EFFECT OF MANAGEMENT AND CONTROL OF CASH IN THE BANKING SECTOR
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EFFECT OF MANAGEMENT AND CONTROL OF CASH IN THE BANKING SECTOR
ABSTRACT
Cash is the lifeblood of any financial organisation, allowing it to stand on its own. Approximately one-half of all new businesses fail, primarily owing to insufficient financial preparation in the name of cash management.
A strong cash management strategy aims to reduce, if not eliminate, the guessing game of unanticipated events and to make all parts of the bank entirely predictable.
In company, good chances can arise at any time, but if you are not prepared to seize them, the best one may be lost forever, resulting in a loss of customer market share and perhaps your capacity to compete globally.
However, the research effort is divided into excellent parts, one of which contains the history of the bank and a statement of the general difficulties of cash management and control, as well as the objectives and relevance of the study.
The second chapter is about the review, and the third chapter is about the processes and analysis used to acquire the writer’s data. The fourth chapter discusses data display and data analysis. The conclusion, limitations, and recommendations are included in the final chapter.
INTRODUCTION TO CHAPTER ONE
1.1 Background of the Research
Banking is widely assumed to have begun with seventeenth-century goldsmiths, who have volt facilities. Because people kept their gold coins with the goldsmith, the business grew and an association was formed. This results in the establishment of merchant and private banks.
Banks have been accused of taking excessive risks with untested new instruments and lines of business. The advise given to the bank is to avoid future risk exposure in the activities.
The primary emphasis of this study project is the influence of cash management and control by the banking sector. Given that cash is the most liquid of the bank’s current assets, this is a very essential topic. Cash is the lifeblood of the financial industry, which means that it cannot exist or function without it.
Van Horne (1980) defines cash management as “managing the monies of the bank firm in order to achieve maximum cash availability and maximum interest income in any idle funds.” Cash management and control, on the other hand, entails the authority or ability to direct or decide how cash works,
so that it is available when needed in the correct quantity and at the right time, as well as having idle cash invested to allow the bank to earn the highest possible return on it.
That is, good cash management and control will put the bank in a better position to achieve profitability, liquidity, and stability. It is essential for the banking industry to remain both profitable and liquid at all times.
1.2 Statement of the Problem
The First Bank of Nigeria, like all other banks, is obliged to deliver prompt and effective service to both customers and interested parties. The bank should understand the importance of time and make every effort to discharge its customers as soon as feasible.
This is because customers are the bank’s business, and so they are considered an asset of the bank. The bank’s goal is to protect the cash and other valuables deposited by their customers.
The first question that a consumer has is if the bank has enough and enough security to preserve and safeguard its customers’ cash and other valuables.
How is this bank’s cash managed and controlled? These are some of the questions that any potential consumer may have.
The study’s goal is to research and maybe find a solution to the above-mentioned question.
1.3 The Purpose of the Research
The following are the study’s objectives:
a. Determine the reasons of customer delays and devise solutions to them.
b. Determine the root causes of ineffective financial management and control.
c. To identify the methods and methods by which banks function in order to achieve a very good flow of cash.
1.4 Research Hypothesis
A hypothesis is an assumption that can be proven false or true based on the researcher’s collection of data or observations. This investigation will employ the following hypothesis.
Ho: Effective cash management and control do not lead to profitability and stability in the banking industry.
H1: Effective cash management and control lead to profitability and stability in the banking sector.
1.5 The Significance of the Research
The purpose of this research is to emphasise the effect of cash management and control, as well as to identify inefficiencies and weaknesses in bank cash management and control. That it will be extremely beneficial to shareholders, customers, and potential investors,
as well as the national economy in general, to achieve the necessary economic growth and development. When completed, this project will serve as a reference point for researchers who wish to do additional research on the effects of cash management and control in banks.
1.6 Scope of the Research
The researcher opted to confine the scope of the study to First Bank of Nigeria Plc, Kachia Road Branch Kaduna, from 2009 to 2013.
1.7 Historical Background of First Bank of Nigeria PLC
First Bank of Nigeria is a significant commercial bank in Nigeria. Sir Alfred Jones, a shipping magnate from Liverpool, founded the bank in 1894 as a tiny operation at the office of Elder Dempster and Company in Lagos. On March 31, 1894, the bank was established as a limited liability corporation, with its headquarters in Liverpool.
With a paid-up capital of £12,000, it began operations under the corporate name of the Bank for British West Africa (BBWA). In 1900, the bank’s international banking activity was launched with the opening of a second Nigeria branch in old Calabar, and two years later, services were extended to northern Nigeria.
The bank had restructured multiple times in order to successfully respond to changing situations over the years. It changed its name from the Bank of British West Africa to the Bank of West Africa in 1957, and it was incorporated locally as the Standard Bank of Nigeria Limited in 1969, in accordance with the Companies Decree of 1968.
The bank was listed on the Nigerian stock exchange in March 1976. In 1979 and 1991, the name was changed to First Bank of Nigeria Limited, and later to First Bank of Nigeria Plc.
The bank implemented a decentralised structure with five regional administrations in 1985, which was modified in 1992 to improve operational efficiency.
First Bank has diversified into a wide range of banking activities and services to meet the needs of its customers, including corporate and retail banking registrarship, trusteeship, and insurance brokerage. The bank now has 394 locations throughout Nigeria, making it the industry’s largest branch network.
First Bank has grown dramatically over the years, from a share capital of N55.6 million in 1980 to N2.619 billion in March 2006. The bank’s total assets were N540.2 billion in March 2006, its deposit base was N390.8 billion, and its market capitalization was N193.81 billion.
First Bank is listed on the Nigerian Stock Exchange (NSE), where its issued and paid-up share capital was 24.86 billion units as of March 31, 2009.
The bank achieved a stunning N35.7 billion profit before tax for the half year ending June 2010, up from N31.3 billion the previous year. It accomplished this milestone by earning a total of N139.7 billion throughout the specified time period.
In June 2011, First Bank of Nigeria plc had total assets of N2.9 trillion, showing a 20% increase over prior years, and deposits of N1.4 trillion. First Bank is Nigeria’s largest bank and one of the top five banks in Africa in terms of assets.
FBN has grown remarkably in terms of deposit base, asset size, and loan and advance size. A good track record of profitability and dependability in sound banking has also contributed to its continued leadership in the banking business.
FBN is deeply devoted to its social duties and identifies with the communities in which it operates; as of March 1992, Nigerian interest constituted 80% of the bank’s equity.
1.8 Definitions of Terms
Understanding technical phrases with specific meanings in the banking industry is critical to the sector’s success.
These are their names:
a. Cash management: The capacity to manage cash in order to maximise cash availability and interest income from any idle fund.
b. Cash control: This refers to a disbursement mechanism targeted at settling accounts payable (liabilities) as late as possible while maintaining credit standing.
This enables an organisation to accelerate receivables collection by deferring payment of liabilities without jeopardising the organization’s credit status in the eyes of its creditors.
c. Commercial banking: This is concerned with financial institutions and monetary transactions for the goal of profit. In other words, commercial banks are financial institutions that were established to provide various services to customers, particularly keeping and lending money to customers, organisations, and governments.
Some of the services provided by commercial banks include accepting deposits, acting as a payment agent, transferring money, foreign transaction technical advice, and acting as a trustee and executor of will.
d. Banking Sector: That section of the business that deals with monetary transactions and matters. In general, it includes the central bank,
which is the government bank, into which all government bank revenue is paid, and commercial banks, which hold accounts for their customers.
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