Effects of Working Capital Management on Financial Performance of Level Three and Four Public Hospitals in Meru County

Abstract

Financial performance of Kenya's public hospitals is essential for the nation's economic development. The notion of hospital quality improvement is centered on measuring public hospital performance. A description of what hospitals actually accomplish can be made possible by measuring hospital financial performance. Level three and four hospitals in Kenya focus on the provision of health care activities and develop individual spending plans and budgetary needs based on recommendations from headquarters distributed throughout the counties. In addition to other issues, the MOH health care delivery system was plagued by diminishing resources, ineffective use of those that were still available, and unfair resource distribution by 2015. Public health institutions now have to manage their own internal resources more effectively as the government's power to save failing institutions of higher learning was severely undermined. The purpose of this study was to ascertain how working capital management techniques affected the level three and level four hospitals in Meru County in terms of their financial performance. The particular objectives were to determine the effect of cash management, inventory management, accounts receivable, and accounts payable on the financial performance of Meru County's Level three and Four Hospitals. The study was grounded on the theoretical premise of contingency, resource-based theory, liquidity preference theory and cash conversion cycle theory. The study's research design was descriptive survey, which allowed the researcher to explain the elements of interest with regard to their attributes. The study used a questionnaire for data collection purposes. The target population consisted of fifty-three senior managers from all the fifty-three public Level three and Four Hospitals in Meru County. These managers included Hospital administrator or finance manager where applicable. The investigation was conducted in Kenya's eastern Provence, in the county of Meru. Data analysis was conducted using SPSS version 27. Utilizing both descriptive and inferential statistics, the examined data was displayed. Regressions, both linear and multilinear, were utilized to determine the association between the variables. The investigation's findings showed that the majority of respondents were female, Additionally, most of the participants were between 31-40 years of age. According to the data, undergraduates made up the majority of respondents with the highest level of education. The investigation concluded that working capital management techniques, which include inventory control, cash management, and cash payables and receivables management, significantly impact financial performance. The accounts payable results ultimately show a statistically significant correlation coefficients, thereby supporting the rejection of the all the null hypotheses. The study thus recommended that the head of finance in these hospitals should continuously communicate payment terms to the clients in a timely manner as this would ensure the payment terms adherence. Further, the study recommends that credit officers of these hospitals should time to time review accounts receivables age so as to facilitate continuous follow up on unpaid dues.