Cash Flow Analysis Is Good When All Of The Above ‘ABC’ Strategies to Sustain Growth of Small Businesses in The Least Developing Countries (LDC)

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‘ABC’ Strategies to Sustain Growth of Small Businesses in The Least Developing Countries (LDC)

As the World Economic Forum kicks off in Cape Town, South Africa, this article suggests simple ways small businesses in the world’s poor countries can keep their businesses afloat.

I. Keeping proper financial records.

The numbers generated by a company are an index of its health and growth. However, many small business managers tend to fear them and therefore do not monitor or update them regularly.

It is not good enough to monitor the state of the company using annual financial statements. This is usually not available until next year, which is quite a long way off given the company’s financial position.

There are good reasons why the owner should ensure that good business records are kept which provide information to, for example, the tax authorities, customs and excise (for VAT) and the bank manager. The most important reason, however, is that properly maintained accounts, summarized at the end of each month and combined with an inventory or stock valuation, will provide the owner-manager with up-to-date information about the business. This would allow the owner-manager to spot danger signs and respond while there is still time to take corrective action and plan for the future.

II. Development of modern financial management practices.

This is necessary to assess the working capital needs of the company. Discounted cash flow analysis could be used to support investment decisions (ie import and export of goods). Financial management practices such as discounted cash flow analysis could be added to the Ghanaian primary school curriculum in the early school years as most small businesses or small medium enterprises (SMEs) employ many dropouts. In the event that most products are imported from overseas suppliers, proper currency management is very important. As mentioned earlier, foreign currency hedging could be used to reduce or lower the cost of purchasing imported products. This is not to say that small businesses should grow overnight, but small businesses must be allowed to identify with modern financial management practices at an early stage of development if they are to maintain any growth that may have been achieved.

III. Adequate financial management strategy

Thus, you can use the available resources to achieve the desired goals. In other words, setting goals so that various financial obligations are met using the best available financial practices that include working capital and current asset management. This would include keeping good records of assets owned by individuals used by the business. Periodic assessments of the market value of these assets would be more appropriate. This means knowing the true value of the company at any given time.

The introduction of an appropriate financial and investment strategy would ensure steady and sustainable growth for the company in the future. Reliance on overdrafts as a form of working capital could be eased by the owner-manager entering into a term loan agreement with its bankers. Other sources of financing should be explored, such as a business relationship with more than one bank and the involvement of business angels. He must have a strategy.

The company should try to take advantage of some of the existing government schemes, such as the Business Assistance Fund (BAF), and seek a financial management consultant to help it formulate and implement a strategic financial management plan. Proceeding from the above, it is imperative that professional managers get involved in the management of the organization. This gives the company the opportunity to achieve its goal of entering the wider economy and the ability to maintain its profits.

IV. Negotiations and deals with bankers

Bankers must be negotiated, not only to discuss interest rates and loan maturities, but also to protect the owner-operator’s personal wealth. -that is, by persuading the bank to agree to new conditions, so that he personally no longer acts as a guarantor for the deal. Also, the owner could agree to pay a percentage point or higher interest to allow for the separation of those assets that belong to him and the company. V. Establishment of an appropriate management information system (MIS)

The use and implementation of information technology in a business to enable accurate information or data collection and business record keeping could act as a powerful competitive weapon. i.e. introduction of computer hardware and relevant financial management software, EPOS (Electronic Point of Sales) machines, accounting software, etc. This should be based on financial planning and forecasting.

VI. Development of a financial management benchmark for SMEs

However, the company’s growth is hindered to some extent by structural weaknesses specific to a particular industry. These include, for example, fragmentation, limited distribution channels, lack of concerted efforts and coordination, and most importantly, no standard financial policy. Standard financial policy refers to the standard for financial management discipline that should somehow be embedded in small business owner-managers. For example, a strict code of avoiding over-trading, over- and under-stocking should be established and enforced.

VII. Introduce more differentiated products and be cost-effective

As the market is young and still growing, a policy of increasing market share must be maintained to increase inventory turnover and reduce slower items. Market share in export markets could be gained through a more proactive and targeted marketing orientation. This system would be much more efficient than the current random approach of randomly selecting customers.

Being a small business gives it the advantage of being able to become more flexible to meet the demands of its customers. Areas where this could be exploited include, for example, delivery times, quality, order processing and new product launches, and customer service. It can also sustain business by strengthening quality and keeping it at a high level. If people discover the quality of the product, the company will be able to generate more sales through product knowledge, training and development programs.

A very rare tactic in Ghanaian business circles, the company was able to maintain and increase market share by providing effective after sales services to its distribution channels. This can be achieved through improved customer service to differentiate products through fast delivery, order acceptance and processing, quick response to inquiries, product availability.

VIII. Designing a new organizational structure.

Some financial institutions consider the caliber of personnel they deal with to mediate the transaction. Recruiting skilled workers from outside the family or a motivated workforce. For example, a financial manager, an accountant, a financial administrator who could also be a secretary. Due to limited financial resources, small companies usually find it difficult to attract top people in the early years. However, as the company grows, its management requirements will often increase and exceed the capabilities of the original staff. The added workload is usually transferred to the owner, who may simply not be able to handle all the tasks. If the survival and growth of a company depends on mature judgment, then having the best possible decision makers with the right financial background is essential.

IX. Development of a new management style that will correspond to the vision of the company.

In small businesses, it is often the owner who has the vision for the business and takes care of every detail. Unfortunately, this 100% hands-on management style usually doesn’t allow staff to develop their talents and skills. Staff are not encouraged to think that the boss does not have all the answers. The owner inadvertently assumes the employee’s responsibilities. There is a risk that the staff will not be able to use their initiative when the owner is away. For this purpose, it is suggested that the owner develops an organizational management style. In this way, employees could fulfill their potential and his expectations of them. This can be achieved through training so that they can perform their roles and responsibilities effectively.

X. Development of a financial plan to address the following:

Sales and Distribution This mechanism is used to deliver products and services to customers, ie. direct marketing requires the use of the company’s own sales force. Another option is to use other distributors and retailers or to set up your own retail outlets. This should boost distribution, which has been found to be a problem for most SMEs.

Pricing and Discounting Strategy – Current practice in the company is for the owner and staff to charge different prices to different customers based on their judgment of the customer’s ability to pay. This causes some confusion among some customers. Although the actual price list is not critical, the overall price structure and rationale for that structure should be provided. It is necessary to consider the policy of discounting and price changes and the impact of the pricing strategy as a whole on gross profit (revenue less cost of goods sold). For example, Homestretch Venture proposed indirectly reimbursing hairdressing services by providing free drinks to customers on busy days, including Sundays, when competition is keen on the hairdressing business.

Future marketing activities and related budget This should show how the overall marketing efforts will be organized and how resources within the company will be allocated between different marketing tools. In each market, sales strategies must be designed to sustain future growth. For example establishing agencies in other parts of the country and expanding connections with suppliers, etc. This strategy would be to emulate the large retail and manufacturing companies in Ghana that have been successful in using such a strategy. Advertising, Public Relations and Promotions – This will play an important role in the company’s attempts to generate sales. The company’s intentions in this regard should be communicated in concise, basic terms. One way to achieve this is to focus on the concept and creative content of the communication campaign. For example, equipment to be used and vehicles to be used, such as electronic media, print media or direct mail.

The services of an outside agency should be explored for promotion and advertising assistance. Although FM stations are popular, other means must be found to build the corporate image of SMEs. It is also necessary to establish contacts with local media that write or publish information about companies in the Community – ie. newspapers, radio and television. This should reduce costs but generate the required sales and returns, thus providing the necessary cash flow.

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