When I created this site naijapreneur, it was my dream to make it the #1 go to business resource for unusual entrepreneurs. If I was going to make this dream a reality, then I couldn’t do it all by myself, I definitely needed some vision partners.
Over the 3 years that naijapreneur has been in existence, I have been searching for this vision partners who would come on board as naijapreneur faculty members to dish out unusual articles in their various fields of business expertise.
It’s taken a long time, but I never stopped searching and today I am glad to inform you that the search was all worth it. I’ve found one of the vision partners I need to become one of naijapreneur faculty members, her name is Folakemi Fadahunsi, she’s a financial strategy consultant and she will be dishing out unusual articles on business finance.
From now on, once or twice monthly, you will be hearing from her on naijapreneur. As you will soon learn, she’s a veteran in her field with over Twelve (12) years experience in auditing, risk management, financial & management accounting, and financial consulting. She has worked with high profile consulting organizations such as KPMG and was a former financial consultant to GlaxoSmithKline.
Without further ado, fellow unusual entrepreneur, here’s Folakemi’s first guest appearance on naijapreneur with this unusual article, enjoy!
How To Save Your Business From Self-Inflicted Financial Crisis
The importance of proper to the successful management of a small business cannot be overemphasized. As a matter of fact, without proper financial management processes and practices in place in your business, you are inevitably heading towards a self-inflicted financial crisis.
I often say this to my training participants:
‘When you pretend to do business without keeping proper records, it’s just a hobby, not a business.’
Why do I say that?
It’s only a matter of time before there will be problems in that business. The business will run out of cash. You will likely over-spend and on the wrong things too. You have absolutely no realistic information to make any meaningful decision, so anything and everything can easily go wrong.
Besides, who will take you seriously? No bank, investor, supplier or even customers will take you seriously. (Some corporate customers ask for Tax Clearance Certificate, Cash Flow Statement etc, before they sign you up as a supplier or service provider). So, are you really running a business or simply practicing a hobby?
Need I say more?
Ok, here’s more!
The Business Importance Of Keeping Good Financial Records
Here are 3 key importances of keeping good records;
1. Price your product accurately:
Small business owners often ask me how much I think they should charge for their products/services. This is especially common to service providers, especially consultants. The easy answer is, let me have a look at your records so far, with answers to a few other questions here and there I can give you a fair idea of how much it costs you to deliver that service.
And if you know how much it costs to deliver the product/service, then you can decide on how much you should be charging your customers. The typical answer I get is:
‘Actually, you know, what I’m really trying to say is that, I didn’t really record everything I spent,… but I can tell you, it’s all in my head.’
2. Know if you’re making or losing money:
In general and on specific products: Can you in all sincerity tell me how much profit or loss you have made in the last six (6) months? Do you know if you are making profit on only one product and making losses on all the others? Do you know if only two of your customers are contributing 80% of your sales?
Most small business owners cannot. It is really alarming. Success in business is a choice not an accident. Success is deliberate. Deliberate record keeping contributes to deliberate business success. If you truly want to succeed in business, there are no two ways about it, it’s either you keep records or you keep records.
Small businesses owners make a lot of costly mistakes all year round, some of which can be avoided with proper book keeping and management accounting. Consider a business that was set up to supply bottled water and dispenser water to offices in Victoria Island Lagos. The business owner has assumed that since he supplies more of the dispenser water, then most of his profits should come from it.
However a close analysis of the records could show that there is actually more profit from the regular bottled water, possibly because the profit margin is higher. If he decides to stop supplying the regular bottled water he will be making a wrong decision. The business may not be financially sustainable. All because of a wrong decision, this can be avoided.
3. Know your cash flow — short and long term:
Proper record keeping is required in order to prepare realistic cash flow forecasts. See ‘How to manage Your Cash Flow.
- Work with bankers: You want a bank to finance your business but you don’t have any records? Don’t embarrass yourself. You need to get your records straight.
- Tax purposes: how do you ensure that you are not over-charged in terms of taxes? Keep a proper record, that’s your only proof of what has been happening in your business.
Financial Record Keeping Made Easy For Entrepreneurs
Follow these two easy steps to keeping good records;
Record money received from Sales (Income):
The easiest way to do this is to use two (2) forms:
- Invoice: Issue an invoice to every customer that buys from you, whether they have paid or not.
- Receipt: Issue a receipt to every customer that pays, for the exact amount that they have paid
If you follow these two steps you would be able to track how much sales you have made, how much money you have received, who owes you and how much they owe.
2. Record money spent (expenses):
All money going out of your business should be recorded as follows:
- Cheque Payment Voucher: Use this to record all expenses you pay for with a cheque, including salaries and withdrawals by the business owner. This assumes that you have a bank account for your business.
- Petty Cash Voucher: Use this to record all expenses you pay for by cash.
To every business owner or entrepreneur, having good financial management skills is not only going to save your business from self-inflicted financial crisis, but can also prove to become a strong competitive advantage. The tips offered above are just a tip of the iceberg, there’s still more to keeping good records and having strong financial management practices in your business.
So what’s my candid advice?
Register for my financial management training for entrepreneurs which is coming up on Wednesday the 26th of June, 2013. It’s a power-packed session for business owners where I will be digging in on how to use strong financial management practices to grow your business. To learn more about the training, click here.
Tito’s Note… Exclusive discount PLUS Unusual bonus for ONLY naijapreneur subscribers!
I have been able to strike an exclusive deal for you with Folakemi, the financial management training for entrepreneurs normally costs N25,000 [$157].
Now here’s the interesting part, for all naijapreneur subscribers, you can attend this training for N15,000 [$94] –that’s an exclusive discount of 40%!
And that’s not all, in addition, you also get a one-on-one financial consulting session for 1hour with Folakemi where you can discuss with her the financial challenges you are facing in your business!
The training comes up next week Wednesday, so you have less than 10 days to claim this extra-ordinary offer. Here’s What To Do Next….click here to register!
This is part of my upcoming birthday presents to you, one gone, two more to go, stay tuned!
About the Author
Folakemi Fadahunsi is a financial strategy consultant that’s passionate about helping entrepreneurs develop strong financial processes and practices that will enable them access funding. She is the principal consultant at Purssion Limited.