Covid-19 Crisis: What’s Your Business Continuity Plan?

How does a Small Business Owner keep the business running in the face of the on-going ravage of the Covid-19 pandemic? Our Guest Writer, Segun McMedal, outlines a business continuity plan for your consideration and action. Read on:

The first quarter of the year 2020 was very unusual – it was the period the world stood still; one, we can never forget, no thanks to Covid-19. The impact of the virus is unprecedented in world history. To ensure containment, development partners and governments directed that all social and economic activities should be locked down in all the affected nation-states including Nigeria. The current restrictions mean that the business environment is very tough, altering business models for almost all the industry and professions. While some industries (tourism, aviation, and financial services) are already on a life support, it is a boom period for others (telecoms, healthcare and medical supply, retail and food processing). So, how best should businesses respond to survive the onslaught?

There are three kinds of people as are companies: Those who make things happen; those who watch things happen; and those who wonder what happened. This challenging time opens a window of opportunity for people who are ready to make things happen to remain in business. This is one of the best times for businesses to step up to the plate and help their customers in navigating this crisis. This is the time to deepen your business’ positioning in the minds of stakeholders to be relevant during and after the Covid-19 crisis. Below are simple ways of ensuring business continuity in this period:

1. Work Remotely:  This is part of putting peoples’ safety first. This style allows workers to execute their duties outside of the traditional office environment. Instead of commuting to the office each morning of weekdays to work from a designated desk, remote employees can perform their assignments wherever they please. All you need is a computer or smartphone plus access to the internet to become a remote worker. The internet gives you access to cloud-based applications which allows you to do everything in or outside the office. Virtual employees can work anytime of the day as they wish to stay in touch with their stakeholders all over the world thanks to the internet. Working remotely help you to complete your duties on your own schedules which can result in higher engagement rates and increased productivity levels as well, if well managed, according to Harvard Business Review. But you must learn a new approach to adapt to working remotely. Here’s how, courtesy of CMC Connect Limited:

a. Create a dedicated workspace, away from distractions.
b. Start your day early. Waking up late will disorganise your day.
c. Prepare for work. Take a shower, change your clothes.
d. Create a to-do-list. Write down the task to be achieved for the day.
e. Stay Focused. Avoid distractions by setting boundaries, help your loved ones understand that you’re not on holidays.
f. Take breaks. Stretch your legs.
g. Communicate. Respond to calls, emails, messaging apps, video calls, etc.
h. Celebrate your wins. Go over the day’s tasks and tick off those you were able to deliver.
i. Review the day’s achievements with your line manager and teammates.
j. Working from home (WFH) is only effective when you are in constant communication with line managers and teammates.

2. Embrace Collaborative Business. In collaborative business, companies co-ordinate with other companies to maximise their efficiency and profitability. Collaborative business is used by companies to team up with competitors and suppliers for efficiency. It can also be used as a sales strategy to capture more market share. A food vendor and transporter can partner to deliver provisions to homes. Technology consulting firms can partner with professional bodies to deliver webinars to their members.

3. Maintain/Increase Your Marketing Budget. In challenging times, many businesses cut down their marketing budget, to the detriment of the business. Lean periods are the times businesses need to market more because consumers are restless and looking to make changes in their buying decisions. You need to help them find your products and services easily. This is also the best time to increase your investment in public relations. Almost all industries and professions have something to say about navigating the Covid-19 era. According to Nielsen, credential experts in medicine, law, finance, human resources, technology, media, supply chain management etc. can leverage radio and television news talk programmes to position their brands, and reach more people than they have in years. This is a time when knowledge or professionalism counts to provide relevant information to customers to manage the crisis. Furthermore, brands should constantly update their online profiles — websites and social media handles — as authentic sources of information. Hotlines should be activated as well. Efforts in social listening, media scanning and keyword monitoring should be doubled to quickly respond to untoward rumours.

4. Protect Business Cash Flow. Cash is the lifeblood that every business needs to take care of overheads and keep business healthy. But the harder times get, the harder it can be to keep the cash flowing in. Free cash flow, equity and debt financing are the best sources of working capital. These options may not be available for all businesses in challenging times. In such cases, there are alternative cash flow management strategies that businesses can use to ease the strain on their working capital, such as requesting for a deposit, cutting or delaying expenses, financing purchase orders and discounting invoices.

5. Communication. Maintain on-going engagement and support, by creating and sustaining an open line of communication relevant to your employees, customers, suppliers, creditors, regulators and other stakeholders. These stakeholders require different messaging and media that are essential to keep them informed.

6. Maximise Government Financial Support Policies.  The Central Bank of Nigeria announced several financial intervention policies to support households and companies in mitigating the negative impact of the Covid-19 pandemic on families and enterprises nationwide. These include:

a. Credit relief of $136.6 million and additional N50 billion facility through the NIRSAL Microfinance Bank for households, small and medium-sized enterprises, airline service providers, hotels, and health care merchants affected by the Covid-19 pandemic.
b. Reduction of interest rates on its intervention funds from nine percent to five percent per annum for one year, effective March 1, 2020.
c. Unspecified credit support for pharmaceutical companies intending to expand or establish their own drug manufacturing plants in Nigeria as well as to hospital and health care practitioners who intend to build or expand to world class standards.
d. Forbearance to big businesses by granting banks leave to consider the temporary restructuring of the tenure and loan terms for businesses and households most affected by the outbreak, particularly the oil and gas, agriculture and manufacturing.

Your organisation must step up to the plate and adapt to the current realities. This is the time for businesses to demonstrate their nimbleness by quickly and effectively responding to the demands of change while continually delivering high performance.


* Segun Mcmedal, a business communications and public affairs expert, is Chairman of Nigerian Institute of Public Relations, Lagos Chapter.

6 Tips For Managing Your Work-From-Home Team

The Small Business Owner is indeed living in challenging times. In these days of the Covid-19 pandemic, with the state-sanctioned stay at home order, office work has become impossible. Work is at a virtual standstill, except for those who are able to work from home. If you and your team must work at this time, you will be forced to experiment with remote working. If this is your situation, what are your options?

In striving to manage communications with your in-house team, while interfacing with clients in the outside world, here are six tips for creating work-from-home systems and processes that will maintain team spirit and keep the business humming during and after the new normal:

  • Deploy A Messaging Tool: In the absence of physical presence in the office, it is important to find ways and means for staff to relate with one another. The inclination of the Small Business Owner would be for team members to default to telephone calls and email messages. This is not the best way to go when remote work is the only work that is possible. Reason: The number of staff who would have to send emails and make phone calls, at about the same times, as they try to relate to one another, is likely to clog the wheel of work.

The challenge is to minimise the use of phones and emails, which can be limited to communications with clients and extended internal messaging. What to do? There are messaging tools that can facilitate messaging between staff members in remote locations, and reach clients worldwide. You should check out Slack (www.slack.com).

Once set up, the Small Business Owner must establish the parameters for managing the channels, direct messages and notifications necessary for keeping the group focused on the work(s) at hand.

  • Structure Virtual Meetings: In the same way that the business holds regular office meetings in the real world, it will need to set times for the remote team to conduct meetings in cyberspace. There should be agreed periods for these virtual meetings, like the regular Monday Meetings that review the preceding week and preview the week in view. This is the time to plan the work for the week, assign the tasks to be done and pre-determine the deliverables. These must sync with the daily chores which come for review in the next week.
  • Monitor Daily Check-Ins: The daily check-ins are short gathering that come up at set times every working day. These company-wide meetings provide platforms for team members to track and discuss the works being done by members. Members give updates of progress or otherwise on the works at hand. These could run for between 15 to 30 minutes, or longer. The key objective is to keep team members on the same page, ensure that agreed tasks are being implemented. The net result is to instil transparency and build momentum among team members.
  • Have Dedicated ‘Home Office’: It is important that key members of the team are truly working from home and not lounging in their sleep wears. Each team member should be encouraged to have a dedicated work space as a ‘home office.’ As team leader, you should make it a point to request each member to share a photo of his or her ‘home office’ with other members of the team. Whether it is a bedside desk or breakfast table, each team member must create the routine of going to work even at home.
  • Share Members’ Calendars: One way to encourage team members to stay organised is for them to share their calendars. This helps them to structure their days, and enables them to check on one another towards meeting important work schedules. In this regard, unless conditions dictate otherwise, the team should align expected work hours with the normal business-day hours.
  • Break Isolation Of Remote Work: It is easy to be faceless in the course of remote work. However, face-to-face conversation, albeit virtual, can humanise the communication between and among team mates. This can be critical when the team needs to meet in real time, and keep everyone focused on one subject at the same time. This is the time to switch to a video conferencing tool that breaks the isolation of remote workers, by displaying members’ faces and enabling screen sharing during a call. One tool that is fit for this purpose is Zoom (https://zoom.us).

With the above-mentioned tools, which are basically free to use, the Small Business Owner can leapfrog the obstacle of getting work done outside the office environment. These are changing times, no thanks to the Covid-19 pandemic. Small businesses must adapt accordingly, if they are to survive and thrive.

Does Your Tech Start-Up Need $50,000?

If your tech start-up is looking for funding, the 2020 MEST Africa tech start-up competition offers $50,000 to talented entrepreneurs to build and scale businesses that add value to African economies.

This pitch competition, to be held online, will provide Africa’s emerging tech entrepreneurs with investment capital, coaching and access to a continent-wide network of start-up hubs. Interested tech start-ups must:

  • Have cumulatively raised pre-seed or seed-stage capital of $100,000 since inception.
  • Be currently generating revenue.
  • Demonstrate traction in one or more of these markets: Ghana, Kenya, Nigeria, South Africa, Côte d’Ivoire, Senegal, Tanzania, Ethiopia, Rwanda.

To apply, submit application on the VC4A platform at www.vc4a.com.

Does your business need assistance in meeting the challenges of the times? Feel free to contact us at https://smefinance.org/thesmelab

3 Steps To Set Up Your Business On AutoPilot

One aspiration of wanting to be a Small Business Owner is the freedom to manage your time. However, a Small Business Owner who is running a business, full-time and hands-on, is not different from an employee of the business. The highly-sought freedom becomes an illusion, especially when the business begins to provide different products and services, with operations in multiple locations.

How can the Small Business Owner become a hands-off owner, and achieve independence of a small to medium-size business? The solution is to virtually automate the business by structuring it into a system where anyone can easily step into anyone else’s job. Here is a three-step plan for automating your business: Organisation Chart, Key Performance Indicators and Training Manuals.

1. Organisation Chart: An organisation chart is a diagram showing the internal structure of a business. It outlines the roles, responsibilities and relationships between the individuals who run the business. The chart, company-wide and specific to departments and units, places the highest-ranking individuals atop the chart and position lower-ranking individuals below them. For example, an assistant manager falls directly below a director, indicating that the former reports to the latter.

There are various ways of designing organisation charts, but their common objective is to situate the principal officials, departments or functions of the business within the hierarchy, with the others following below in order of descending ranks. Most importantly, the organisation chart lets each employee see how his or her role fits into the general structure of the business.

Why do you need an organisation chart as a Small Business Owner? You do because you don’t want to be an owner who directly commands and controls employees on all levels, in addition to the managers who report to you. A chart establishes the role of each department or unit, and the reporting line of each employee.  Imagine if your business doubles its present size and, in pursuit of the illusion of control, you spend your working hours listening to every employee. That is a recipe for exhaustion and chaos. What to do? Design the organisation chart of your business, and allow it to work. It is not easy to let go, but getting this right is essential to automating the business. It will free you from worrying about myriads of low-value managerial chores, and release you to focus on the strategic checks necessary to keep the system free from abuse and incompetence.

2. Key Performance Indicators: A Key Performance Indicator (KPI) is a measurement that helps the Small Business Owner, and other members of the business, to know whether a department or unit or employee is achieving, or failing to achieve, the strategic goals of the business.

How does a Small Business Owner identify the right KPIs for a business? KPIs must be defined, quantifiable and specific to the business. They must be communicated throughout the business, department or unit. They must be factors that are critical to the success of the business. Above all, a KPI must benchmark and track the performance of every employee in every department or unit of the business.

It is easy for employees to be busy performing tasks without precise and measurable results, which is no better than playing football without goal posts. Such vagueness can keep ineffective employees in the business, and the Small Business Owner will attempt to manage this by trying to be watchful on every level. This is a wasteful distraction.

A business must break down every task, with an end goal for every position held by every employee. Every standard job must have a non-negotiable KPI score, and an employee that consistently falls short of his or her KPI must be taken off the payroll. Business Owners who allow such employees to hang on are using their time and money to sabotage their own business. Business Owners who knowingly keep incompetent employees are sending the message that feelings, friendships, loyalty or any other excuse, are acceptable alternatives to performance, and unwittingly tilting organisation behaviour towards everyone trying to be likable to the Business Owner rather than being useful to the business. Even worse, the Business Owner is telling other employees that performance is optional, that it is okay not to achieve standards.

And when, inevitably, the business starts operating at a loss, and the Business Owner begins to miss payroll, these same under-performing employees will grumble and scramble for alternative employment. The bottom line is that a Business Owner and an employee do not need to negotiate a non-negotiable. An employee would not keep working for the business without receiving pay, and the Business Owner should not keep an employee who is not performing.

3 Training Manuals: A training manual is a set of instructions designed to improve the quality of a performed task, by breaking each task into a predictable and consistent system. It can be particularly useful as an introduction prior to training, an outline to be followed during training, or a reference document after training. It may also ensure that information on skills and processes needed to perform tasks are available in one place. Training manuals can be work books used to provide basic information, examples and exercises; self-paced guides for trainees to work through on their own; reference manuals with detailed information on processes and procedures; handouts to support training done during sessions; and job aids that provide step-by-step instructions for use in the workplace.

Training manuals provide the final component for automating your business. These can be books, booklets, audio, video, etc. created for departments, units and positions within the business. Each position in the organisation chart needs a training manual that contains the operating protocol for every client-facing role, and does not leave anything for the employee to figure out. The manual is ready for use only when someone, without prior knowledge of it, is able to study it and give it a successful test performance. Furthermore, by self-learning from the manual, a newcomer to the business must be able to do the job required of a position on the organisation chart. There must be a manual for every employee, from entry-level employee to high-level manager, with each manual being specific to the position on the organisation chart.

With your organisation chart, key performance indicators and training manuals in place, you should watch your system for a trial period. After minor fixes, gradually ease yourself from daily management, and shift attention to working on the business instead of working in the business. Your ultimate step will be to hire the right person who can handle every aspect of the business, replace you as the prime mover of the business, and give you the freedom to concentrate on high-value work without taking your eyes off the dashboard of the business. Or, better still, set you free to pursue other interests. That is the prize for automating your small business.

Do you need automating expertise in setting up your small business on autopilot? Contact Us Now or email ted.iwere@smefinance.org

When And How To Hire A Collection Agency

Debt collection is the pursuit of payments owed by individuals or businesses. An organisation that specialises in collecting debts is known as a debt collector or collection agency.

A debtor, the individual or entity that owes the debt, may fail to make a payment as and when due for a variety of reasons. It could be lack of financial planning, an unforeseen event, a dispute over what is being owed, and dishonesty of the creditor or the debtor.

Regardless of the origin or cause of the debt, the time comes when you, as a Small Business Owner, will choose to engage the service of a debt collection agency. Before thinking of hiring a credit collection agency, you would have been through the early stages of attempting to collect the debt. You would have evaluated how much is owed, how many days the payment has passed due date, and the debtor’s situation.

Conscious that the longer you wait to collect a debt, the harder it becomes to collect, desiring to maintain good customer service, hoping that the debtor may still be a customer, your phone calls will stop short of appearing like harassments of your debtor. When phone calls fail to deliver the desired results, you sent written demands for payment, which are useful if you have to file a lawsuit.

When the demand notes requesting for payment of the debt do not resolve the collection process, you would start considering the benefits of hiring a debt collection agency, if only to let the debtor know that you mean business and are serious about collecting the debt.

As a Small Business Owner, there are compelling reasons to outsource your collections, and factors to consider in your choice of an agency. Here are the main ones:

  • Higher chance of recovery: Your decision to engage an agency implies that the debtor has refused and/or neglected to pay, in spite of your efforts to collect. Your phone calls and demand letters have failed, the account has become delinquent, and recovery is becoming doubtful. Knowing that the longer the debt goes unpaid, the less likely it will be paid, you have to exercise the option of handing the collection to an agency, as soon as possible, so that its expertise and advance tactics can give you a higher chance of getting paid, albeit at the price of losing a percentage of the debt as cost of collection.
  • Cost of hiring an agency: When you reach a decision, a collection agency, not being a party to the original contract, will be assigned an account directly, without an upfront cost to you, the creditor.

There is no average rate for collection agencies. A collection agency typically charges a flat fee or a percentage fee, based on the type of collection, the amount to be collected and the volume of debts. Subject to giving you the choice to accept or decline, you will also pay legal fees and disbursements if the agency takes your case to court.

  • Contingency pricing: Most collection agencies use contingency pricing. Their fees, including litigation costs and court fees, are usually charged after the recovery of your debt; on the basis of a contingent fee, or percentage of the amount owed and/or collected. This frees your cash flow for other uses and gives you peace of mind.

In a typical agreement between you and the collection agency, the agency will take a percentage of the debt it succeeds in collecting. The agency will not earn money until it collects the debt from the debtor. Depending on the type of debt, the age of the debt and the failed attempts you have made to collect it, the fee could range from 10 to 40 percent of the debt or whatever the parties agree.

  • Customer Service: Your aim will be to select an agency that responds to your concerns. It is also helpful for you to research your target agency, and talk to some clients who have worked with, or are working, with the agency. The agency you pick must be reputed for good customer service, and be able to recover your funds without tarnishing the name of your company.

How do you narrow your choice of the best collection agency for your small business? Collection agencies use various processes in recovering delinquent debts; like tracking difficult debtors, including those who go out of town to avoid paying their debts; issuing formal demand letters as a first step of contact prior to further action; and initiating legal action against your debtor when preceding steps fail.

There are issues to consider when zeroing in on the collection agency that is right for your business. In searching for the best deal possible, you must seek answers to the following questions:

  • What fee, if any, does the agency charge, over and above the percentage on the account?
  • What discount, if any, does the agency offer, based on the amount to be collected?
  • Would the agency offer, in case of litigation, a discount based on the amount to be collected?

Do you need help to collect debts due to your business? Contact Us Now or email ted.iwere@smefinance.org.

6 Steps To Automate Your Bookkeeping System

The Small Business Owner must manage the different functions of the business, ranging from making products and managing employees, through marketing and distribution, to finance and accounting.

When you consider the manual process of reconciling the monthly books; the use of excel spreadsheets to record transactions; the upfront cost of storing information on dedicated hard drives that can hardly be accessed by more than one person at a time; the manual labour of recording hard copy receipts and stacking them in drawers; the valuable time wasted on this inefficient process; you will understand why many Small Business Owners leave their bookkeeping to the last minute.

The financial and accounting functions of the business can be a challenge for many Small Business Owners, mainly because of the time-consuming and tedious nature of the tasks. This does not have to be so if the Small Business Owner decides to automate the accounting process.

You can manage the finance function of your business efficiently by use of technology. Its user-friendly interfaces will keep your accounting activities in one place, enable anyone in charge of the accounting function to keep records of transactions, and help automate the rest of your business systems.

How can the Small Business Owner deploy an automated bookkeeping system to manage the day to day activities of the business? Here are some methods and tools that the Small Business Owner can use to automate the accounting process of the business:

1. Link Your Books With Your Bank(s): Get an accounting software package that can connect to your bank account, and automatically download transactions. You don’t have to type in transactions. You can reconcile your bank account(s) once per month to ensure that your books match what happened at the bank.

2. Schedule Recurring Transactions: You can schedule recurring transactions to hit your bank account directly. You can setup such charges to show up in your books on a weekly, monthly, quarterly, or other schedule. There will be no need keep such transactions in your memory or write them on your calendar.

3. Automate Your Payroll: Meeting payroll can be a complex process. There could need paperwork to accurately calculate employee’s salaries, write cheques and/or make direct deposits into their accounts. There are taxes to be calculated and withheld.

Nevertheless, your employees keep your business running. They perform the tasks that make your business work. They need to be paid as and when due.

Automating the payroll simplifies this process, eliminates potential mistakes, saves time, and enables Small Business Owners to take their minds off the related tax payments. It also leaves time for the team to concentrate on tasks that matter most and improve productivity of the business.

4. Digitise Your Receipts and Invoices: Small Business Owners can now save time and space by taking pictures of hard copies of their receipts and invoices, by extracting information from them, and entering such information into their automated bookkeeping system. By literally digitising your receipts and invoices, you will save the labour and time involved in manual data entry, and leverage information so derived towards managing the business in a smarter way.

5. Automate Invoicing, Accounts Receivable and Accounts Payable: Automation of invoicing and accounts receivable simplifies the daily activities of the business. When invoicing and accounts receivable are set on autopilot, the business can easily track who has paid and who hasn’t. This process can also be matched with electronic invoices.
Automation can equally set up automatic payments for your vendors, using information stored and pre-set in your accounting software.

6. Move Your Accounting To The Cloud: Cloud-based accounting software packages give Small Business Owners the option of storing their information in the cloud, instead of desktop applications and dedicated hard drives.

Cloud-based accounting gives the Small Business Owner the benefits of reduced cost and easy access to the system from anywhere there is a connection to the internet.

These software packages also link users’ bank accounts, give real-time information on cash flow positions, automate invoices and payments, generate financial reports and enable smarter business decisions at the click of a button. Most important, they give the Small Business Owner greater processing power at a smaller cost!

Without spending more time on the tasks or hiring an employee to do them, an automated bookkeeping system saves time and effort through the fiscal year, helps the bookkeeper set and meet deadlines, and provides invaluable operational information to keep you abreast of what to do to improve the business.

If you are new to technology, automating the bookkeeping activities of your business will require time to fully integrate into your business. However, once you switch to automated services, your business will run better.

Do you need help to automate the bookkeeping system of your business? Contact Us Now or email ted.iwere@smefinance.org.

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Why Business Loans Cannot Cure Lack Of Business Income

Business Loan

There is something lenders call the business loan hustle.

Whether they are large financial organisations like banks or similar institutions that advance monies that are to be paid back with interest, lenders get used to Small Business Owners requesting for loans to run their businesses.

A business loan is credit that is obtained on behalf of a business. This credit is in the name of the business, and based on the ability of the business (not the owner) to repay it.

Business credit confers many unique benefits. It builds a credit profile for the business, which is different and separate from the personal credit profile of its owner. It doubles the borrowing power of the Small Business Owner, as it translates into a credit-worthy profile for the business and the owner.

Furthermore, a business commands a higher capacity for credit than its owner does. Which is why approval limits are usually much higher for business accounts and lower for personal accounts.

When the average Small Business Owner meets the average lender, the conversation runs like this:

The Small Business Owner will not say the business is not generating enough income. The Small Business Owner will not say the marketing and sales team is not moving enough products or services and, hence the business is not making enough money. The Small Business Owner will say something like the business is not making money because it does not have working capital. The Small Business Owner will say that the business will boom once it receives the loan.

After listening to the Small Business Owner, the lender will start asking questions like: What is the personal credit of the Small Business Owner? How long has the business been in existence? How much money does the business make in a typical month? How much income did the business generate in the preceding six to 12 months?

As the lender continues this line of questioning, it becomes increasingly clear to the Small Business Owner that the lender is gauging the business and its owner, and determining if the business can satisfy the requirements for a successful loan application. It then begins to dawn on the Small Business Owner that the business is required to give something before it can get something.

It’s true that there is plenty of money out there for lending. It is also true that lenders want to lend. The greater truth, however, is that no lender wants to lend to a business that does not show signs of surviving, not to talk of thriving. Lenders want to see the transactions being handled by the business. Lenders want to see cash flowing through the business. Lenders want to see a business with a history of bringing in revenue, on a regular basis, for a number of months, if not years.

Your business must put in the work before it can get a loan. Your business must first show the lender its own money, and assure the lender it has the capacity to make money. Your business must demonstrate a sustainable way of generating income. Your business will not get a loan if it appears to be on the brink of financial failure.

Before considering whether to approve a loan application, or the rate and terms of the loan, a lender or similar credit issuer needs to be convinced that the business has a capacity to make money, and this is evidenced by visible and sustainable streams of revenue.

In the absence of this proof, a loan advance would at best be a bandage for the business, a palliative, a stop gap that can only kick the ball down the road. At its worst, such a loan will put the business on a fast track to closing shop, which will inevitably happen when the creditors come calling and the business is unable to make repayments as and when due.

Don’t be a victim of the business loan hustle. Don’t mistake the failure of your business to generate income, which may be the result of its failure in marketing and selling, for an imagined need for business loan which, you believe, albeit erroneously, will magically transform your business into a money machine. The plain truth is that you will be setting your business and yourself on the path of financial ruin if the business, somehow, manages to procure a loan but lacks the capacity to generate the income it will need to repay it.

Your business must first show that it can make, and is indeed, making money. Lenders base their decisions on the current revenues of the business. When income is streaming into the business on a regular basis, the business can then leverage these inflows to get the money it wants. A business searching for money from a position of lack is no better than a person trying to fetch water from a dry well. Such an enterprise is like trying to get something for nothing and will not work.

Contact Us Now if you need a business loan or need to generate more income for your business. Or drop us a line via ted.iwere@smefinance.org if you are itching to start, grow or scale your small business.

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How To Use Budget Variances In Managing Your Business Finances

how to manage your business finances

You may be the Small Business Owner who is not comfortable with sitting at your desk and reviewing the numbers that mirror your business. You may think that reading of reports is a time-consuming exercise. Yet, you need a dashboard for you to monitor and control your business.

You need a report that can help you understand your business, and help you make better decisions about managing it. Beyond your overarching business plan, your monitoring and control starts with your budget, which contains your key financial goals; like making money, growing at a predetermined rate, hiring staff and expanding your customer base.

To increase the chances of success of your business, you must document these goals in the form of a budget that is complete with forecasts for best-case and worst-case scenarios.

While you cannot guarantee the rightness or wrongness of the predictions of your budget, your budget gives a unified direction to your business. It aligns the responsibilities of team members with the goals of the business. It also provides leading indicators that reveal what’s producing the profits, or losses, of the business. Simply stated, it helps you get smarter in running your business.

To achieve this result, you must line up your budget forecast alongside your real numbers over given financial periods. You must review your budget to see the items that performed as expected, those that performed above expectations, and those that under-performed. This exercise will tell you at a glance if the business met, exceeded or failed to meet its financial goals for the period under review. It will also provide the opportunity for you to act on the lessons you learn.

A periodic review of the budget with your management team, say quarterly, will immediately reveal where the business met, or deviated from, the original plan. This will enable you and your managers to decide whether to stay the course, tweak your forecast or take actions to steer the business in a new direction.

To obtain the actionable information to keep you and your team on top of your goals, in your continually changing marketplace, you must assess the four profit and loss line items of your budget, as listed below (Revenue, Cost of Goods Sold, Gross Profit and Expenses) and adjust future forecasts based on past performance.

  1. Variance in Revenue: Examine your total revenue. Look at each line item. What is the contribution of each item to the revenue basket? Are some items generating more revenue than others? If so, in what proportions? Is the revenue for the period less than, equal to or more than what was projected? What is the explanation for the match or mismatch? Do the results call for inaction or action?
  2. Variance in Cost of Goods Sold: Labour, materials and production, for examples, are some of the items relating to cost of goods sold. How did costs of these items tally with estimated costs? Were they higher or lower than what were expected? If they were higher, was this due to an increase in demand, and an indication of a possible upswing? If lower than expected, what caused it?

Going forward, is there any action that can be taken to lower the cost of goods sold? And, if costs were not as high as expected, how can the business put the unused cash into other productive uses?

  1. Variance in Gross Profit: This is the profit that the business earns on the product produced and/or service rendered. Was the gross profit of the business, if indeed there was, higher or lower than what was estimated? After determining whether the gross profit is positive or negative, you judge if the outcome is a reflection of the current market or pointer of a future trend.

If the business earned more than it expected, it will be instructive to figure out the things that it did right to earn the extra gross profit and, possibly, do more of those things. If it earned less than it expected, you should find out why, and determine the corrective actions to implement.

  1. Variance in General Expense: These include such general and administrative expenses like utilities and sales and marketing costs. Specific line by line interrogation of these items will reveal the one(s) that made the general expense to go under or above budget estimates. Your finding will show if the match or variance is a one-off or recurring cost, and suggest actions you may need to steer your business in the right direction.

Armed with these information from your budget performance review, you will be in a position to adjust your forecasts and growth projections. If you do this quarterly, based on performance of your business and you correct its course accordingly, you will be able to set clear and achievable goals for your business.

Contact Us Now if you need help to make your budget a tool for managing your business. Or drop us a line via ted.iwere@smefinance.org if you need help with starting, growing and scaling your small business.

You Must Understand What The Numbers Say About Your Business

Knowing your business

When you engage Small Business Owners in a conversation about the challenges they face in managing their business, they will mention one area of weakness they hate to deal with: Financial Management.

Managing finances is the area of the business that deals with handling of cash, bookkeeping, accounting and raising capital. Unfortunately, while most Small Business Owners admit that they are comfortable with the day-to-day operation of their businesses, like producing, marketing and selling their products and services, they are also the first to confess that they do not feel comfortable when dealing with the money side of their companies.

What is responsible for this discomfort among Small Business Owners? Can they afford to ignore this discomfort, without impairing their effectiveness as entrepreneurs?

Small Business Owners are rarely at their best when dealing with numbers. Business is, however, a game of numbers. It involves counting and keeping scores. What these mean is that the Small Business Owner must come to terms with the uncomfortable fact that financial management is a prime requirement for entrepreneurial success. They must realise that one giant step to being a successful Small Business Owner is an appreciation of the fundamentals of finance, a skill that will empower them to manage the financial resources of their business.

This knowledge will keep the Small Business Owner up to date on how the business is doing. It will also throw up the financial tools that the Small Business Owner can use for the efficient management of the cash flow of the business. It will enable the Small Business Owner to know when, where and how to seek the resources to finance the business.

True. The Small Business Owner need not be able to personally prepare financial statements, which Is the work of Officers in the Finance and Accounts Department. But the Small Business     Owner must possess the competence to make sense of the financial statements being generated by the business.

The Small Business Owner must understand the purpose, elements and significance of documents like the income statement, the balance sheet and the cash flow statement. It is the numbers contained in these statements that monitor the health of the business.

The income statement is the scorecard of the business. It tells whether the business is making or losing money. Sometimes called the Profit and Loss Account, the income statement shows the earnings and expenses of the business during a particular period. It indicates how the revenues transform into the net income of the business, otherwise known as its profit or loss.

The key line items in the income statement include sales revenue, cost of goods sold, specific general expenses, depreciation expense, interest expense and tax expense.

The balance sheet mirrors the financial condition of the business, and discloses whether it owes more than it owns. It states the assets, liabilities and capital of the business at a particular point in time. It also details the balance of income and expenditure over the preceding period.

The main line items on the balance sheet are assets (cash, accounts receivable, inventory and fixed assets) and liabilities (accounts payable, accrued liabilities, customers’ pre-payments and short/long-term debts).

The cash flow statement records the movement of money in and out of the business, and indicates whether the net flow is positive or negative. It measures the cash produced or used by the business in a given period, and includes it’s operating, investing and financing activities.

Financial statements represent the dashboard of the business. They may appear complex and inaccessible. But they are not beyond the comprehension of the average Small Business Owner. If the Small Business Owner cannot read and understand the numbers on the financial dashboard of the business,  he or she will not have the information to make the informed decisions that are essential for the success of the business. The business will literally be flying blind, with obvious and dire consequences.

The message, therefore, is that financial management is too important to be left to the Finance and Accounts  Department. The Small Business Owner must put in the time and effort necessary to understand the numbers that run the business. Otherwise, he or she may not even know enough to have a meaningful conversation with the Officers in the Finance and Accounts Department.

If you need help knowing and understanding the numbers that run your business, visit the SME Clinic at https//:smefinance.org/sme-clinic/.

Three Must-Have Skills To Run A Profitable Business

Skills To Run A Profitable Business

You have been dreaming that some day you will start and run your own business. You are currently employed in a big company and are steadily progressing in your chosen career.

But, deep inside, you have the itch to move into your own line of work, the desire to have no one to answer to, and the urge to do something different with your life.

In this state of mind, what do you need to equip you to take the leap of faith that will propel you towards your goal?

Here are three skills you must have to run a profitable business. Without Any one of them, with everything else, You are guaranteed to fail:

  1. Self Confidence: You will need to believe in your own abilities and judgement. Without believing in your own actions, you will find your self struggling to reach your full potential.

It so often happens that the biggest difference between those who succeed and those who fail is not intelligence or opportunity or resources, even though these elements enhance your chances of succeeding. One quality that is critical to the outcome of your endeavour is the self assurance that you can make your goal to happen.

By having the can-do attitude, you will realise that the only thing that separates you from accomplishing your goal is just a matter of time and a commitment to work. By literally seeing your self arriving at the finish line, you will be motivated to work toward your goal. By realising that failure is part of the process, and a temporary stop on the road to success, you will overome the temptation to fold your tent when you run into an obstacle.

You need the inner belief that you will make the business succeed.  After all, if you don’t believe in your self, who else will?

  1. Self Discipline: This is the ability to control and motivate yourself, to keep your self on track, to enable You to do what you need to do, and do it when you need to do it. This self control gives you the inner strength to manage your self. your actions, and your reactions. It gives you the power to stick with your decisions,keeps you on line to follow through with whatever you do, aand keeps you going Until you reach your goal.

Self discipline is an essential ingredient of business success, which finds expression in such qualities like perseverance, the ability not to give up despite failures and setbacks, and trying again and again until you achieve what you set out to do.

While you have no one to answer to in running your business, self discipline keeps you from being lazy, from watching television when You have important matters awaiting your attention.It makes sure you are not staying in bed in the morning for a few more hours when you should be on your shop floor or sitting on your desk at the office.

  1. Self Improvement: This entails the improvement of your knowledge, status and character through your own efforts. It is the quest to make your self better in any and every part of life.

It is the ability to always learn from the mistakes you make, and then move on. Your personal development covers the activities that improve your awareness and identity, the things you do to develop your talent and potential, and translates to how you apply what you learn into looking for ways of improving your self and Your business.

It is through improving your self that you will get the best from your self and your business.You can achieve this in a diverse range of ways; like reading personal development material, reaching out to the leading lights in your line of business,working with a mentor or coach, staying focused on your to-do lists, getting out of your comfort zone, identifying your weak points and overcoming them, taking up a new course of study or starting a new hobby.

The more you grow, the more you realise that there is so much out there that you don’t know, and so much that you have to learn.

You want to start your business? Get up and go!

If you need help, visit the SME Clinic at https://smefinance.org/sme-clinic/

Keeping Good Records Will Improve Your Credit Worthiness

Keeping Good Financial Records

One reason financial institutions give for not approving credit applications from small businesses is that they do not have records of their transactions. It is common to find businesses that have been trading for many years but do not keep books.

This situation is made worse in the case of many Small Business Owners. Just as the businesses they run do not have records, they too do not keep records of their financial transactions. This chaos in their personal affairs Invariably spills into the running of their businesses, and stands as a big minus when they apply for credit on behalf of their businesses, particularly when they are required to support the loan applications with personal guarantees.

Here are five simple steps you can take to remedy this condition, and boost your credit worthiness as a Small Business Owner?

1. Cultivate the discipline of saving. Saving money will help you live a frugal but prosperous life. It will help you develop and maintain the habit of not spending all the money that you earn. It will help you understand the importance of budgeting your income and expenditure, and enable you to meet your basic expenses while setting aside portions of your earnings to be invested in maintaining and growing your business.

To this end, a continually updated listing of your banking and investment accounts will greatly ease your effort to track your savings.

2. Keep Spending Records. It so often happens that the average Small Business Owner is hardly sure about where his or her money goes. Or, he or she feels that you the spendings are much more than they ought to. Not to worry. It is time to start storing your purchase receipts in one big envelope.

When you buy big-ticket items, keep the receipts. Once a month, sit down, record your spendings according to categories and total them to produce your spending for the month.

You may choose to do this on a simple spreadsheet.

3. Keep Tax Records. You must organise your records if you plan to get the deductions you are entitled to under the tax law. You should create files or folders for your income, expenses, deductions and any other bits and pieces of information that will make it easy for you to file your taxes.

4. Keep Maintenance Records. Have you ever wondered how much you spend on maintaining your home and your car?  You will never know, unless you record it. It is helpful for you to keep a schedule to routinely maintain your home and car, so that you don’t have to wait for break downs that will cost you more to repair.

It pays to stay on top of your maintenance tasks. A simple way to do this is to create a log and start tracking the work you do on your home and your car.

5. Have a good filing system. Keep the documents you need on file, and prune them at least once a year. Keep vital documents like
birth certificates, marriage certificates, school records, insurance policy, deeds, stock certificates, etc. under lock and key in a fire-proof safe or in an offsite safe deposit box.

Now that you know how to get organised with your records, go to work. It will enhance your personal and business finances, and improve your credit worthiness.