THE INFLUENCE OF FINANCIAL MANAGEMENT ON THE PERFORMANCE OF

SMALL SCALE BUSINESSES

Case of: Kibindi Farm Project Masaka District


BY


A RESEARCH REPORT SUBMITTED TO UGANDA MARTYRS UNIVERSITY NKOZI
IN PARTIAL FULFILMENT FOR THE AWARD OF A DEGREE
IN BUSINESS ADMINISTRATION AND
MANAGEMENT

JUNE 2014





TABLE OF CONTENETS


ABBREVIATIONS
PEST : Political Economic Social Technological
SWOT : Strength Weaknesses Opportunities Threats
NAADS : National Agricultural Advisory Services
BOU : Bank of Uganda
SEDA : SEDA
IV : Independent Variable
DV : Dependent Variable
MPT : Modern Portfolio Theory
SPSS : Special Package for Social Sciences
IIA : Institute of Internal Auditing
SWAP : SWAP
CVI : Content Valid Index
Abstract
The research study was, The influence of financial management on performance of small scale
businesses, Kibindi Farm Project as the case study-Masaka district. The purpose of the study
was to examine the effect of financial planning on performance of Kibindi Farm Project, to
establish the influence of financial control and performance of Kibindi Farm Project and
establishing the relationship between financial decision making and performance of Kibindi
Farm Project.
The researcher used both primary and secondary data sources while collecting data for the study.
Using primary data: questionnaires, interviews and documentary analysis were used plus
studying the existing secondary data as the main tools used.
It was established that there is poor financial planning evident of absence of financial statements
because they are not prepared: income statement and statement of financial position among
others despite the fact that there is a special finance manager .Although budgets are drafted,
expenditure still exceeded the estimated income to use in various departments basing on findings
Basing on the findings still, there is need for even female individuals to actively participate in
business activities since they were very few, there is also need to sensitize and educate Kibindi
Farm Project to start preparing financial statements because it is a vital tool for success of any
business. Further studies are recommended to investigate on the influence of other variables such
as the level of education on business performance other than financial management.


CHAPTER ONE
INTRODUCTION
1.1 Introduction
The chapter presents the concepts of financial management in small scale businesses financial
performance. It specifically deals with the background of the study, statement of the problem,
general objective, specific objectives, research questions, scope of the study, justification, and
significance of the study, conceptual framework, limitations and lastly a conclusion will be made
for the whole chapter.

1.2 Background of the study
Financial management means analyzing, planning and controlling the financial performances of
the firm. Regardless of the size and the property form, financial management is mostly
responsible for the financial policy adopted at the micro -economic level, which is to be enforced
in order to achieve the objectives established by t he owners and/or the managers of the financial
resources. The role of the financial management is to create a system of managerial reports in
order to efficiently develop the business. This system has two major elements: economic analysis
and budgets. It is highly important to implement a system of financial management, represented
by all the internal reports adapted to the managing teams requests.

According to Armstrong (2002) financial management entails planning for the future of a person
or an organization to ensure a positive cash flow. It includes the administration and maintenance
of financial assets. Besides, financial management covers the process of identifying and
managing risks. Financial management is the management of the finances of an organization in
order to achieve financial objectives (Musgrave, 2009).The key objectives of financial
management are to create wealth for the business, generate cash, and provide an adequate return
on investment bearing in mind the risks that the business is taking and the resources invested.
Therefore, managements need to ensure that enough funding is available at the right time to meet
the needs of the organization. Planning the activities of an organization ensures that the
organization sets out in the right direction (Opiela, 2002). Without a formalized plan the
organization will lack direction and management will not be aware of their targets and
responsibilities. Therefore, a formalized financial plan and discipline will help to ensure a
coordinated approach and the planning process itself will force management to continually think
ahead, planning and reviewing their activities in advance (Shelley, 2001). According to Roe
(2004), if the organization has started out in the right direction but to ensure that it continues on
course it is the managements responsibility to exercise control and monitoring. Appropriate
action can then be taken to correct any deviations from the plan. Therefore, for any organization
planning and control should go hand in hand (Shelley, 2001).

According to Kameri-Mbote (2005) financial management entails planning for the future of a
person or an organization to ensure a positive cash flow. It includes the administration and
maintenance of financial assets. Besides, financial management covers the process of identifying
and managing risks. Financial management is the management of the finances of an organization
in order to achieve financial objectives (Magnay, 2005). The key objectives of financial
management are to create wealth for the business, generate cash, and provide an adequate return
on investment bearing in mind the risks that the business is taking and the resources invested.
Therefore, managements need to ensure that enough funding is available at the right time to meet
the needs of the organization. Planning the activities of an organization ensures that the
organization sets out in the right direction (Opiela, 2002). Without a formalized plan the
organization will lack direction and management will not be aware of their targets and
responsibilities. Therefore, a formalized financial plan and discipline will help to ensure a
coordinated approach and the planning process itself will force management to continually think
ahead, planning and reviewing their activities in advance (Shelley, 2001). According to Roe
(2004), if the organization has started out in the right direction but to ensure that it continues on
course it is the managements responsibility to exercise control and monitoring. Appropriate
action can then be taken to correct any deviations from the plan. Therefore, for any organization
planning and control should go hand in hand (Shelley, 2001).

According to Ross, et al (2008) financial management refers to the ways finances of a business
are managed or handled .But technically stated, financial management means planning,
organizing, directing and controlling the financial activities of an enterprise. To Koontz, et al
(2004), financial performance is where an organization is able to achieve their stated goals and
objectives, by being able to perform as per the work plan. Like any public organization, Koontz
and Weihrich (2004) also observe that to a greater extent, every organization is faced with the
inflexibilities of the political climate existing at any given time and as such causes significant
effect on financial performance of the organization. Therefore, participatory financial
management is a process where all staffs are engaged in determination of expenditure and
revenue mandates of the organization at different stages and levels in the planning and budgeting
cycle.

Hodge (2008) says that the performance of small scale businesses is a fundamental feature for
small scale businesses survival and sustainability where performance factors like budgeting,
financial reporting plus financial statements and saving are found to spur business expansion
hence being a key aspect of management of businesses.

Keizer, et al (2002) affirms that, the impact of financial management on the performance of
small scale businesses is both direct and indirect. It is upon this background that the study seeks
to analyze the factors influencing the financial performance of small scale businesses with major
focus on financial management as a key factor. Financial management is seen in the investment
and financial decisions that are usually made by the finance managers in the accounting
department of the organization. Therefore in this study financial management will mean a
mechanism of handling and controlling funds of an organization and indicated by budgeting.

Small scale businesses cover a broad range of areas and predominantly small enterprises in
which the case study is inclusive: Kibindi Farm Project. According to the bank of Uganda sector
report (2009) small scale businesses contribute to the economic development through job
creation, innovation and the competitive disciplining of markets. This is a justification why
developed, developing and emerging economies like Uganda have continued to recognize small
scale businesses as a major economic entity and their performance, an opportunity for
accelerating the countrys sustainable economic growth.

According to the global entrepreneurship monitor report (2004) over one in every three adult
Ugandans was engaged in one form of business. The report further posts that these businesses do
not live for long and for almost 35% of the small scale businesses close, about 37% start new
businesses again.
Kibindi Farm Project is a piggery project established in 2007 initially with three pigs: two
females and one male pig. It is located in Masaka district, Kibindi village in Buwunga sub
county, five kilo meters away from Masaka town. The farm faces challenges like inadequacy of
funds, high staff turn over and poor financial management which are making it hard to attain its
goals.

1.3Problem statement
Despite efforts by government and other donor agencies to provide support to small scale
businesses in order to attain sustainable financial performance through different government
programmes like the NAADS, there has been little improvement in financial performance of
many small scale businesses (BOU Report, 2009). Kibindi Farm Project as a case study, the
deterioration of financial performance may be explained by a number of factors: inadequate
generation of revenue, over expenditure of budgetary allocations, illegal payments, failure to
account for funds, lack of value for money in the project financial undertakings. This has
resulted into reducing profits, reducing sales growth, reducing market share, low return on
investment and low value for money which makes it less competitive on both local and
international markets (SEDA Uganda, 2010). According to Bhatia (2003) through proper
financial management there will be capital accumulation leading to investments, efficient and
economic use of funds that uphold the performance of a business.

1.4 General objective
To find out the influence of financial management on the performance of Kibindi Farm Project
1.5 Specific objectives
i) To examine the effect of financial planning on performance of Kibindi Farm Project
ii) To establish the influence of financial control on performance of Kibindi Farm Project.
iii) To establish the relationship between financial decision making and performance of
Kibindi Farm Project
1.6Research questions
(i) What are the effects of financial planning on performance of Kibindi Farm Project?
(ii) What is the influence of financial control on performance of Kibindi Farm Project?
(iii) What is the relationship between financial decision making and performance of Kibindi
Farm Project?


1.7 Scope of the study
1.6.1 Area scope
The study was carried out in Kibindi Farm Project in Masaka district. This is the area from where
the data needed was collected to accomplish the study.

1.6.2 Subject scope
The study focused on establishing the effect of financial management as the independent variable
(IV) and service financial performance as the dependent variable (DP).

1.6.3 Time scope
The study took a time scope of three years between 2009 and 2012 because this is the period
when the project realized poor financial performance.

1.8 Justification
The findings of the study might offer critical data to foster the response and the Kibindi Farm
Project authorities may be encouraged to improve on financial management.
The study might help to point out the role of financial management on the financial performance
of small scale businesses and also extension of knowledge on financial matters.
It is also a university requirement to be awarded a degree of Bachelors of business administration
and management.

1.9 Significance of the study
In simple terms, the study is hoped to highlight to the researcher about the influence of financial
management in small scale businesses financial performance.
The study may inspire other scholars to undertake research about financial management in other
organizations like banks, MTN and others.

1.10 Conceptual framework
Fig. 1: Conceptual framework showing the relationship between financial management and
performance

Financial Management (IV) Performance indicators (DV)









Financial Decision Making
Financial Control
Financial Planning
Moderating variables
Political Interference
Rules & Regulations
Legal Requirements

Improved liquidity
Service delivery
Resource
accumulation
Reduced
embezzlement
Improved working
capital



Source; Source: self constructed model, using the ideas suggested by Amin (2005)
According to the conceptual frame work above, financial management is considered as the
independent variable, and performance as the dependent variable. Moderating variables are the
factors that affect financial management. Moderating variables include political interference,
organizational rules and regulations and legal requirements. From the figure above, when all
factors under the independent variable are executed fully, and moderating factors are controlled
financial performance is evidenced with improved service delivery, resource accumulation,
reduced embezzlement and improved liquidity.














CHAPTER TWO

LITERATURE REVIEW
2.1 Introduction
This chapter is divided into four parts, namely, the Theoretical Review, the effect of financial
management on performance, association between financial management and performance and
the relationship between financial management and performance. This was done in line with the
study objectives and questions.

2.2 Theoretical Review
Literature reviewed was based on Modern portfolio theory (MPT) developed by Harry
Markowitz in the 1950s through the early 1970s and was considered an important advance in the
mathematical modeling of finance. Since then, many theoretical and practical criticisms have
been leveled against it. These include the fact that financial returns do not follow any symmetric
distribution, and that correlations between revenue are not fixed but can vary depending on
external events (especially in crises).

Modern portfolio theory of finance planning attempts to maximize portfolio expected revenue for
a given amount of sources, or equivalently minimize risk for a given level of expected revenue,
by carefully designing financial control mechanisms.

Portfolio theory provides a context for understanding the interactions of systematic risk and
revenue. It has shaped how institutional portfolios are managed and motivated the use of passive
planning techniques. This is because different types of revenue sources often change and this
requires proper strategic planning. Diversification lowers risk even if revenue or returns are not
negatively correlated indeed, even if they are positively correlated.
Portfolio theory was adopted for this study because it is based on three basic financial planning
preparations:
Strategic planning which is concerned with preparing long-term action plans to attain the
organisations objectives.
Operational planning which is concerned with preparing the short- to medium-term plans
of the organisation
Budgetary planning which is also concerned with preparing the short- to medium-term
plans of the organisation.
More technically, MPT models an asset's return as a normally distributed function (or more
generally as distributed random), defines risk as the standard deviation of return, and models a
portfolio as a weighted combination of revenue sources, so that the return or revenue of a
portfolio is the weighted combination of the revenue. By combining different sources whose
returns or revenues are not perfectly positively correlated, MPT seeks to reduce the total
variance of the portfolio return and also assumes that investors are rational and markets are
efficient and these requires proper financial control mechanisms..

2.4 The effect of financial planning on performance
The longer the effect of a plan and the more difficult it is to reverse, the more strategic it is.
Therefore, strategic planning is concerned with decisions that have enduring effects that are
difficult to reverse (Esaete, 2003). Strategic planning is long-range planning. In general
strategic planning is concerned with the longest period of time worth considering Strategic
planning deals with the futurity of current decisions. It also looks at the alternative courses of
action that are open in the future; and when choices are made among the alternatives they
become the basis for making current decisions. Strategic planning is a process of deciding in
advance what kind of planning effort is to be undertaken, when it is to be done, who is going to
do it, and what will be done with the results. The more of an organisations activities that are
affected by a plan, the more strategic it is strategic planning is broad in scope planning at the
corporate level is generally more strategic than planning at any organisational level below it.

Budgetary planning is concerned with preparing the short- to medium-term plans of the
organisation (World Bank, 2001). It will be carried out within the framework of the strategic
plan. An organisations annual budget could be seen as an interim step towards achieving the
long-term or strategic plan (Esaete, 2003). All organisations need to manage performance so
that their financial and strategic objectives are achieved and management and financial
stakeholders can be confident in the associated control processes. The proper construction and
control of budgets is central to this, to safeguard the organisations viability and the effective
delivery of its objectives (Faguet, 2000). This requires a comprehensive financial planning and
approval framework; consistent and rigorous processes for constructing budgets, both capital
and revenue; sound methodologies for assessing the financial impact of proposed expenditure;
compatibility with other management and performance data, and a control system that sets clear
responsibilities and produces prompt and accurate monitoring information on performance
against budgets (Work, 2002).

In his paper 'Decentralisation of governance', Villadsen (2000) asserts that given the power to
decide on what future they want to bring about, local governments can effectively budget and be
able to achieve their set objectives. Njuguna, (2001) mentioned that the town councils have little
control over the utilisation of funds received from the central government. He said that in 1994,
the ministry of education issued a policy guideline circular specifying how the town councils
should spend the grants and out of the 1,598 million sent to Rakai that year, only 502 million
(31%) were not specified. Given these conditionalities, local governments' discretionary powers
to allocate to their priority areas is greatly inhibited (Steffenson and Trollegaard 2003). They
also sighted lack of full devolution to local governments of the development budget hence
affecting their internal revenue performance.

In a more decentralised structure, managers are provided with greater decision-making
autonomy for planning and control, including matters relating to purchase of capital items,
pricing of product and services, and the hiring and firing of personnel. Dansereau et al. (1975)
argue that bosses often attempt to secure increased organisational commitment from
subordinates by providing them with greater discretion and influence (Wagaba, 2002). It is
argued that subordinates with high decision-making autonomy are likely to develop a greater
sense of responsibility through increased personal involvement in making decisions
(Villadsen&Lubanga, 2000). In turn, subordinates are expected to reciprocate by offering
organisationally desired contributions such as organisational commitment. Empirical findings
by Bateman and Strasser (1984) and Morris and Steers (1980) indicate positive correlations
between decentralised structure and organisational commitment. Likewise, Mathieu and Zajac
(1990) report a positive association between managers task autonomy (whereby managers hold
greater decision-making authority over their work tasks) and organisational commitment.
However, as discussed in the previous section, the size of the correlations or the strength of the
relationship between structure and organisational commitment varies considerably (Morrow,
1993).

Decisions that are the province of strategic planning are those most important to the
organisations future. Strategic planning is the process of deciding on the objectives of the
organisation, on changes in those objectives, on the resources used to obtain these objectives.
Strategic planning (1) focuses on decision situations concerned with both internal and external
environments of the organisation; (2) recognises the concept and importance of positive
acceptance from stakeholder groups; and (3) accepts the inevitability of rapid change in a
complex external environment. Strategic planning is applicable to any situation as long as: it
is directly related to overall organisational purposes; it is future-oriented; it significantly
involves uncontrollable environmental forces that affect organisational performance. In
summary, strategic planning is the process by which an organisation envisions its future and
develops the necessary procedures and operations to achieve that future...It requires the clear
setting of goals and objectives [which] provide the organisation with its core priorities and a set
of guidelines for virtually all day-to-day managerial decisions.

Pollitt & Putnam (1998) says that, strategic planning starts with strategic objectives. Objectives
indicate what management expects to accomplish, while planning sets forth how, when, where
and by whom the objectives will be attained. Strategic objectives give rise to strategic planning
maturities. These maturities reflect the scheduled points in time by which strategic objectives
are scheduled to be accomplished. In turn, strategic planning maturities are established within
planning horizons. Planning horizons represent spans of time over which the activities leading
to planning maturities will be accomplished, thereby culminating in the attainment of the
strategic objectives that constitute the foundation of the strategic plan. Strategic planning
maturities are important to management because of the need to have a continuous focus on the
end date for the completion of strategic objectives. Strategic planning horizons are important to
management because planning necessarily begins with the setting of strategic objectives at some
point in the future and works backwards through future time into present time. The futuristic
orientation of strategic objectives necessitates that management decide today what it intends to
accomplish tomorrow and to undertake what needs to be done between then and now to get
from here to there.
Strategic planning is concerned with preparing long-term action plans to attain the
organisations objectives. Strategic planning is also known as corporate planning or long-range
planning. Strategic planning and management entails the use of systematic approaches for
developing an organisations vision, mission, values, objectives, actions for achieving these
objective, performance measures, and allocating resources to implement the plans, monitoring,
evaluating and reporting on performance (Opiela, 2002). The corporate planning process is an
important aspect of any organisation. Further, the use of credible performance management
frameworks is an important aspect of this process. Survey results indicate that the practice of
preparing multi-year business/corporate plans has taken root in local governments (Pollitt &
Putnam, 1998). However, a review of the quality and diversity of performance measures used
by revenue bodies indicates wide variations, with many using a mix of output, process and few
outcome indicators to measure organisational performance (Robertson, 2002).

Also, the survey noted that local governments have established departments responsible for
periodic monitoring, evaluation and reporting on performance of corporate, operational, tactical,
and individual performance imperatives. Although, they had not adopted modern practices and
technology in monitoring, evaluation and reporting (Esaete, 2003).Internal revenue performance
in this case refers to how well or poorly local governments have managed to attain their set
financial objectives/targets, through actions taken to achieve them. With financial performance,
local governments' independency on self-generated revenue will be improved by granting local
governments autonomy to prepare and approve their own budgets (Ramani, 2001). Financial
performance is also indicated by improved quality of accountability, value for money and
transparency in the systems for the local governments with well-designed monitoring and
evaluation systems, through the Local Governments Act and the Local Government Financial
and Accounting Regulations (World Bank, 2002).

A variety of tools and techniques have been developed to help managers identify and deal with
strategic planning decisions (Ramanujam et al., 1986). These techniques help managers to
change valuable data into forms suitable for decision making and action (Fleisher and
Bensoussan, 2003). The benefits of these tools include: increasing awareness about the business
environment, strategic issues, opportunities and threats which helps reduce the risk involved in
making certain decisions; establishing priorities in large complex companies and providing a
framework for evaluating the relative importance of different business portfolios; and aiding the
presentation of complex issues. They may also be seen as a valuable communications device, in
addition to their analytical role (Frost, 2003). Webster et al. (1989) presented a set of 30
strategic planning tools and techniques. More recently, Lisinski and Aruckij (2006) identified
28 tools of strategic planning. However, not all these tools and techniques are used by firms
operating in the countries which have been surveyed to date.

Most of the empirical studies reporting tool usage have been as part of studies of strategic
planning processes. A few studies have investigated the use of strategic planning tools and
techniques exclusively. For instance, a recent study of a range of organisations in one region of
the UK found that three tools SWOT, bench marking and critical success factor analysis
were used more extensively than any other (Gunn and Williams, 2007). Al Ghamdi (2005)
investigated the use of strategic planning tools and techniques in Saudi Arabian organisations.
He found that 10 per cent of organisations used tools and techniques regularly. The most
regularly used tool was analysis of critical success factors, followed by benchmarking, and then
what-if analysis, while SWOT analysis, product life cycle, and stakeholder analysis were used
only moderately. Experience curve, portfolio analysis, value chain analysis, Delphi, cognitive
mapping and Porter's five forces analysis were found to be the least used tools.

A study of Egyptian companies (Elbanna, 2007) reported that the most commonly used tools
were pro forma financial statements, cost-benefit analysis, portfolio analysis, benchmarking,
SWOT analysis, competitor analysis, analysis of critical success factors, gap analysis and
product life-cycle analysis. Less commonly used were experience curve analysis, value chain
analysis, Porter's five forces analysis, PEST analysis, balanced scorecard and cognitive
mapping.

Aldehayyat and Anchor (2008) investigated the use of strategic planning tools and techniques in
Jordanian companies which were quoted on the Amman Stock Exchange. The main findings of
this study are that the most used techniques by Jordanian companies are financial analysis (for
own business), PEST or STEP analysis, Porter's five forces analysis and analysis of key
(critical) success factors; that the managers of these companies had an awareness of most of the
techniques surveyed and that the use of strategic planning tools and techniques related more to
the size of company and less to the age or nature of the business.

2.5 The influence of financial control on performance

Historically, internal audit has been considered as a control function, the organizational
policeman and watchdog (Morgan, 1979), tolerated as a necessary component of organizational
control but deemed subservient to the achievement of major corporate objectives. However,
Institute of Internal Auditors, (IIA, 1991; Taylor and Glezen, 1991; Konrath, 1996) defines
internal auditing as an independent appraisal function, established within an organization to
examine and evaluate its activities as a service to the organization. By measuring and evaluating
the effectiveness of organizational controls, internal auditing, itself, is an important financial
control device (Carmichael et al., 1996), which is directly linked to the organizational structure
and the general rules of the business (Cai, 1997). Cook and Wincle (1976) argue that, the
Internal Control System resembles the human nervous system which is spread throughout the
business carrying orders and reactions to and from the management.

According to Cook and Wincle (1976), the l Control System resembles the human nervous
system which is spread throughout the business carrying orders and reactions to and from the
management. In this concept, by measuring and evaluating the effectiveness of organizational
controls, internal auditing, itself, is an important managerial control device (Carmichael et al.,
1996), which is directly linked to the organizational structure and the general rules of the
business (Cai, 1997). In todays business environment internal auditor is now providing
management with a far broader range of information concerning the organizations financial,
management and compliance activities to improve effectiveness, efficiency, and economy of
management performance and activities (Rezaee, 1996).

The financial control moves within a greater scope of management philosophy and of practical
application, and adds up value, offering at the same time a systematic scientific approach on the
assessment and the improvement of the effectiveness of a businesss financial position
(Papadatou, 2005; Karagiorgos et. al, 2006).
Financial control activity is primarily directed at improving financial performance. Framework,
financial control is broadly defined as a process, affected by an entity's board of directors,
management, and other personnel, designed to provide reasonable assurance regarding the
achievement of financial objectives in the following internal control categories:
Effectiveness and efficiency of financial operations.
Reliability of financial reporting.
Compliance with laws and regulations.
Management is responsible for internal control. Managers establish policies and processes to
help the organization achieve specific objectives in each of these categories. Internal auditors
perform audits to evaluate whether the policies and processes are designed and operating
effectively and provide recommendations for improvement (Nagy and Cenker, 2002; Goodwin,
2004, Karagiorgos et. al, 2007).
Tension is emerging between firm highly control system and the centrally driven SWAP
processes where service delivery targets have been established at the company level. This has
been combined with excessive and increasing central control over finance through a large
number of tightly earmarked controls. Despite the attempts by firm to increase central control
there remains wide variations in performance of firm, even with similar resource endowments.
The focus on central control has actually distracted attention from the need firm controls and
systems for accountability in the delivery of services.

The planning and budgeting processes are explicitly results-oriented. The firm set objectives, and
identify outputs and activities to be carried out over the next three years (taking into account
national targets where they exist). The quality of the analysis behind the use of performance
indicators has improved, although the use of indicators is often confused. Many firms have
identified a fairly comprehensive set of activity/output level targets, linked to resource
allocations.

In financial control is a very crucial element. Pickett (2009a) states that financial controls are put
in place to keep the company on course toward profitability goals and the achievement of its
mission, and to minimize surprises along the way. They enable management to deal with rapidly
changing economic and competitive environments, shifting customer demands and priorities, and
restructuring for future growth. Financial controls promote efficiency, reduce risk of asset loss,
and help ensure the reliability of financial statements and compliance with laws and regulations.
Because financial control serves many important purposes, there are increasing calls for better
financial control systems and report cards on them. Financial control is viewed more and more as
a solution to a variety of potential financial management problems.
According to Moeller (2009), financial control comprises the plan of organization and all of the
coordinate methods and measures adopted by a business to safeguard its assets, check the
accuracy and reliability of its accounting data, promote operational efficiency, and encourage
adherence to set financial l policies. Cascarino and Van Esch (2009) states that, financial control
is any action taken by management to increase the likelihood that an organizations financial
objectives and goals will be achieved.

2.6 The relationship between financial decision making and performance
Complex financial disclosures as an ultimate responsibility for the integrity of organizations
financial disclosure make it a challenge for internal audit to identify if there are discrepancies in
organizations financial statements (Roth, 2010). It also becomes a big challenge to confirm
whether they are abiding by the financial reporting standards, verify whether sufficient controls
are in place, and affirm whether all stakeholders have sufficient information to make informed
financial decisions that result into improved performance.

Risk is an integral part of any endeavor. The risk management unit and the risk management
committee are responsible for risk management financial decisions, but it is the management task
to ensure that the risk management program works (Stern, 2010). An effective financial
decisions system depends on the ability to build process cycles against an accurate matrix of
assessed risk. However, given the dynamic regulatory environment and the complex inter-
connectedness of business functionalities, it is often extremely difficult to assess the versatile
nature of organizations risk and to make appropriate financial decisions that affect performance.
It is now generally accepted that the correlation between financial decisions making and
financial performance affects all kinds of economic activities and that the perceived implications
and consequences of this interaction have changed considerably in the recent years. Financial
decisions making and financial performance have now become a matter of major public concern.
In this concept, decision making improves performance, and is a source of competitive
advantage (International Conference on Economic and Business Issues, New Delhi, India, 2009).

The contribution of financial decision making to financial performance is depicted via
demarcating the relationship between financial decisions and key elements of performance. In
this concept, it is a fact that the Board of Directors has been recognized as the key player in
financial performance by regulators and governance committees around the world (US Congress,
2002; ASX, 2003). The new definition of financial decisions focus on corporate governance,
especially the Board of Directors. This definition emphasizes internals audit role in aiding the
entity to achieve its objectives of the fact of the Board of Directors (Cohen et. al., 2002).

Papadatou, 2005; Karagiorgos et. al, 2006 observed that, based on the financial decision making
committee, on the one hand decisions making contributes to financial performance by:
Bringing best practice ideas about internal financial controls and financial risk management
processes to the decisions making committee, providing information about any fraudulent
activities or irregularities (Rezaee and Lander, 1993), conducting annual audits and reporting the
results to the audit committee encouraging the committee to conduct periodic reviews of its
activities and practices compared with current best practices to ensure that its activities are
constituent with leading practices (Sawyer, 2003).

2.7. Conclusion
From the above literature it is clear, that financial management through financial planning,
decision making, and control develops ever-new approaches to manage finance, and helps fulfill
increasingly more complex demands that management nowadays faces in managing finance.
Related to that, it can be expected that financial management policy will be increasingly oriented
towards advising the management on efficient financial performance.












CHAPTER THREE
METHODOLOGY
3.1 Introduction
The primary purpose of this study was to establish the influence of financial management
towards performance in Kibindi Farm Project Masaka District. This chapter deals with the
methods and procedures of data collection and analysis on the subject matter above. It shows the
research design, population of study, sample size and sampling techniques, data collection
instruments, testing validity and reliability of the instruments, research procedure and methods of
data analysis.

3.2 Research design
The study employed both descriptive and correlation research designs. These were used because
the research was both qualitative and quantitative in nature. Crain (1985) argues, research on
behavioral aspects is rather descriptive in nature thus needs to employ much of the qualitative
technique. Descriptive research design was employed on objective one to analyze data on
corporate planning towards internal revenue performancewhile objective two and three the
researcher employed correlation research design to analyze therelationship between operational
planning and internal revenue performance. The qualitative approach suited this investigation
because it is a process meant to understand social phenomena based on methodological tradition
of inquiry that explores social and human problems and practices related to financial planning
(Creswell, 1998). The study also took on quantitative research orientation. This is because the
relationship between financial planning and internal revenue performance were measured
quantitatively. Appropriate statistical techniques and simple quantitative tools like frequencies,
percentages and Pearson correlation with the help of SPSS were used.

3.3 Study population
Although the targeted population was eighteen, the study mainly involved the categories of
people who were consulted by the researcher during the investigations, especially the employees,
mangers, and Board of Directors because they are the key implementers of financial management
policies. The study population comprised of employees, General Manager, farm manager,
finance manager, Board of Directors. It is from this population that a sample was drawn.

3.4 Area of study
The study was carried out from Kibindi Farm Project Masaka district in the central region of
Uganda. The area was selected because it has many small scale businesses with poor financial
management policies.

3.5 Sample size and selection
Category Population Sample size Sampling technique
Manager 03 03 Purposive
Board of Directors 05 05 Purposive
Employees, 10 10 Purposive
Total 18 18

According to Amin (2005) a sample refers to the selected elements from a population in such a
way that the sample elements selected represent the population. Therefore since the targeted
population was eighteen, the researcher took a sample of all respondents; group them into three:
10 employees, 01 general manger, 01 farm manager, 01 finance manager, 05 Board of Directors
from Kibindi Farm Project were selected purposively

3.6 Sampling Procedures
Amin (2005) and Odiya (2009) define sampling procedures as a process of choosing the units of
the target population which are to be included in the study. This is helpful because a holistic
coverage of the population is impossible given resources constraints. Therefore since the targeted
population was eighteen, the researcher took the entire population as a sample. 10 employees, 01
general manger, 01 farm manager, 01 finance manager, 05 Board of Directors from Kibindi
Farm Project. This enabled the researcher to choose a member from each of the groups to
represent others. This made data collection easy and time saving.

3.6 Sampling techniques
Sampling refers to the process of selecting elements of population in such a way that the sample
elements selected represent the population (Odiya, 2009). The sampling techniques used for this
study included purposive and simple random sampling techniques. The purposive sampling
method was used because Kombo, et al., (2006) argues that, purposive sampling has enormous
power of selecting information rich for in-depth analysis. The random sampling population was
finally reached using Morgan (1970)s table as shown from appendix III.

3.7 Methods of data collection
The researcher used both primary and secondary data sources while collecting data for the study.
Using primary data: questionnaires, interviews and documentary analysis were used plus
studying the existing secondary data as the main tools used.

3.7 .1 Questionnaires
A questionnaire is a research instrument that contains a set of questions on defined issues under
study that are put to respondents for answering on a self-administered basis (Saunders, et al.,
2007). This was used to collect data from other staffs, given that they were somehow many in
numbers that it could take much time to interview them one-by-one. The instrument used
contained mostly closed-ended questions. The questionnaire was used because it was easy to
apply as most respondents ware educated and could fill in the questions easily or with little
guidance at their convenient time.

3.7 .2 Interviewing
An interview guide is a research instrument that contains a set of questions on defined issues
under study that are put to respondents on face to face basis (Saunders, et al., 2007). Some data
were collected using interview guide, interviews were held with the General Manager and
Finance officers. The interview guide contained mostly open-ended question. The instrument
was used for the study because some sections of the study respondents had more financial
information that could not be fully captured using a questionnaire and to get in depth information
the interview was the most appropriate.

3.8.3 Secondary data (Documentary analysis)
Documentary analysis was based on the little budgets prepared since there were no formal
financial statements and reports since 2009-2012, Auditor Reports and Project financial reports
being prepared.

3.9 Data management and analysis
The study was more of qualitative than quantitative although the researcher used both
approaches. The method of data analysis used for the qualitative data meant to derive and
interpret meanings and implications in relation to the main objective.
Reliable information was collected by the researcher regarding the influence of financial
management on the performance of small scale businesses-Kibindi Farm Project. The impact of
financial management is the independent variable while financial performance of small scale
businesses was the dependent variable .Therefore financial management provided information
that was relevant to the small scale business and this greatly influences performance.

3.9 Reliability and validity
3.9.1 Reliability
According to Trochim (2005) Reliability has to do with the quality of measurement. In its
everyday sense, reliability is the consistency or repeatability of your measures. A pilot study
was done on 10 staffs of Kibindi Farm Project in order to ascertain those items in the instruments
that seemed to be vague. It was very difficult to find out whether the respondents were telling
the whole truth about the influence of financial management towards financial performance. The
respondents may have not given the whole truth for fear of being dismissed from their respective
jobs. The instruments were piloted to these selected people so as to establish the internal
reliability of the instrument. And because items of the questionnaire were multiple response
items that is Likert scale, the reliability of the instrument were established by calculating the
Chronbachs alpha coefficient at the appendix. The instrument was considered good for research
purposes because the reliability was found more than 0.60 (Odiya, 2009).

Chronibachs alpha coefficient; = _ k _ X [(SD
2
- SD
i
2
]
(k - 1) SD
2

Where:
k = number of items in the instrument (41)
SD = standard deviation of scores in the whole instrument
SD
i
= standard deviation of scores on individual items
= 41 X 0.579 = 0.593
(41-1)
Since was 0.6 then this implies that the instruments were 60% reliable

3.9.2 Validity
Validity in research means measuring what one intends to measure. To establish the validity of
the instruments, the researcher used expert judgement as recommended by Gay (1997) as the
best method for ensuring reliability.Concerning validity I set out to measure the influence of
financial planning towards internal revenue performance. The validity of the questionnaire was
tested using the content validity Index (CVI). The researcher with the help of supervisor used
the Content Valid Index (CVI) which is a scale developed by computing or rating the relevant
items in the instrument or questionnaire by checking their clarity.


Since CVI was 0.78 then this implies that the instruments were 0.78% good for the research
purpose
3.9.3 Data Analysis
After collecting the questionnaires, the researcher carried out central editing to check the
questionnaire for obvious errors such as wrong entry, missing or inappropriate replies and
contacted the respondents for clarifications where necessary. Data from the field was compiled,
sorted, edited and coded to have the required quality, accuracy and completeness. This was then
entered into the computer using the Statistical Package for Social Sciences (SPSS v. 17.0) for
analysis. The data was analyzed according to the research objectives. For the sample
characteristics, descriptive statistics such as frequency tabulations was used and for the analysis
of the objectives, analytical methods such as, Pearson correlation matrix was used. The
researcher used the Pearson correlation matrix to test the relationships between the independent
and dependent variables.

3.10 Ethical considerations
The researcher sought approved consent from the respondents and explained to them that the
main purpose of the research was purely academic before engaging them in the study. It was
possible that the researchers views could influence the way the study findings would be
documented thus creating an ethical dilemma of failure to present exactly what the study subjects
would reveal in the course of the study interviews. However, the prepared instruments helped the
researcher to collect objective data hence fears of personal views was reduced.

3.11 Conclusion
The chapter introduced the concept of research design, sampling design , data collection,
measurement scales, reliability of the research instrument, data processing and analysis and
limitations of the study which formed the research methodology. The next chapter introduces
presentation and interpretation of the study results.




CHAPTER FOUR
DATA ANALYSIS, INTERPRETATION, AND PRESENTATION
4.1 Introduction
This chapter presents a detailed description of the results which were obtained from the field.
These were trying to examine the relationship between financial management and performance
of small scale businesses, with Kibindi Farm Project as the case study. The collected data was
interpreted and analyzed using qualitative and quantitative data analysis methods whereby
quantitative data was analyzed using statistical technique. Data analysis was done following
objective by objective.

4.2 Summary of methodology
Tables, pie charts as well as simple bar graphs were used because they summarize a lot of
information in a small space yet easy to understand: people can interpret the information quickly.
The target population was 18 employees and the whole number of 18 respondents was purposely
selected.

4.3 Background information of respondents
4.3.1 Age bracket of respondents
Table 4.3 1: Age bracket of respondents
Age Frequency Percentage
18-25 6 33.3%
26-30 5 27.8%
31-35 4 22.2%
Above 35 3 16.7%
Total 18 100%
Source: raw data from respondents
Table 4.3.1 above shows that, 33.3% of the respondents are aged between 18-25 years, 27.8%
were between 26-30, and 22.2% were between 31-35 whereas only 16.7% were above 30 years
of age. This implies that, majority of the respondents were still young and energetic to work and
could work more to improve of financial performance of the company.
4.3.1 Gender of respondents
Pie chart 4.3.1: Gender of respondents



56%
44%
Male Female
The results on the pie chart below revealed that, male respondents were 10 (55.6%) as compared
to their female counterparts who were 8 (44.4%).This implies that, a bigger percentage of
respondents at the project are of male employees.

4.3.3 Education level of respondents
Table 4.3.3: Level of education
Level Frequency Percentage
Primary 1 5.6%
Secondary 6 33.3%
Certificate 5 27.8%
Diploma 2 11.1%
Degree - -
Masters - -
PhD - -
No level 4 22.2%
Total 18 100%
Source: raw data from respondents
According to the tabulated data in table 4.3.3, only 11.1% of the employees have diplomas,
27.8% have certificates, 33.3% were secondary leavers while 5.6% were primary leavers yet
22.2% had no education level.

4.3.4: Experience in the project
Table 4.3.4: Experience in the project
Period Frequency Percentage
Less than 2 years 2 11.1%
2-3 years 2 11.1%
4-5 years 5 27.8%
6-10 years 9 50
Above 10 years - -
Total 18 100%

Source: raw data from respondents
Following the results above, 50% of the respondents have spent between 6-10 years, 27.8% have
spent between 4-5 years, 11.1% have spent between 2-3 years, 11.1% too have spent less than 2
years yet no one has spent above 10 years, which was explained to be of the fact that the farm
has only existed for 7 years. The 50% represents that majority of the employees have spent much
time serving the organization which implied that they were capable of having almost all the
necessary information that the researcher needed for research.

Table 4.3.5: Area of responsibility
Table 4.3.5: Area of responsibility
Responsibilities Frequency Percentage
Owner 9 50%
General manager 3 16.7%
Employees 6 33.3%
Totals 18 100%
Source: raw data from respondents
Following the research findings, results from the 18 respondents showed that much of the work
is done by the owners and employees. This is evident in the 50% respondents as owners and
33.3% of employees. A few small scale businesses have general managers and this is equivalent
to 16.7% of Kibindi Farm Project. This is an indication that there is no clear division of labor and
responsibility in the farm since the scope of work is relatively small.

4.4 Objective 1: To examine the effect of financial planning on performance of Kibindi
Farm Project
In order to effectively find out the effects of financial planning on performance of small scale
businesses with Kibindi Farm Project as the case study, specific questions in line with the
research objectives were designed.
4.4.1 Preparation of financial statements
Table 4.4.1: Preparation of financial statements
Responses There is proper planning
and record keeping
Financial statements are
always prepared
Frequencies Percentage Frequencies Percentages
True 7 38.9% 4 22.2%
Very true 2 11.1% - -
Neutral 4 22.2% 7 38.9%
Untrue 4 22.2% 1 56%
Very untrue 1 5.6% 6 33.3%
Total 18 100% 18 100%
Source: raw data from respondents
Table 4.4.1 revealed that, out of the 18 respondents, 7 (38.9%) accepted that, there is proper
financial planning and record keeping, 2 (11.1%) say it is very true, 4 (22.25) are neutral,
4(22.2%) say it is untrue yet 5.6% say it is very untrue. This indicates that financial management
plan contributes to financial performance of Kibindi Farm Project.

In order to find out whether financial statements are always prepared, 22.2% said it is true,
38.9% were neutral, 5.6% said it is untrue financial statements are not always prepared yet
33.3% said it is very untrue about the preparation of the statements in the project. This implies
that the small scale business perception of financial statement preparation is not so clear. There
are no formalized income statements and balance sheets being prepared. This was further
evidenced by the research question that required establishing whether the financial plan and
books of accounts are maintained to keep track of the expenditures.

Additionally, concerning expenditure, it was still found out that the expenditure of the project is
limited to what was approved in the financial management plan.50% agreed, 22.2% strongly
agreed yet 27.8% strongly disagreed. This was derived from the analysis that was carried out by
the researcher.

To find out whether the financial management plan properly operates, it was revealed that there
are cases of departments spending more than what was approved in the budget.55.6% agreed on
the presence of those cases, 27.7% disagreed yet 16.7% strongly disagreed. Comparing the
percentages, it can be concluded that sometimes expenditures exceed income in some
departments which might be as a result of poor financial planning or poor finance management.
Table 4.4.2: Whether there is a special finance manager
Response Frequency Percentage Cumulative
percentages
True 10 55.6% 55.6%
Untrue 8 44.4% 100%
Total 18 100%
Source: raw data from respondents
4.4.2: A pie chart showing whether there is a special finance manager

On whether there is a special finance manager the findings revealed that, 55.6% said there is a
special finance manager whereas 44.4% denied it.

56%
44%
TRUE utrue
According to John Conroy cited in Timothy S. Hatten (1997) page 463 said that one reason that
so many businesses run into cash flow problems is that too often no one is put in charge of it.
The idea of having one individual in firm responsible for cash management is also in order by
Leslin. Manonson, president of cash management resources and a leader of the American
management associations corporate cash management course. He said that cash managers
should get help from financial survey individuals, knowledgeable professionals, bankers or
colleagues in the financial profession. They should attend regional cash management seminar,
read industry magazines and books on cash management.

Table 4.4.3: Authorization of purchase
Responses Frequency Percentage
Disagree 4 22.2%
Strongly agree 9 50%
Agree 5 27.8%
Total 18 100%
Source: raw data from respondent






4.4.3: A pie chart showing authorization of purchase


In testing adherence to established procedures, table 4.4.3 above established whether
authorization of purchase and all reallocation of funds go through established procedures and the
following results were established. The biggest percentage 50% strongly agreed and
acknowledged the managers role in authorizing any purchase which is an indication of strong
internal controls which are meant to ensure that the business funds are spent according to the
intended desired goal. Only 22.2% were in disagreement and 27.8% agreed.

In conclusion therefore, it can be concluded that Kibindi Farm Projects failure to manage
finance is due to failure of preparing financial statements: income statement and statement of
financial position. This is evident in table 4.4.1 above in which a bigger percentage (33.3%) of
22%
28%
50%
disagree agree strongly agree
respondents said it is very untrue when they were asked to establish whether financial statements
are always prepared.

In addition to the above, a question was asked to find out whether the financial management plan
properly operates, it was revealed that there are cases of departments spending more than what
was approved in the budget.55.6% agreed on the presence of those cases, 27.7% disagreed yet
16.7% strongly disagreed.
Budgetary planning is concerned with preparing the short- to medium-term plans of the
organisation (World Bank, 2001). It will be carried out within the framework of the strategic
plan. An organisations annual budget could be seen as an interim step towards achieving the
long-term or strategic plan according to Esaete (2003).But however it was deduced from the
analysis that Kibindi Farm Project does not always prepare financial statements in reference to
table 4.4.1 where 33.3% respondents agreed that it is very untrue when they were asked whether
financial statements are always prepared.
According to Steffenson and Trollegaard (2003) lack of full devolution to the development
budget and other financial statements affects internal revenue performance. This hence helps to
explain why financial management is a problem to the farm project.
In conclusion therefore, the farm should devote itself to preparation of financial statements as a
mean of managing finances properly at the project and strategically. And as supported by Opiela
(2002) who says that without a formalized plan the organization will lack direction and management
will not be aware of their targets and responsibilities.

4.5 Objective 2: To establish the influence of financial control on performance of Kibindi
Farm Project
Table 4.5.1: Whether staff understands how budgeting and financial performance operates
Responses Frequencies Percentage
Strongly disagree 3 16.7%
Disagree 4 22.2%
Neutral - -
Agree 8 44.4%
Strongly agree 3 16.7%
Total 18 100%
Source: raw data from respondents
A graph showing staff understands of budgeting and financial performance


0.00% 5.00% 10.00% 15.00% 20.00% 25.00% 30.00% 35.00% 40.00% 45.00%
Category 1
strongly disagree strongly agree neutral disagree agree
On whether staff understands how budgeting and financial performance operates , the findings
revealed that, out of the 18 respondents, 44.4% agreed that staff understands how budgeting and
financial performance operate, 22.2% disagreed, 16.7% strongly agreed while another 16.7%
also disagreed strongly.

Table 4.5.2: Cost control is essential for financial performance
Response Frequency Percentage
Agree 6 33.3%
Strongly agree 10 55.5%
Disagree 1 5.6%
Neutral 1 5.6%
Total 18 100%
Source: raw data from respondents
4.5.2: A pie chart showing the usefulness of cost control


33%
56%
6%
6%
agree strongly agree disagree neutral
The findings from table 4.5.2 above revealed that, cost control is essential for financial
performance and accountability of the project. This is evident of the 55.5% respondents who
strongly agreed, 33.3% agreed whereas 5.6%, 5.6% disagreed and remained neutral respectively.

Table 4.5.3: Whether the business makes budgets, an indicator of internal control
Responses Frequencies Percentage
Agree 5 27.8%
Neutral 2 11.1%
Strongly agree 11 61.1%
Total 18 100%
Source: raw data from respondents
Whether the business makes budgets, as an indicator of internal control the finding revealed that,
61.1% of the respondents strongly acknowledged the need for budgeting, 27.8%agreed while
11.1% were neutral about the subject matter.

Table 4.5.4: Whether there is need to evaluate the financial management plan or budget.
Responses Frequencies Percentage
Strongly disagree - -
Disagree 1 5.6%
Neutral 3 16.7%
Agree 6 33.3%
Strongly agree 8 44.4%
Total 18 100%
Source: raw data from respondents

4.5.4 A bar graph showing the need to evaluate financial management plan

Source :raw data from respondents
The finding from table 4.5.4 above indicates that, it is of great importance to evaluate the
financial management plan or budget and that it has enhanced financial performance of the
project. This is supported by the biggest percentage of 44.4% of respondents who were strongly
in agreement,33.3% agreed and 16.7% plus the 5.6% were neutral and as well in disagreement
respectively.

Table 4.5.6: profitability and customer satisfaction
Responses The business has been
making profits


Our products satisfy
customers
Frequency Percentage Frequency Percentage
Strongly disagree 3 16.7% - -
Disagree 3 16.7% 5 27.8%
Neutral - - 2 11.1%
Strongly agree 5 27.8% 11 61.1%
Agree 7 38.8% - -
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
Disagree Neutral Agree Strongly agree strongly disagree
Total 18 100% 18 100%
Source: raw data from respondents
About whether the business has been making profits, 7 (38.8%) agreed, 5 (27.8%) strongly
agreed whereas 3 (16.7%) were strongly in disagreement .On the other hand, the employees
claimed that their products (pigs, piglets, manure and urine) satisfy customers. This is evident of
the 11 respondents (61.1%) who strongly agreed although 5 (27.8%) respondents disagreed.
However, the 2 respondents (11.1%) were neutral.
4.5.7: The project carries out auditing, an indicator of internal control
Responses Frequency Percentage
Disagree 9 50%
Neutral 5 27.8%
Agree 4 22.2%
Total 18 100%
Source: raw data from respondents
4.5.7A bar graph showing whether the project carries out auditing

0% 10% 20% 30% 40% 50% 60%
disagree
neutral
agree
strongly disagree
strongly agree
Column1
As tabulated above, it was revealed that Kibindi Farm Project does not carry out auditing. This is
because the biggest percentage of 50% disagreed, 27.8% were neutral whereas only 22.2%
agreed.

At the project, financial management is sometimes measured based on time management hence
financial management is determined by the results achieved in a given time period. This was
revealed during the interviews which the researcher conducted. The results were: 10 (55.5%) out
of the 18 respondents agreed, 6 (33.3%) disagreed while 2 (11.1%) strongly disagreed.
Still, it was found out that lack of budget or financial management plan participation by all
stakeholders affects financial performance negatively because the estimates cannot be
appropriate.9 out of the 18 respondents agreed, that is 50%.5 (27.8%) strongly agreed yet 3
(16.7%) disagreed. Also, budget financial management plan supervision is essential for the
effective and efficient financial performance of the project.
13 (72.2%) respondents out of the 18 respondents agreed that the project officials know the
factors that influence financial performance of the project, 3 (16.7%) were neutral yet the 2
(11.1%) strongly disagreed. It was still found out that evaluation, control and feedback are so
essential for financial performance.
According to Pickett (2009a) financial controls are put in place to keep the company on course
toward profitability goals and the achievement of its mission, and to minimize surpluses along
the way. They enable management to deal with rapidly changing economic and competitive
environments, shifting customer demands and priorities, and restructuring for future growth.
However, the projects internal controls like budgets are rarely maintained at the farm. This is
evident of the results in table 4.5.3 although table 4.5.4 revealed that there is need for preparation
of budgets where 44.4% out of 18 respondents agreed strongly.
Concerning auditing as an indicator of internal control, it can be concluded that kibindi farm
projects management does not appreciate the usefulness of auditing yet historically, internal
audit has been considered as a control function, the organizational policeman and watchdog by
Morgan (1979)
In conclusion there fore, the project needs to carry out auditing and prepare budgets always in
order to make it easy to trace the usage of funds.

4.5 Objective 3: To establish the relationship between financial decision making and
performance of Kibindi Farm Project.
4.6 The relationship between financial decision making and performance
Table 4.6.1 The relationship between financial decision making and performance

Correlations
1 .794
**
. .000
66
66
.794 **
.000
.
66 66
Pearson Correlation
Sig. (2-tailed)
N
Pearson Correlation
Sig. (2-tailed)
N
Financial decision making
Performance
Financial
Decision
l
Performance
t
Correlation is significant at the 0.01 level (2-tailed). **.
1
From the figure above, the two variables show that there is a high positive correlation co-
efficient (r) of (r = 0.794) 79.4 %. A change in financial decision making affects performance at
79.4 %. This implies that performance is highly influenced by the financial decision taken.
It is now generally accepted that the correlation between financial decisions making and
financial performance affects all kinds of economic activities and that the perceived implications
and consequences of this interaction have changed considerably in the recent years as supported
by Roth (2010). Financial decision making and financial performance have now become a matter
of major public concern. In this concept, decision making improves performance, and is a source
of competitive advantage. (International Conference on Economic and Business Issues, New
Delhi, India, 2009).
4.7 Conclusion
It can be concluded that says that without a formalized plan the organization will lack direction and
management will not be aware of their targets and responsibilities, the project needs to carry out
auditing and prepare budgets always as indicators of internal control an it is now generally
accepted that the correlation between financial decisions making and financial performance
affects all kinds of economic activities.
















CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMMENDATIONS

5.1 Introduction
This chapter gives a summary, conclusion and recommendations of the study findings based on
the objectives as follow:
The purpose of the study was to establish the influence of financial management on performance
of small scale businesses, with Kibindi Farm Project as a case study. Therefore, the summary,
conclusion and recommendations were based on the major findings in chapter four.

5.2 Summary of the study findings
5.2.1 Objective 1
The first research question was: what is the effect of financial planning on the performance of
small scale businesses with Kibindi Farm Project as the researchers case study. This is
supported by the results in table 4.4.1.On the other hand, the research established that there are
mixed perceptions about the meaning of financial statements. There are no formalized income
statements and balance sheet being prepared. However at least some little budgets were
maintained.
In addition to the above, a question was asked to find out whether the financial management plan
properly operates, it was revealed that there are cases of departments spending more than what
was approved in the budget.55.6% agreed on the presence of those cases, 27.7% disagreed yet
16.7% strongly disagreed.

5.2.2 Objective 2
The second research question was: what is the influence of financial control on performance of
Kibindi Farm Project. Several questions were asked to find out whether the business makes
budgets and carries out auditing as indicators of internal controls. The findings were tabulated in
tables 4.5.3 and 4.5.7 respectively.
About budgeting, 11 (61.1%) strongly agreed that budgets are made though not always, 5
(27.8%) agreed whereas only 2 (11.1%) were neutral. On the other hand,9 out of 18 (50%)
respondents agreed that the project does not carry out auditing,4 (22.2%) agreed whereas 5
(27.8%) were neutral.

5.2.3 Objective 3
The third research question was to establish the relationship between financial decision making
and performance of Kibindi Farm Project. The calculation revealed that, there is a high positive
correlation co-efficient (r) of (r = 0.794) 79.4 %, then this means that there is a high relationship
between financial decision making and performance. This further implies that, a change in
financial decision making influence performance of Kibindi Farm project by 79.4 % hence
performance is affected by financial decision taken by 79.4% and 19.6% may be due to other
factors like quality of the product and skill of employees among others.

5.3 Conclusion
There are no formalized income statements and balance sheet being prepared. it was revealed
that there are cases of departments spending more than what was approved in the budget.it can
still be concluded that the project does not carry out auditing an indicator of internal control yet
even the budgets are prepared irregularly. The calculation revealed that, there is a high positive
correlation co-efficient (r) of (r = 0.794) 79.4 %, then this means that there is a high relationship
between financial decision making and performance.
5.4 Recommendations
Small scale business owners should start preparing financial statements since these statements
are a vital tool to financial success as they can help to trace incomes and expenditure hence
monitoring financial performance.

The government should come in to organize seminars, workshops and sensitization programs to
train the various small scale business owners periodically on how to plan through preparing
financial accounting records this is because proper record keeping is a vital tool in tax
administration of which the government is a direct beneficiary.

There is also need to sensitize the women to get actively involved in the productive
entrepreneurial activities since research revealed that most the employees were men.

Business owners need to attend business management courses so that they improve on their
business administrative skills and performance.


5.5 Suggestions for further research
Other researchers need to carry out investigations trying to establish the relationship between
business performance and other variables such as education levels, gender, and the role of formal
education on business performance or on job creation, where research has not been exhaustively
carried out.
The research findings were based on small scale businesses: Kibindi Farm Project in Masaka
district, as the case study. There is need for similar studies to be carried out with bigger
businesses and in other parts of the country.














References

Berea O.A., Grigoru C., Blceanu V.A., (2008), Evaluarea afacerilor. Managementul
financiar i realizarea performanelor , Editura Bren, Bucureti;
Collin A. Carnall, (1990), Managing change in organisations , Editura Prentice Hall
International, Londra;
Davies, D., (2000), The art of managing finance, Mc Graw Hill Book Company, New
York;
Harringtion M.J., (2001), Management total n firma secolului XXI, Editura Teora,
Bucureti;
M. Le Saget, (1999), Managerul intuitiv, Editura Economic, Bucureti;
Tichy M.N., (2000), Liderul arta de a conduce, Editura Teora, Bucureti.



APPENDIX I
TABLE FOR DETERMINING SAMPLE SIZE FROM A GIVEN POPULATION
N S N S N S N S N S
10 10 100 80 280 162 800 260 2800 338
15 14 110 86 290 165 850 265 3000 341
20 19 120 92 300 169 900 269 3500 246
25 24 130 97 320 175 950 274 4000 351
30 28 140 103 340 181 1000 278 4500 351
35 32 150 108 360 186 1100 285 5000 357
40 36 160 113 380 181 1200 291 6000 361
45 40 180 118 400 196 1300 297 7000 364
50 44 190 123 420 201 1400 302 8000 367
55 48 200 127 440 205 1500 306 9000 368
60 52 210 132 460 210 1600 310 10000 373
65 56 220 136 480 214 1700 313 15000 375
70 59 230 140 500 217 1800 317 20000 377
75 63 240 144 550 225 1900 320 30000 379
80 66 250 148 600 234 2000 322 40000 380
85 70 260 152 650 242 2200 327 50000 381
90 73 270 155 700 248 2400 331 75000 382
95 76 270 159 750 256 2600 335 100000 384
Note: N is population size
S is sample size.
Krejcie, Robert V., Morgan, Daryle W., Determining Sample Size for Research Activities,
Educational and Psychological Measurement, 1970






APPENDIX 2
Questionnaire
Dear respondent,
This questionnaire is seeking information concerning the topic the influence of financial
management on performance of small scale businesses.This is for an academic purpose only
and shall be accorded utmost confidentiality. There fore, your contribution towards filling this
questionnaire will be a great contribution to my academic endeavor.
Thank you
GENERAL INFORMATION
Section A
Age bracket
18-25 years 26-30 years 31-35 years Above 35 years


Gender
Male Female


Education level
Primary Secondary Certificate Diploma Degree Masters PhD No level


Experience at the project
Less than 2 years 2-3 years 4-5 years 6-10 years Above 10 years


Area of responsibility
Owner General manager Employees


Section B
Key
This is true (1)
This is very true (2)
Neutral (3)
This is untrue (4)
This is very untrue (5)
The impact of financial management and performance
Please tick to the level you agree with the statements

No. 1 2 3 4 5
The project always prepare its financial management plan on time to
control its expenditure

Expenditure of the project is limited to what was approved in the
financial management plan or budget

The project always meets its financial management plan or budget
commitments

The project does not suffer cases of cash outflows exceeding cash
inflows

Whether there is special finance manager
Books of accounts are maintained to keep track of expenditures
There are no cases of departments spending more thaw ht was
approved in the financial management plan

The project does not transfer funds from approved programs on
expenditure items not approved in the financial management plan or
budget

All re-allocation of funds go through established procedures
applicable in project


Section c:
The association between financial management and performance
Please tick according to the level you agree or disagree
Strongly agree (5)
Agree (4)
Neutral (3)
Strongly disagree (2)
Disagree (1)
No. 5 4 3 2 1
The staff at the project understand how budgeting and financial
performance operates

The project carries out auditing
Time management is essential for carrying out accountability of the
budget or financial management plan

Financial performance is measured by results achieved
Products satisfy customers
Cost control is essential for financial performance and accountability
of the project

Lack of budget or financial management plan participation by all
stakeholders affects financial performance

Evaluation, control and feedback are essential for financial
performance

At the project, financial performance is measured based on time
management, quality products and cost saving.

Budget supervision is essential for the effective and efficient
financial performance of the project

Proper coordination of the budget processes enhances financial
performance

Financial management plan evaluation has enhanced performance at
the project

Proper financial control leads to profitability and customer
satisfaction

Section D
The relationship between financial management and performance
Please tick according to the level you agree or disagree with the statements below
No. 5 4 3 2 1
There are adequate controls in the day today running of the project
There are well established work processes followed when performing
the operations of the project activities

The management of the project usually updates our budgetary plans
The staff of the project usually follows approved procedures in
execution of their duties

We usually experience system breakdown at the project
There is always information flow amongst employees at the project
Staff are usually sensitized on operational planning
Staff always adhere to the approved procedures followed during
operational planning

The staff are always committed and honest
At the project, operational planning decisions are usually made at the
appropriate level

We always integrate risk management into operational planning at all
levels











INTERVIEW GUIDE
Section A: FINANCIAL MANAGEMENT
Does the project always prepare budgets on time?
Is the expenditure of the project limited as approved in the budget?
Does the project always meet its budgeted commitments?
Does the project maintain a clear record of revenue received ad spent?
Are there cases of departments spending more than approved?
Section B: PERFORMANCE
Does the staff at the project understand how budgeting and financial performance operate?
Is cost control essential for financial performance?
At the project, is financial performance sometimes measured based on time management, quality
products and cost saving?
Do the project officials know the factors influencing performance?