managers, accountants, and accounting staff as respondents. A self-

structured questionnaire was formulated to determine the background characteristics

of the respondents in terms of age, sex, educational background, highest

characteristics of the enterprises studied in terms of form of business, number of

years in business, nature of business, person responsible with cash management

practices of MSMEs in the 2nd District of Quezon in terms of methods of financial

records keeping as to disbursement, information and communication, accountability,

significant difference on the cash management practices when respondents are

grouped according to background characteristics and the significant relationship

between cash management practices and the profitability of MSMEs in the 2 nd

Keywords: Cash management, micro-small-medium enterprises, business

a. Rationale of the Research

(Merchant Factors, 2017).

Cash necessitates proper monitoring, protection, control and better

management in order to safeguard the profitability of any business Marie (2015).

Medium Enterprises. Every business is at risk of bankruptcy because timing is

outflows while they were waiting their customers to pay.

According to Maness (2016) ultimately, every business is about generating

through practice of proper cash management.

management mistake is likely to lead to closure of an enterprise as there is no

constraints facing MSMEs thus hindering their development.

In consideration of the existence of micro, small and medium enterprises in

take a passive approach to their cash management rely on manual processes or

b. Purpose of the Research

The purpose of this research was to examine cash management practices of

Medium Enterprises in the 2nd District of Quezon Province.

Specifically, it sought answers to the following:

1. What is the background characteristics of the respondents in terms of:

1.4. highest educational attainment;

1.5. position held in the enterprise; and

1.6. length of service?

2.1. form of business;

2.2. nature of business;

2.3. person responsible with cash management; and

2.4. number of employees?

3. What are the cash management practices of MSMEs in the 2 nd District of

Quezon in terms of:

3.1. methods of financial records keeping;

3.1.2. information and communication;

3.1.3 accountability; and

4. Is there a significant difference on the cash management practices when

respondents are grouped according to background characteristics?

5. Is there significant relationship between cash management practices and the

profitability of MSMEs in the 2nd District of Quezon.

profitability of micro, small and medium enterprises in the 2 nd District of Quezon

is established by principal-agent relationship, which starts by entrusted behaviors,

attributed to the task.

In order to facilitate report and censorship, it is necessary to record status of

documented to prove that accountability is completed. He further stated that the

history of human society is a kind of history that accountability develops, which is

reflected by the alternation of principals and agents position due to conventional

forces, the popularization of principal-agent relationship, the increasingly strict

supervision on accountability and the growing abundance of its content.

complex, so does the principal-agent relationship. Thus far, accountability covers at

least reporting responsibilities, property maintenance, law & regulation compliance,

accountability on the basis of classification of accountability. The former requires the

according to the principle of economy, efficiency, effectiveness, fairness and

financial information and communication, financial accountability and monitoring

need utmost consideration in order to ensure the profitability of the business.

The accountability theory is an important theoretical source of accounting for