| Abstract: | The study is conducted with the main objective of assessing the quality of cash
management practice at National Oil Company (NOC). Accordingly, an attempt is made
to see the company’s cash forecasting technique, management of cash shortage and
overages, and its collection and payments systems. Besides, internal control related
issues (such as approval system and segregation of duties), as well as transaction
processing and documentation are dealt with. To this end, primary data is collected from
15-employees by questionnaire, which also supplemented by personal observations.
Secondary data is collected by reviewing company documents and other sources. After
data is a summarized using table, simple descriptive statistical tool (i.e. percentage) used
in presenting and analyzing the results.
Generally, the study found that the company’s cash management practice is satisfactory.
There is effective forecasting technique, and the management of cash shortage and
overage is good. Moreover, the company’s systems of cash collection (by checks, via
bank deposited); and system of cash payments (by checks and cash) are efficient and
convenient for the company and its customers. However, the collection system has some
inherent deficiencies of routine nature such as occurrence of large numbers of bounced
checks from customers, improper handling of deposit slips, and use of non-sequential
collection receipts and untimely encoding of such receipts (in some cases), inadequate
listing of specific invoices for each collected receipts, lack of minimum coupon sales
thresholds, and other related problems. Similarly, the payment system has problems such
as using payments vouchers with out supporting documents(in some cases), delay in
receiving of clearing invoices from clearing agents, delay in recording of insurance and
other similar payments, and improper handling of letter of credits among other things.
Some aspect of control process (such authorization system) is also appropriate, though
segregation of duties over some cash related transactions is not adequate. However,
there are problems of varying degree in the areas of data recording, processing and
documentation of financial files. Some of the problems identified are delay and
inadequacy of data recording and posting, inefficient bank reconciliation process (partly
manual), inadequate protection and follow-up of financial documents among other
things.
As the result of the study shows, most of the aforementioned problems are routine in
nature, which occur due to reasons such as stressful working condition, lack of adequate
segregation duties(in some cases),lack of adequate communication, limited awareness
creation on the part of customers, and lack of job related trainings for employees among
others.
Hence, to realize competitive cash management systems in line with prevailing
competitive business environment, the company should react to the existing problems in a
proper manner. |
