On 4th May 2019 Mpower Limited held a financial talk by George Wanyonyi and Priya Chana of Equity Bank. They provided valuable insights on how to manage and access finance/money. They provided insights on Planning, Forecasting, Budgeting, Costing, Borrowing/Leveraging, Insure, Tax, Credit Rating, Negotiating and choosing the correct financial solution.
Money is a core asset for any business to operate, after all, CASH IS KING. On advancing cash, they provided insight that the financier considers;
- Ability to Pay
- Integrity to Pay
To enhance ability to pay, a system of regular banking and non-cash payments creates an evidence of ability to pay. Integrity to pay is measured from past experience. It is useful to borrow from time to time to create a positive track record. Further, a business should ensure that they are not in Credit Rating Bureau even for a Kshs 200/= debt.
However, a past, poor track record does not cut you out of accessing finance in the formal sector. Many business people opt for informal borrowing (shylock/money lenders) as they fear the scrutiny of formal lenders and investors. A business can always consolidate debts and start a fresh and present a new outlook by creating a plan and a new history. Keeping of records is key to building confidence of any financier/investor.
Handling of expenses is a major weakness of the business. Many entrepreneurs do not separate their personal expenses and funds from the business expenses and revenues. Keeping of a clear paper trail of any funds into and out of the business are key to keeping track of finances. Moreover, such records are records of accountability and create confidence by the financier/investor.
Presently, IT systems make it easy for the business to track all the money in and out of the business e.g. Quick books, Ex-tensity, Spreadsheets, and Workday etc. As a business you should be able to account for money and track whether it is being used to achieve your key objectives and not being wasted.
Financier and Investor’s attraction plan
When approaching a financier or investor here are some tips;
- Build a relationship. Take time to build your portfolio and align interests.
- Say the truth
- Be accurate in the information provided
- Prepare for the interview and know your business
- Practice elevator pitch. (1 minute to deliver the mission, vision and impact of your business)
- Do not be desperate
- Do not sign away more than the value of the funds e.g. shareholders, assets
- Have a risk mitigation plan
- Avoid expensive credit. Know the total cost of money given/lent e.g interest and costs
- Choose the correct product for your business e.g. term, loan, overdraft, invoice discounting, LPO financing.
In conclusion, the finances of your business are key and every business owner should be aware and keep track. Poor finance management can bring down even a successful business. Some tips to ensure that you are financially stables are;
- Monitor money flow- the receipts and invoices
- Sales Pipeline- Plan your revenue inflows
- Costing- Know the cost of everything and record it. Use this to price properly.
- Negotiate- Do not accept the first offer. Justify through your plan, track records and references.
- Spend less than you earn.
- Save- Keep money for a rainy day at least 6 months of expenses. This can be grown gradually.
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