The Head of Finance at the Stanbic Investment Management Services (SIMS), Paulina Okai, has advised small and medium scale enterprises (SMEs) to make budgeting a core part of their business operations.
Ms. Okai said this during a Financial Management Webinar targeted at SMEs on
the theme ‘Financial Management for Small Businesses; Budgeting, Forecasting
and Cash Flow’.
In her presentation, the SIMS executive mentioned that what accounts for the
failure of many SMEs is the assumption that budgeting is the preserve of large
corporates only.
According to her, “From budgeting and forecasting to cash flow management,
prudent financial practices are indispensable in ensuring business success.
When you develop good budgeting principles for your business, it ensures that
your revenues are matching your expenditure and this in the long run, ensures
business sustainability and success.”
Ms. Okai also touched on the issue of confusing cash as profits, as done by
many SME owners in the country. She said; “A critical misconception prevalent
among small enterprises – the conflation of profit with cash.
Profitability does not equate to immediate liquidity, and businesses must
diligently manage cash flow to sustain operations and seize growth
opportunities.
As a small business, it’s crucial to track several key metrics. These include
your revenue, stock levels, reorder points, debtor accounts, and profit margins.
For every business, the goal is to make profits, so the key part of your budget
should focus on expenses and revenue generation. Budgeting on how you spend and
tracking these metrics helps you stay informed about your business's financial
health.”
In navigating the competitive business landscape, Ms. Okai stressed the
necessity for SMEs to adopt a proactive stance towards tracking of financial
performance KPIs. Effective financial management, she emphasized, is not a
luxury but an indispensable requirement for SMEs traversing uncertain terrains.
By embracing a strategic approach encompassing prudent budgeting, insightful
forecasting, and good cash flow management, entrepreneurs can steer their
ventures towards enduring success and sustainable growth amidst evolving market
dynamics.
Source: Peacefmonline.com