Owing a dedicated business account opened in the name of the business and also ensuring that all business transactions go through that account; obtaining source documents for business transactions, and getting an automated SME-focused accounting tool are steps to transforming your financial record, notes a Lagos-based accountant.
The accountant encouraged businesses to issue invoices, collect expense receipts for purchases, and keep dedicated folders for different categories of transactions.
Accounting tools will also reduce errors and easily tell how you are performing, says Jovita Madojemu, managing director, Pundit Bookkeeping Services.
Many solutions targeting Small and Medium Enterprises (SMEs) usually revolve around funding. They either provide or help SMEs with seamless sources of finance. But not many solutions support this category of businesses with tracking the spending of the funds.
The lack of finance is a common challenge for SMEs, but skewed financial appropriations and budgeting could cause a bigger challenge if founders ignore the culture of consistent financial documentation and bookkeeping.
But Madojemu has been committed to this course—balancing the books of SMEs—for five years. She started Pundit Bookkeeping Services to look after the finances of small businesses because of her belief that every SMEs need to make financial decisions from an informed standpoint.
“There are so many businesses here today and gone tomorrow because so many of them are flying blind. So, I was going to make it happen by ensuring that they have professionally prepared books of account on a monthly basis because I believe that 12 months is too long a time to realise that they have been spending money on the wrong things,” she told BusinessDay.
Bookkeeping, as she explains, is about recording, tracking, following the money, and identifying what the money is doing for the business. It enables business owners to know how much money they are spending and how much they are receiving.
“It’s important,” she notes.
With effective bookkeeping, SMEs get to see at a glance how their business decisions are translated to money, they are better guided in making an efficient budget in subsequent periods as it establishes a baseline.
Additionally, where there has been mismanagement of funds, bookkeeping will reveal it, and the business owner has an opportunity to change course; and also makes it easy to hand over a business’ financial activities to the next generation.
“Or, you could sell it to a discerning investor who could probably need such records to make such a decision,” she states.
Madojemu calls herself an advocate for financial intelligence for the SME space. Through her company, her clients have been instilled with the prudence required in business in terms of handling money—and the feedback has been encouraging.
Clients are happy that they can get their business performance update month-on-month for half the cost of keeping a full-time, in-house, qualified and experienced accountant. Some others now see her company as an accountability partner and it makes her “feel very fulfilled.”
But the impact of COVID-19 forced some clients to break their contracts with the company, leading to a shortfall in clients for Pundit Bookkeeping Service.
While she did not take any legal action in a bid to be empathetic, other clients just ceased communicating as the pandemic persisted.
“COVID-19 was a rude shock to many,” she narrates the impact the virus had on her business. “Some of those clients just disappeared. Some others were more courteous and called to explain the need to discontinue our services.”
Consequently, her company had to adjust. It became more prudent—keeping expenses as low as it could. It let go of some of the staff members, as the running cost could only be sustained for a short time. With reduced clientele, it further increased communication frequency with clients who stayed on.
Additionally, the company also allowed them to pay in installments as a way for them to manage their uncertain cash flow and also kept exploring new ways to keep improving its competencies and also increase visibility.
Nigeria is increasingly becoming difficult to do business. Insecurity, poor power supply, corruption, rash and often poorly thought-out government policies, lack of adequate infrastructure, and access to funds constantly deprive entrepreneurs of sleep.
So, how can business thrive in such a clime?
“The first thing is the mind-set of the business owner. The business owner needs to understand that the business is different from him or her. The business has a life of its own. It is important that you do not try to force the business to fund your lifestyle if it cannot.
“Also, as a business owner, constantly lookout for better deals in terms of dealing with vendors. Consider installmental plan options for major expenses so that you are not stifled. Then, improve on your business competencies and transfer knowledge,” she suggests.