CASH RECONCILIATIONS AND THE FINANCIAL PERFORMANCE OF MEDIUM ENTERPRISES IN MANUFACTURING SECTOR IN NAIROBI COUNTY
CASH RECONCILIATIONS AND THE FINANCIAL PERFORMANCE OF MEDIUM ENTERPRISES IN MANUFACTURING SECTOR IN NAIROBI COUNTY
Charity Wairimu Maina - School of Business and Economics, Kenya Methodist University, Kenya
Wilson Muema - School of Business and Economics, Kenya Methodist University, Kenya
Doreen Mutegi - School of Business and Economics, Kenya Methodist University, Kenya
ABSTRACT
The majority of challenges faced by medium enterprises (MEs) are fraud-related and could be avoided if in place there is a strong internal control system. The purpose of this study was to establish the influence of internal controls on the financial performance of MEs in the manufacturing sector in Nairobi County. The study was descriptive, the population for the study included 95 MEs in the areas of the food processing sector: flour milling, milk processing, and cooking oil manufacturing. The sample for the population was 77 MEs obtained through the Yamane formula at a margin error of 5%. Data for the study was collected using a questionnaire through the in-person drop and pick method. The study also collected secondary data from the financial statements of the companies on sales as well as net profit earned. Collected data was analyzed through descriptive analysis (frequency, percentages, mean and standard deviation) and inferential analysis through simple linear regression using SPSS. The study found that food manufacturing companies in Nairobi County utilize cash reconciliation, segregation of duties, inventory audit, cost management, and risk assessment as the internal controls. The study further revealed on cash reconciliation and financial performance β = 0.759, t=2.770 with associated p- value= 0.0079 which was less than 0.05). The study concluded that cash reconciliations had a positive and significant influence on the financial performance of MEs in Nairobi county. The study recommended for the manufacturing MEs in Nairobi County to keep petty cash records for reconciliation, have a real-time cash reconciliation register, reconcile payment receipts and invoice records, conduct ad-hock cash checks, have alert messages on bank transactions.
