Based on the literature, the following framework was developed to demonstrate the relationship that exists between the components of cash management and the growth of informal businesses in the light of the moderator variables of internal and external environment. The framework is depicted in Figure 4.1.
FIGURE 4.1: THEORETICAL FRAMEWORK OF THE RELATIONSHIP BETWEEN CASH MANAGEMENT AND GROWTH OF INFORMAL BUSINESSES
120
Based on the literature and theoretical model in Figure 4.1, the following directional hypotheses were formulated about the relationship between cash management and growth of informal businesses.
H1 There is a significant relationship between cash management and the internal
environment in which informal businesses operate in Uganda.
H2 There is a significant relationship between cash management and the external
environment in which informal businesses operate in Uganda.
H3 There is a significant relationship between the internal environment and growth of
informal businesses in Uganda.
H4 There is a significant relationship between the external environment and growth
of informal businesses in Uganda.
H5 There is a significant relationship between cash management and growth of
informal businesses in Uganda where the internal environment will have a moderating influence on the relationship.
H6 There is a significant relationship between cash management and growth of
informal businesses in Uganda where the external environment will have a moderating influence on the relationship.
4.6 SUMMARY
The chapter reviewed the theoretical models that explain relationship between cash management and growth of informal businesses. It was specifically noted from the review that cash management components that include cash planning, cash forecasting and budgeting, financial controls and reporting, debtor collection cash conversion cycle and disbursement, short-term investment of surplus cash, competence and skills of owners-staff and adoption of accounting information systems may have a positive or negative relationship with the growth of informal businesses.
121
The positive or negative relationship depends on how each of the cash management components is managed in relation to business growth. For instance, businesses without proper cash planning tend to make irrational investment decisions that lead to business failure compared to businesses with proper cash planning. Similarly, informal businesses that are unable to forecast and budget their cash flows do not realise adequate cash to re-invest in a timely manner and hence may miss investment opportunities that would enhance business profitability, expansion and growth.
The basic measures of informal businesses’ growth were profitability, sales volume, growth in employment and length of existence. It was further highlighted that the relationship between cash management and growth of informal businesses is moderated by the operating environment from both internal and external perspectives. However, no studies particularly focused on cash management and the growth of informal businesses in Uganda, which was the purpose of this study.
The next chapter addresses the methodology that was adopted in conducting the empirical study. Specifically, the research design, research methodology, research approaches and data collection methods are reviewed. Finally, the chapter discusses data analysis techniques and research ethics that guided the conduct of this study.
122
CHAPTER FIVE
RESEARCH DESIGN AND METHODOLOGY 5.1 INTRODUCTION
Chapter four provided a review of the theoretical relationships between cash management components and the growth of informal businesses that guided the empirical study as part of the research problem. It was found that the cash management components of cash planning, cash forecasting and budgeting, financial controls and reporting, debtor collection, cash conversion cycle and disbursement, short-term investment of surplus cash, competence and skills of owners and staff as well as the adoption of accounting information systems may have either a positive or a negative relationship to the growth of informal businesses. It was further concluded that the nature of these relationships depended on how each of the cash management components is managed in relation to business growth.
For example, businesses without proper cash planning tend to make irrational investment decisions that lead to business failure. Similarly, informal businesses that are unable to forecast and budget their cash flows do not realise adequate cash to re-invest in a timely manner. Therefore these informal businesses may miss investment opportunities that would enhance business profitability, expansion and growth. Chapter four provided a basis for the study of the empirical relationships between cash management components and the growth of informal businesses amidst the influence of the internal and external environment, which was the primary objective of this study. This chapter focuses on the research design, research methodology and the approaches that were used to conduct the empirical study to achieve the primary objective. This chapter also describes the study population, determination of the sample size, sampling techniques and procedure that were adopted in the study and further discusses the data collection methods, data collection instruments and how validity and reliability of the data were tested. This chapter concludes with the discussion of the data analysis techniques that were used in this study. The ethical considerations applicable
123
for the study were also addressed. Hence this chapter provides the roadmap through which the empirical study of the relationships between the cash management components and the growth of informal businesses with due regard to the internal and external environment was conducted.