Research consultancy

Research consultancy

IMPACT OF FINANCIAL MANAGEMENT ON ORGANIZATIONAL PERFORMANCE
A CASE STUDY OF NATIONAL WATER AND SEWERAGE CORPORATION (NWSC) – KAMPALA BRANCH

CHAPTER ONE

INTRODUCTION

1.0 Introduction

This chapter outlines the study’s background, problem statement, purpose, objectives, research questions, scope, and significance.

1.1 Background to the Study

Financial management is a critical driver of economic and organizational success, ensuring efficient fund procurement and utilization. In today’s dynamic business environment, its role has expanded due to industrialization and innovation. Effective financial management integrates planning, allocation, and control to optimize organizational performance (Babar & Ahmed, 2010).

According to Gitman (2007), financial management involves strategic capital use and sourcing to achieve organizational goals. A robust system includes:

• A clear financial strategy,
• An income generation plan,
• Efficient financial controls, and
• A conducive internal environment.

Financial management intersects with key functional areas like production, marketing, and human resources, influencing decision-making across departments (Horne, 2000). It supports financial planning, fund acquisition, and sound fiscal decisions, directly impacting operational efficiency (Hood, 2001).

In developing nations, financial management faces challenges such as manual processes, weak leadership, staff shortages, and inadequate infrastructure (Dr. Bouasy Lovauxay, 2009). To address these, Uganda adopted the Integrated Financial Management System (IFMS) in 2003, enhancing budget transparency, accountability, and reporting across ministries (Ssemakula & Muwanga, 2012).

The National Water and Sewerage Corporation (NWSC) exemplifies effective financial management in Africa, serving 78% of Uganda’s urban population. Its financial practices include:

• Tariff regulation by the Ministry of Water and Environment,
• Rigorous internal audits, and
• Compliance with the NWSC Act, which mandates standardized financial reporting (Dr. Muhairwe, 2003).

NWSC’s strategic plans prioritize revenue growth, cost optimization, asset management, and stakeholder engagement, ensuring long-term sustainability (Edward, 2005).

1.2 Statement of the Problem

Despite financial management frameworks, many organizations struggle with:

• Delayed cash collections,
• Rising bad debts,
• Low labor productivity, and
• Declining profitability.

Poor financial practices undermine competitiveness and organizational stability (Stoner & Nzotta, 2004). This study investigates whether ineffective financial management contributes to NWSC’s performance challenges, threatening its long-term viability (Sheffrin, 2003).

1.3 Purpose of the Study

To assess the impact of financial management on organizational performance, using NWSC-Kampala as a case study.

1.4 Research Objectives

1. To analyze the components of financial management in organizations.
2. To evaluate the users, objectives, and functions of financial management.
3. To identify performance indicators in organizations.

1.5 Research Questions

1. What are the key components of financial management used by organizations?
2. Who are the primary users, and what are the objectives and functions of financial management?
3. How is organizational performance measured?

1.6 Scope of the Study

• Geographical Scope: NWSC-Kampala (Jinja Road).
• Content Scope: Financial management components, user objectives, and performance metrics.
• Time Scope: Data from 2012–2017, with literature spanning 2000–2017.

1.7 Significance of the Study

• Helps organizations identify financial management weaknesses.
• Provides a basis for improving financial policies.
• Contributes to academic literature on financial management.
• Serves as a reference for future research.

Key Improvements:

1. Conciseness: Removed redundancies (e.g., “financial management is directly related” → “intersects with”).
2. Flow: Structured content logically (e.g., grouped NWSC’s practices under subheadings).
3. Clarity: Simplified complex sentences (e.g., “judicious use of capital” → “strategic capital use”).
4. Engagement: Used active voice (e.g., “The study will help” → “Helps organizations identify”).