Cash Management in Medium Scale Enterprises


There have been several of theories and options about cash management in medium scale firms as a tool for their survival.  Most of these theories and options have been expressed by academician in the field of financial studies, different writers in different textbooks, journals, lecture series and newspaper.  It has becomes necessary for the project writer to review some of these ideas and options with a view to identify the logic behind their findings.  This will provide the project writer with all the necessary ideas based on medium scale firm so as to draw valid conclusion on this research into proper and effective cash utilization in medium scale enterprises.


Actually, the role of proper and effective cash management in medium scale enterprises cannot be overemphasized.  Cash management effectively act as a catalyst towards the expansion and long term survival of medium business.  In a similar development, the “Delta State Governor Mandated entrepreneur to identify areas of need for prudent utilization in cash in medium scale business this was “According to C.O. Okubuiro (1997), a business consultant with establishing a long lasting medium scale industries.  C.O. Okubuiro commented on the poor or number of feasibility report before commencement of medium scale firm in Nigeria.

“According to C.O. Okubuiro,” it is when the feasibility and viability of a project is ascertained that an enterprise should be registered for establishment with the Institute of Chartered Accountant of Nigeria Lagos.  “According to Olunlola Adeosun” he stresses the need for good accounting system maintenance for medium scale enterprises.



There are as many definitions of Medium Scale Enterprises (MSE) as there are experts on the subject.  “According to the Nigerian industrial policy” it describes medium scale enterprises as those total investment of between N100,000 to N2 million.  Also the “Central Bank of Nigeria” described medium scale enterprises or firm as those whose capital investment does not exceed N5 million including land and working capital or whose turnover are not more than N25 million annually.



One of the techniques used in cash management is by the use of central over cash.  Cash is the most easily misappropriated assets of any company.  It is therefore important for the company to maintain strict control over cash to ensure that: receipts of cash are controlled in such a way as to prevent the possibility of loss, theft between receipt of cash are properly classified.

All receipt of cash are properly classified and recorded by the company.  Among the control measures to be adopted to minimize exposure of cash receipts to loss are such procedures as deposit of receipts.


Infect, centralization of cash handling maintenance of minimal cash balance and immediate recording of cash transaction.  Physical safeguard such as such register, vaults immediate endorsement of cheques and limited assess to cash areas are equally necessary.  (“According to Boner and Apewood, 1989”), with respect to disbursement, cheques should be used for the major payments.

Only small amounts should be paid by cash and this should be through an imprest account.



Medium scale enterprises have been identified as a basic tool for rural development.  They have taken a turn for the better since the past decades.  The prospect it for this decade and subsequent decades are bright.  The enterprising ingenuity and enthusiasm of many Nigerians are great challenge to the development of the country as a whole.  To achieve this depends solely on the proper management in medium scale enterprises, other problems that attribute to the ineffective cash management can be discussed below:-

  • Improper cash management in medium scale enterprises. This is as a result of neglecting one of the accounting concept (business entity) which says “that the business quite different from the other so many people decides to go into business without having a full knowledge of what a business takes. For instance, an enterprise without keeping its day to day accounting, you can now see that the cash there must be mismanagement because we might not know when we are running at loss or gain.

Cash has been described as the lifeblood of many organizations.  Every business organization needs cash to invest in operation, to pay its obligations as they become due, and to provide returns to investors in the form of interest and dividend.  This cash has to be managed very well or else it will yield a bad return to the medium scale firm.  Some of the problems of improper management of cash are:-

  1. Improper record by the accountant of the firm.
  2. Investment on product without the full knowledge of their market price.
  • Another problem is when the entire has been mismanaged, for example when the owner of a medium scale industry do not boarder to known whether their business is moving or not, or even whether they are gaining or loosing, all they do is to come in to collect cash and run out without replacing those money. This is one of the major problem of improper cash management.



Some of the ways to ensuring availability of cash for business operation are:-

  1. Borrowing money from banks
  2. Borrowing money form private individuals.
  • Borrowing money from money lenders.
  1. Turning a business into a limited liability by selling shares.


  1. Borrowing money from banks:- So many business men cannot start up their own business without borrowing money. This is due to short of fund to the business and no business can be operated without enough finance.  You can find out that a business without enough finance/capital is going to collapse, so one of the ways to ensuring the availability of cash for any business operation is by borrowing money from the banks.
  2. Borrowing money form private individuals:- Money from private individuals to support his business, reaching and agreement that the money will be paid back either monthly or yearly.  This means is another way to ensuring the availability of cash for a business operation.



Having reviewed some opinions and theories put forward by some winters, I the project winter can now pause a while to see how these opinions relate to one another and the relationship they bear to the topic of the project titled “cash management in medium scale firms”.

Going through the literature, the winter discovered that apart from the local emphasis on the important role of good accounting record maintenance towards the success of any business undertaking, the procedures of establishing a medium scale firm based on feasibility report is also a basic necessity.  All others seems to dwell much on the effective and efficient utilization of cash in medium business with particular reference to:-

  1. Lack of finance or cash handling experience
  2. Lack of internal control system
  • Inadequate attention to proper financial control
  1. Lack of trained or qualified staffs

On the importance and contribution of medium scale firms cash management, the two experts seems to have the same view by stressing the importance of contribution which cash management could have towards the expansion of medium business.

Speaking on different occasions each of the experts advised the entrepreneurs to make sure that at least efficient cash management is practiced and maintained.


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