THE IMPACT OF CASH FLOW MANAGEMENT ON THE ORGANIZATIONAL PERFORMANCE (A CASE STUDY OF GUINNESS PLC BENIN CITY)
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THE IMPACT OF CASH FLOW
MANAGEMENT ON THE ORGANIZATIONAL PERFORMANCE (A CASE STUDY OF GUINNESS PLC
BENIN CITY)
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
Cash flow is generally acknowledged as the single most
pressing concern of the Small/Medium Scale Enterprise (SME). In its simplest
form cash flow is the movement of money in and out of your business. Cash flow
is the life-blood of all growing businesses and is the primary indicator of
business health. The effect of cash flow is real, immediate and, if mismanaged,
totally unforgiving. Cash needs to be monitored, protected, controlled and put
to work.
While the basic principles of effective cash management are
relatively simple, in practice the actual activities necessary for monitoring,
managing and forecasting cash can be cumbersome. This is largely because the
data needed for different cash management activities exist in different
sources, both inside and outside the organization, and is often difficult to
access and work with.
By understanding the key areas of activity for effective cash
management, as well as the sources of data necessary to accomplish each
activity, we can establish a cash management system that provides easy access
of needed information. Additionally, the best cash management system is one
that is cost-effective, utilizing existing sources of information to the
highest degree possible.
The irony of expending a disproportionate amount of cash for
a cash management information system is surely clear to all finance
professionals.
Cash flow can be defined as the movement of money into or out
of a business, project, or financial product. It is usually measured during a
specified period of time. Measurement of cash flow can be used for calculating
other parameters that give information on a company's value and situation.
Jimmy Wales (1991).
Cash flow management can be defined as the process of
monitoring, analyzing, and adjusting your business' cash flows. Jimmy Wales
(1991: 4).
For small businesses, the most important aspect of cash flow
management is avoiding extended cash shortages, caused by having too great a
gap between cash inflows and outflows. You will not be able to stay in business
if you can not pay your bills for any extended length of time.
1.2 HISTORICAL BACKGROUND OF GUINNESS NIGERIA PLC
The firm Guinness Nigeria Plc came into existence in year
1950 with the sole aim of importing and distributing Guinness stout from Dublin
for eventual sales in Nigeria. Due to the success of the product in the country
it gave rise to a decision to establish a small brewery in the year 1962. The
foundation stone of Guinness was laid at Ikeja on the 31st January 1962, by
Arthur Benjamin Francis Guinness now the Earl of Irish to which titles he
succeeded on his grandfather’s death until 1967 in active services during the
2nd world war.
Guinness Nigeria is a subsidiary of the prestigious Diageo
Plc of the United Kingdom. The brewery was the first outside of Ireland and
Great Britain. Other breweries have been opened over time – Benin City brewery
in 1974 and Ogba brewery in 1982.
Guinness Nigeria produces the following brands – Foreign
Extra Stout (1962), Harp Lager Beer (1974), Malta Guinness (1990), Satzenbrau
(1995), Gordon’s Spark (2001), Guinness Extra Smooth (2005), Smirnoff Ice
(2006).
Guinness Nigeria Plc is a company that believes in enriching
its communities. This it has achieved by embarking on laudable Corporate Social
Responsibility projects in several communities in Nigeria. These projects are
Water of Life initiative, which currently provides potable water to over
500,000 Nigerians spread across several rural communities, from Northern to
Southern Nigeria; scholarship and Guinness Eye Hospitals in three cities in
Nigeria.
Nigerian Guinness is said to be twice as strong as Irish
Guinness. In the 1800s, the Irish brewed the Guinness twice as strong, due to a
fear of evaporation on the long voyage to Nigeria. However, the alcohol did not
evaporate, and to this day Nigerians brew their Guinness twice as strong.
Guinness Nigeria limited became a public company In 1965 and
was one of the first companies to be quoted in Nigeria stock exchange with
shares being offered to Nigerian shareholders, 1200 Nigerian held 20% of the
equity.
In 1971, a decision was taken to build a new Brewery at Benin
at a cost 12 million to brewery larger beer, this was the biggest brewery ever
built in Nigeria.
The company believes that investment in the training and
development of its staff are wise investments. This has resulted in the
establishment of training centers in Benin and Lagos (Ikeja).
Following the ban on importation of methods barely the
company has conducted research into the use of maize and sorghum in place of
malt in production of the different brands of beverages.
In the Nigerian market, Harp lager beer gained a remarkable
success alongside Guinness stout, due to
its good quality too hence received a wide patronage and now known as Guinness
Nigeria PLC.
It was merely up to a decade of the brewery and marketing of
harp that its brand loyalists started shifting their interest to the other
hand. The complaint raised by Harp patronizes for gradually changing preference
was as a result of the carelessness on the part of the brewers to eradicate particles
discovered in the final product and these were major set-backs suffered by
Guinness Harp.
In the year 1995 a new product line “satzenbrau” was in the
market and it received attention in Lagos and west Ibadan to be precise for
now.
In 1990 another product line “Malta Guinness”, was also in
the market and it has received attention all over the country and outside the
country.
It indeed received acceptance and as such requires effective
management system, to guide against the future of all lines of product carried
out by Guinness Nigeria Plc. (www.Guinnessnigeria.com).
1.3 STATEMENT OF THE PROBLEM
One of the major problems why this research is carried out is
the existence of negative cash flow in some organizations in Nigeria. Negative
cash outflow occurs when your outflow of cash is greater than your incoming
cash. This generally spells trouble for business organizations in Nigeria,
although there are steps that can be taken to remedy the situation and generate
or collect more cash while maintaining or cutting expenses, but taking this
steps is never an easy task.
Achieving a positive cash flow does not come by chance. You
have to work it out. You need to analyze and manage your cash flow to more
effectively control the inflow and outflow of cash.
Again, the problem while this research work is carried out is
to look into the impact of cash flow management on performance of an
organization using Guinness Nigeria as a case study, and to suggest and give
good recommendation on the system of cash management in an organization that
will help the organization.
1.4 OBJECTIVE OF THE STUDY
The objective of this study is basically as follow:
1. To ascertain the
impact of cash flow management on organizational performance.
2. To examine the
impact of cash flow management performance on the organization.
3. To examine how
cash flow management has helped in achieving an organizational goals.
4. To examine how
cash flow management has helped Guinness Nigeria Plc in achieving
organizational objectives.
5. To give a literature review of what cash
flow management is all about.
6. To examine the
advantage and the cost of cash flow management in organization.
1.5 RESEARCH QUESTION
1. Does strategic
cash flow management impact the organizational outcome positively?
2. Is there any
relationship between cash flow management and organizational performance?
3. Is strategic
cash management really suitable for all kind of organization?
4. Has cash
management impacted positively on the performance of Guinness Nigeria Plc?
5. Can any staff
take part in the process of strategic cash management?
6. Has the practice
of cash flow management been easy in Guinness Nigeria Plc?
1.6 HYPOTHESIS OF THE STUDY
HYPOTHESIS I
Ho: There is no relationship between cash flow management and
organizational performance.
Hi: There is a relationship between cash flow management and
organizational performance.
HYPOTHESIS II
Ho: Strategic cash flow management does not impact the
organizational outcome positively.
Hi: Strategic cash flow management impacts organizational
outcome positively.
1.7 SIGNIFICANCE OF THE STUDY
The researcher generated by the postulation of the study can
enrich the literature on cash flow management and enhance people and student
understands of the concept.
This study will be useful to most organization that needs the
impact of cash flow management in their organization also in other
organizations and institutions. Government can use the finding and the
recommendation of this study to improve the qualities of her organization in
the area of cash flow management.
1.8 LIMITATION OF THE STUDY
This research work is limit due to some factors:
Time factor:- The time giving is too infinitesimal for me to
carry out the project work accurately.
Finance:- This also restraints me in carrying out my research
work as being expected.
1.9 SCOPE OF THE STUDY
This project work is designed to cover every aspect that has
to do with impact of cash flow management in an organization and functions with
the duties of it. In a country, organization and how it will be regulated when
it has been adopted into the system.
The area covered in the research work is limited to Guinness
Nigeria Plc, Benin City, in which the population of the study and the sample
size of the study were derived.
1.10 DEFINITION OF TERMS
i.
Cash flow: the total amount of money being transferred into and out of a
business, especially as affecting liquidity.
ii.
Organizing: this is determined of activities that need to be done in
order to reach the activities to the proper personnel.
iii.
Motivation: this is an inner state of minds satisfaction which energizes
or encourages someone’s behavior towards the entailment of the objectives.
iv.
Productivity: this can be defined as efficiency with which work is done,
the amount of work done in a certain work.
v.
Responsibility: this is the duty to perform certain assigned tasks in a
satisfactory manner.
vi.
Delegation: delegation is the assignment of authority and responsibility
to other sub-ordinate in order to carry out certain assignment.
vii.
Management: The organization and coordination of the activities of a business in order to
achieve defined objective.
Management is often included as a factor
of production along with‚
machines, materials, and money. According to the management guru Peter Drucker
(1909-2005), the basic task of management includes both marketing and innovation.
Organization: A social unit of people that is structured and
managed to meet a need or to pursue collective goals. All organizations have a
management structure that determines
relationships between the different activities and the members, and
subdivides and assigns roles, responsibilities, and authority to carry out
different tasks. Organizations are open systems--they affect and are affected
by their environment.
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