Cash Flow Forecast and Its Effect on Financial Sustainability of Community Based Organizations in Kakamega County, Kenya

Abstract

Community-based organizations play a critical role in uplifting the livelihoods of thousands of Kenyans especially at the grassroots. Although the CBOs should have reliable funding or sources of income, this has not been the case. Rather, they have perennially been facing a shortfall of funding which has consequently compromised their operations or activities. The objective of this article was to evaluate the effect of cash flow forecast on financial sustainability of the CBOs. The agency cost and resource mobilization theories guided the article. A cross-sectional research design and quantitative approach were adopted. A sample of 213 CBOs' officials was drawn using simple random sampling technique from the CBOs operating in Kakamega County.  A structured questionnaire was used to collect data. Descriptive and inferential statistics were used in the analysis which was facilitated by the Statistical Package for Social Sciences tool. The correlation results indicated a positive, moderately strong, and statistically significant relationship between cash flow forecast and financial sustainability of CBOs (r = 0.541; p = 0.000). Cash flow forecast was also found to explain 29.3% of variability in financial sustainability of these CBOs. Additionally, the effect of cash flow forecast on financial sustainability was revealed to be statistically significant (t = 7.025; p = 0.000). It was concluded that cash flow forecast was imperative in enhancing financial sustainability of the CBOs. Consequently, it was recommended that CBOs should assess how well their cash flows would ensure their financial sustainability.