Jovita Madojemu is the managing director and CEO of Pundit Bookkeeping Services, a virtual company that provides accounting services to MSMEs. In this interview with JOSEPHINE OKOJIE, she talks about her organisation and lack of financial literacy within the Nigerian MSME ecosystem.
What is your motivation for starting Pundit Bookkeeping Services Limited?
The motivation behind starting Pundit Bookkeeping Services was to immortalise MSMEs by giving them access to a reliable partner that would see to the accurate accounting of all their financial transactions and provide them professionally prepared financial reports. That way, we guide the entrepreneurs on various decisions with a view to sustainable business growth. This motivation gave birth to our mission, which is, ‘To be the entrepreneur’s best friend and partner in all things finance’.
Furthermore, we wanted the entrepreneur to get past the concept of just having an inexperienced person in-house, doing money errands, which is what most of them call an accountant. What we are providing is a shared service where clients have access to professionally prepared accounts overseen by experienced, qualified accountants. This way, they pay as low as half the cost of keeping a certified accountant in-house on a full time basis.
What is your assessment of the Nigerian business environment?
I see the Nigerian business environment as flux-filled. There are huge infrastructural deficits that increase the burden of the business owner. A simple case to point is the continuous gridlock in the ports which have made logistics costs increase astronomically for exporters and importers.
Then, of course, there are tax policies which could be friendlier. For instance, the current increase in Value Added Tax (VAT) from 5 to 7.5 per cent is ill-timed. This is in an environment where entrepreneurs have to generate their own power and pay for a private supply of water to keep the workplace functional and comfortable for employees. It is almost like you are being punished for trying to create value in the economy.
In addition, the Internet Service Providers (ISPs) need to be called to order. In this age of the digital, most entrepreneurial activities are powered by the internet, but we are yet to get the optimal value for money from these ISPs. Some of us have to use two or three of them so that when one is down, you switch to the other. This is a needless incremental cost that can be avoided if the service quality of the ISPs is properly regulated. The insecurity challenges are a real threat and create a lot of doubts as to whether or not the going concern status of an enterprise will be truncated.
A critical point for entrepreneurs is finance. How does your firm provide support entrepreneurs to enable them easily access finance?
In tracking the financial transactions of our clients on a monthly basis, we are exposed to their spending patterns, their revenue gaps or the lack thereof, and this helps us anticipate their future needs. The core reports we prepare monthly include the statement of profit or loss, financial position and cash flow. These form the baseline in assessing the need for funding and the timing of such funding.
To arrive at the best financing decision, we run several simulations to predict the outcome of the utilisation of the funding. This enables us to see if the business is better off with one lender’s proposition as against the other. The only reason any of these is possible is because we have been tracking the business transactions with sufficient regularity; in this case, monthly. So, we can tell if there are sufficient margins to accommodate interest expense, for instance, and if the business can meet repayment schedules.
What are the peculiarities that hinder the growth of Nigerian MSMEs?
There is a prevalent dearth of financial literacy in the Nigerian MSME ecosystem as compared to other parts of the world. There is hardly any mom-and-pop store in Northern America or Europe that is not supported by a professional bookkeeper. This brings financial literacy in very close proximity to the business owners. There is a strong awareness and embrace of this sort of support. It is planned for; it is seen as an integral cost of running the business and revenues are planned to accommodate this cost as well as other costs like the shop rent, staff salaries and so on. This is something the Nigerian MSME needs to adopt fastidiously.
The absence of trained teams is a problem for Nigerian entrepreneurs. In many cases, the business owner is more concerned about the fact that, in the shortest possible time, the employee may leave to a bigger company, rather than urgently investing in that employee’s capacity development so that the burden of coordinating the business can be shared.
Another serious problem which we must not overlook is that the quality of education is fast declining and the fact is that not all graduates are trainable. There are fundamental issues with basic quantitative aptitude and verbal communication that make it terribly frustrating to work with such graduates. We have seen a number of businesses with such graduates in their employ, and it is one horror story after another. The ministry of education has its work cut out for them. If we are not churning out a literate workforce from our educational institutions, then we are gradually bringing meaningful enterprise up-scaling to a halt.
There are a lot of incubators and accelerator hubs with similar accounting services like Pundit. So what makes your initiative different?
Simply put, we are differentiated by the fact that we combine management consulting with accounting. We present an end-to-end solution from the point of transaction initiation to the reporting, and ultimately to course-correcting decisions that drive business profitability.
For every transaction that occurs in the business, we are asking the question, ‘Is this hurting or helping the business?’ We relay this answer to the business owner for immediate alteration of spending and income generation behaviour, where necessary.
We also pride ourselves in our continuous organisational learning process. It is an integral part of who we are, and we find that not many people rendering this service pay attention to this aspect. In most cases, knowledge resides with just one person, while the other members of the firm are basically just running errands.
From your profile, you have worked with a lot of MSMEs. Why do most start-ups fail after five years of being birthed?
Improper accounting and lack of professional accounting support are usually the major reasons. In some cases, the entrepreneur just refused to cooperate with the accounting process, ignored the warning signals and faced the consequence of that inaction.
Closely related to this is the fact that some business owners decide to spend business funds as if it is their personal money. There have been several cases of MSMEs taking business loans from the banks and diverting these funds for personal perks like status cars and other related luxuries.
Other reasons include burnout resulting from disenchantment with low sales, lack of trained teams to drive customer acquisition and retention, as well as plain indiscipline on the part of the business owner in following through with the design and implementation of strategic business goals.
With the current challenges facing the economy, what is the outlook of entrepreneurs in the economy?
The challenges in the economy make it very clear that with unemployment rates skyrocketing and our population exploding at a geometric progression, more and more people are going to be starting their own businesses to create employment for themselves and a few others that they can absorb. This ultimately means that in whatever entrepreneurial endeavour you find yourself, competition is going to become stiffer. What this means is that entrepreneurs will have to make more insightful decisions on the basis of credible numbers. Every cost is going to matter and corresponding revenue streams need to be guarded.
In the face of such a situation, it also becomes critical for entrepreneurs to differentiate themselves with product and service quality. There will be a need for concrete organisational learning and transfer of knowledge within the enterprises run by these entrepreneurs.
