SIMS urges SMEs to embrace budgeting for success
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.
