Quick Read >>How to manage your finances wisely

  • Written by Super User
  • Category: News

Financial Management 

Financial management is a life skill. It is essential in every facet of life, from the individual, to the corporations and the nation as whole. It encompasses the entire process of generating revenue and judicious expenditure to create maximum returns. It involves using one’s money in an efficient manner such that needs will be satisfied.

 Revenue Sources

Revenue is the money an entity receives for undertaking productive activities. It is the reward for performing a required or contracted assignment. It could be any amount of money received for the sale of goods and services. It may also be earned from an investment in the form of interests, dividends or royalties. Individuals receive revenue from wages and salaries. Countries earn their revenue from taxes paid to them by the citizens.

Expenses

Expenses is an outflow of money to another person or an entity as payment for purchases or service. Expenses incurred by individuals include payment of rent and utilities, school fees, car maintenance and hospital charges. Companies incur expenses for their operating activities. They include salaries to workers, telephone and electricity charges, and vehicle and office machines. The nation incur expenses by way of compensations to civil and public workers. Another line of expenses is the construction of roads, hospitals and schools, grants and subsidies. Expenses are natural to life but the real deal is how it is managed with reference to the revenue envelop.

Managing Expenses

Our financial emancipation will emanate from how well we manage our financial activities vis a vis our revenues and expenditures. Individuals can manage their expenses better by buying what is needful and necessary as able to avoid impulse buying. Planning is key in this instance. Leave within your means! Do not spend more than you make!

Companies are equipped with planning and budgeting tools which guide them in their financial operations. A company is formed to create wealth. The strategy therefore is to increase revenue and minimize expenses. This calls for maximization in the application of resource to get maximum returns. The watch word is high productivity.

Nationally, the challenge is the same. Countries raise revenue from taxes to enable them undertake national programmes and agenda. This is captured in the national budget as reference document. The bane of most underperforming economies is the weak tax net and abuse of the resources therefrom. Government can do far better by spending the tax income judiciously. The wanton dissipation of the people’s money on luxurious and expensive v8 vehicle is an eyesore and mindboggling especially when the said vehicles are mainly used in the cities.

The high spending on the few government executives (business class air travels, fully furnished accommodation, medical services abroad) and the padding of contracts are worrisome to the financial literates. Governments can manage the kitty better by focusing on development and cost beneficial project and programmes as against wasteful frivolous expenditures as with the Accra desalination plant.

Sometimes, it is impossible to do away with certain expenses. In such cases, it become necessary to identify other sources of revenue to take care of such indispensable expenditures. The obvious last resort may be to borrow money from a financial institution. The caveat is to make sure such expenditures are investment in nature, capable of yielding adequate returns to set off the expenditure incurred. Individuals in such a dilemma should identify other work activities such weekend job, uber services or teaching children at weekend schools. Every time and everywhere you find a need, there would be an opportunity to earn some additional income.

Financial management

 

Managing your finances is a critical life skill. Every entity has the responsibility to sustain lifestyle as humans and business operations as corporate beings. This would require the management of financial resources to enhance growth and development. As a nation, an effective and efficient management of our resources should improve our well-being and lifestyle. When we take charge of our finances and manage our expenses efficiently, there will be no need to request for assistance from the international bodies such as the World Bank Monetary Fund (IMF) for funding various projects. When resources are well managed it would create an opportunity to save and invest in wealth creation projects and programmes for nation building. As humans, our wants naturally exceeds our means. It is therefore very important to manage our expenses mindful of the fact that resources are always limited. When finances are well managed, there will be an efficient use of resources (money).  - The Spectator  

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30 Secs Read >>Funding Technique: Sources of funds for businesses

  • Written by Super User
  • Category: News

By Stephen Quarshie 

 

Every business would be funded in some way. It could be from internal or external sources. Funding is necessary for a new business or an old one trying to expand its cooperation. The challenge faced by most business is choosing the right source of finance. This is dependent on the unique situation faced by the business entity. There are so many options but each source of finance with its own set of advantages and challenges. The choice of funds depends on certain criteria such as cost, duration and terms and accessibility.

 

Personal Savings and Assets

One of the major sources of finance for a business is personal savings and the use of other assets. Personal savings is a necessity for start-ups. It is difficult to access external funds without evidence of committed personal funds. Personal savings do not physically cost the owner because the money is his. On the flip side one could lose all the personal savings ploughed into a business venture. Other assets such as vehicle, equipment and furniture could also be used in setting up a business. There are other resource such as retirement benefits which could be used in establishing a business.

Investors

Investor form a core group for sourcing finance. Investors may be active or passive. They are usually called shareholders or equity holders. The active shareholders may seek representation on the board of directors and participate in managing the affairs of the business. Investor group can help raise capital for start-ups or business growth or expansion. The business in such instance must make sense and provide adequate returns. The involvement of investors in any business setup reduces the control exercise by the promoters. Investors bring in additional capital and know-how but also demands strict accountability. Shareholders share the risk as well as the return on investment of the business.

Retained profits

This is the cash that is generated by the business when it trades profitably. It is another important source of finance for any business, large or small. Retained profits are used for recapitalization and grow the business. It is synonymous with personal savings and does not cost the business entity.

Bank loans

Bank loans are very good source of funding giving the roles that banks play in financial intermediation. Small business may be able to secure loans to support their operational activities. Banks also offer facilities to business for working capital and acquisition of non-current assets such as land and building. Bank loan are used to, promote business growth and expansion. Bank loans are not free. Unlike personal savings, they attract interest on the loan. The interest rate may vary due to economic and other default charges. Some interest charges could be disincentive to business finance.

Government Grants and Loans

The Ghana government has several programmes and facilities to help small and medium enterprises and companies to grow and expand their businesses. Grants are basically free financial support. Government guaranteed loans or facilities come with interest rate that is basically far below the existing market rates. They usually come with certain specific and focused agenda to address some public interest issues such as skills development. They may not be available for every type of business. Government guaranteed loan is still a loan and may exact similar terms and conditions as per any other commercial loans.

Some of the funds under the following schemes; Youth Enterprise Support (YES), Microfinance and Small Loan Centre (MASLOC), Export Development and Agricultural Investment Fund (EDAIF) and Venture Capital Fund. The motivation for the establishment of these schemes has been to increase the flow of finance and credit to SMEs in other to assist them to increase their operational capacities, increase productivity and increase entrepreneurship.

Business Angels

Business angels are professional investors who typical invest their funds in a start-up company. They prefer to invest in business with high growth prospects. In addition to their money, Business Angels often make their own skills, experience and contacts available to the company. Getting the support of a Business Angel can be a significant advantage to a start-up.

Venture Capital

This is a specific kind of share investment that is made by funds managed by professional investors. Venture capitalists rarely invest in the start-ups or small businesses. They prefer to invest in businesses which have already established themselves. Another term which is usually used for Venture capitalist is ‘private equity’. A start-up is much more likely to receive investment from a business angel than a venture capitalist. – The Spectator

 

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Business Loans: Borrow or not borrow?

  • Written by Super User
  • Category: News

Borrowing money is a necessity of life. This is especially so for business development and personal emergencies. But loans are never free. There is usually a cost element attached to the facility. This is interest factor. The interest rate on a debt is a very important element in determining its suitable or otherwise.

To borrow or not to borrow is not the question. The purpose for which the loan is contracted is the matter. A good loan should generate adequate returns to repay the loan plus interest amount. The loan should be used for a project with a net positive value (NPV) thereby creating enough cash to pay for the project and other associated cost.

Whenever a loan is contracted, it becomes a debt to the recipient. The total amount for any debt is the amount borrowed plus the cost of borrowing (interest payment). The cost of borrowing may include the interest payment plus other incidentals such as loan facilitation fees, default risk premium, account maintenance fees, insurance fees and other fanciful ones which are peculiar to the loan offer. Caveat emptor (Buyer beware!)

IMPORTANCE OF BORROWING

Some form of borrowing is vital to running a company or economy successfully. This is caused by the inadequacy of financial capital to prosecute all projects and programmes within the business time frame. The incidence of the cost of borrowing money makes it important to learn how to borrow more effectively and efficiently.

Borrowing is necessary for undertaking investment projects and to facilitate the operation of business activities. It is mostly used to finance the acquisition of fixed assets like heavy duty equipment or landed property. It is sometimes used to fund and replace maturing loans. It is also useful as working capital when financing short term cash flow challenges.

FINANCE

The sources of finance are usually from personal savings, internally generated funds or borrowings from third parties. Loans could be short or long term. The key criterion for selecting an appropriate funding source for any project is the interest rate. For good financial management, you should borrow money for an investment only if the return on the investment (project) is higher than the interest on the loan. This underscores the maxim that the financial objective of a firm is to maximise the wealth of the owners. It makes sense to take a loan only when the benefit outweighs the cost in either social or commercial terms. Any other contrary decision would be a slippery road to financial disaster at personal, corporate or national level.

INFLUENCE ON INTEREST RATES

The interest rates are influenced by numerous factors relating to the type of loan. They include, the length of time over which the loan is to repaid, the collateral, credit history, the loan maturity period and the lending source. All these could influence the rate charged. There are other external influences like the prevailing economic conditions with regard to inflation, Treasure bill, exchange rates and other government policies.

GOOD LOANS, BAD LOANS

A loan in any form is not a bad thing. Indeed some loans are desirable in the capital structure or a business. It is rather too much of it which could be bad. When you have too much debt, it leads to high gearing. Too much debt could give you financial diarrhoea. The cost of debt i. e. interest payment could bleed your financial resources to the point of financial distress or death, whether personal, corporate or national. The adage is to borrow within your means. Many persons and businesses have gone bankrupt for failing to observe this credo. If you must borrow, then borrow effectively or efficiently.

DOS AND DONT’S 

Never borrow to finance expenses, unless it is a temporary measure. A microfinance loan of 6 percent per month is equal to 72 percent per annum.

Never borrow short term for long term projects. Don’ts also borrow long term to finance short term projects. They could all lead to financial mis-match.

Debt is a necessary component for financial activities i. e. projects, but it is best served when the cost (interest rate) is lower than the returns on the investment.

POOR BORROWING

Debt can be very tantalising especially when your back is against the wall. But it could hold you to ransom and slavery when poorly managed. The HIPC program was a good experience. The continuous challenge faced by countries such as Ireland, Italy, Greece and Iceland are hard lessons. The bitter result is usually economic hardship and inevitable bailout.

THE WAY FOREWARD

Borrowing is not the only solution to financial challenges. Occasions for funding could be resolved by evaluating various optional solutions. Adopt other financing methods like leasing and hire purchase. For capital intensive projects, public private partnership (PPP) could take the pressure off scarce resource. Better still, project financing (using future cash flow to pay for the cost of the project) methodologies works. - Johnny Quarshie, The Spectator

 

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 How to manage a small business

 

How to search for business opportunities

  • Written by Super User
  • Category: News

 By Chris Nikolov

Often wait for opportunities, but is it worth waiting for opportunities? My answer no, it isn’t. First of all you can’t depend on pure luck, you never know if you will be granted with a great opportunity or not. So why do you want to be dependent on luck?

Instead you could be and should be dependent on yourself. This is the only sure way you know you will be granted with opportunity.

Opportunities are missed by most people because they don’t realise they have encountered such.

Here is one of the basic laws in life: There will always be opportunities for those who recognise and pursue them. The lucky people are simply those who have more chances than average.

Know your limits

You can’t be perfect. You can’t do everything yourself. You can’t create a business or live the life of your dreams or make a lot of money if you don’t know your weakness, strength and passions. If you know your limit and what you are capable of, you will know exactly what you need. Once you begin to know yourself, you will realise your weakness and you can fill these weakness with other people’s strength.

Open your eyes

There is a lot more happening in the world than you see. Stop listening to music all the time when you are riding the bus or taxi. Maybe there is someone who can change your life in that bus or taxi. Maybe the person sitting next to you is your next business partner or your husband/wife or your new best friend. You just never know, life is unpredictable, and that’s why you should always keep your eyes wide open. You might miss opportunity simply because you were too busy listening to music on your phone. Always be on the lookout even when doing simple activities as drinking coffee, riding the bus or walking back home.

Meet new people

If you want to be presented with more opportunities, simply meet new people. The more people you know, the higher chances you will be presented with new experiences. Go to meetings with people having similar interests as you. Visit conferences. You can even meet people online these days; join different Facebook groups, follow people on twitter, join LinkedIn. People are not so mean as you think. Also if you are one of those people who meet a lot people on daily basis and have a problem remembering their names this app will help you a lot-Anki (This app will make you never forget a name, a job position or age again. It does miracles. )

Don’t be afraid to ask

There is no shame in not knowing something, and there is no shame in questioning things. Do you know how I got my first job? I simply asked the manager could I work here and after he interrogated me a bit he said; Yes. So I found a job by simply asking a question in a company that wasn’t looking for employees. Most people would gladly help you if you ask them nicely for some help.

Don’t be afraid to try different approach

In Bulgaria (the country I am from) blogging is not something people make money out of. When I decided I wanted to blog, people laughed at me to find myself a serious job. But I didn’t think so; I knew I could create a successful blog myself and that all happened thanks to the steps I mentioned above. And in the end I did. Now I am earning five times more than what my friends are earning. I am working from home, I work when I want to. Just because the masses of people think something is wrong doesn’t mean they are right.

Travel

You should visit different places at least one time a year. This way, you will meet new people and also might be presented with an opportunity that simply doesn’t exit at your hometown.

Build self confidence

You can’t let people follow you if you don’t look confident. That’s why you need to confidence, you need to be sure 120 percent things will work out right in the end if you want other people to believe you as well. It might be fake confidence, but you need to have it. Most people follow the leaders even when they make bad decisions simply because of their leadership status. And if you could make people follow you, you will surely be able to create a lot of opportunities for yourself/ your company/ your work place. Keep learning. Learning is a process that never ends. You can always learn something new. Always maintain the attitude of a student. If you think you are done learning, then bitterness set in, but if you have more to achieve every day in an arena that makes each morning awaking full of potentials and cheery portent. In the end, all comes to doing. You will never get presented with opportunities by sitting and watching television all day. Go out, feel, see, be and take part of live. If you are active and always on the lookout, you will always end up on the right place in the right moment. - motivationgrid

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How to manage a small business

  • Written by Isaac Kwasi Adusei
  • Category: News

Starting a business is a courageous decision. It is tantamount to venturing into the dark with no guarantees of achieving your objective. It is synonymous with taking control of your destiny, mindful of all the risks and responsibilities involved. Despite the challenge, the following guidelines would help to assure your success.

WRITTEN PLAN

Always have a plan. Written plan. A good plan is necessary for informed action. Taking on any activity without a plan can lead to chaos. Any good intentions without a plan is a mere dream. A plan would outline the specific objectives of the business, strategies to achieve it, financing resources, a sales and marketing plan and a budget to encapsulate all the financial requirements.

SET GOALS

The success of every business is dependent on setting smart goals. It is critical to define where you want to go and develop goals on how to get there. With goal-setting comes clarity of intentions and alignment of activities. Setting goals allow everybody to understand the structure and directions of the company and critical success factors.

MANAGE YOUR DAILY ACTIVITIES

Pay attention to the daily activities. Manage all aspects of the business paying critical attention to product and service delivery. Quality product/service will sustain the service. A check list may be necessary to manage the daily activities. It serves as a memory aid. Record keeping is very important when managing daily activities.

ORGANISED STRUCTURE

A good business structure is important to support a functional business system. When a business is well organised, it becomes easier manage. It then functions and create value. Keep each aspects of the business organised and functioning at peak performance.

CRAFT A BUDGET

A budget is a quantification of your business plan. The financial numbers are necessary for quality financial decisions. It helps to know the sources of the business funds and the business expenses. It helps to place the business on an even keel. It act as a guide to help your business grow. It also gives you enough understanding of your finances and helps to determine action lines to achieve business objectives. A budget should act as an action plan.

BUSINESS PROCESSES

Business processes are critical to establishing an effective and efficient business set-up. It is important to have documentation of all of the business processes. A typical business operating procedure serves as a standard for promoting business effectiveness. It also serves as a reference manual for the staff. It helps to run the business in detailed and efficiently.

BUSINESS SYSTEMS

Business systems are necessary for business development. A business system inter-connects all the functional aspects of the business to form a cohesive unit. It connects Human Resources and Sales to Accounting to create a harmonious working system. It is critical for overall business operations.

 

Related: This 29-year-old startup founder shares her advice for entrepreneurs

 

MAXIMIZE REVENUE, MINIMIZE COST

The formula for business success is to maximise business income and minimise cost. It behoves on the business manager to ensure that cost is managed in every aspect of the business in order to create a margin. Decisions should be taken to ensure that waste in operation is reduced to barest minimum. Maximising revenue as against minimising cost creates an opportunity to maximise profit. A typical objective of a business entity.

QUALITY HUMAN RESOURCE

The success of every establishment depends on the quality of the human capital. Recruitment of quality staff is important in this instance. Quality staff would create business growth and success. Be prepared to hire qualified and hardworking persons and fire lazy persons. Motivated and train your staff as part of business development.

INNOVATION

It is worthy to reposition your business as and when in the continuously changing business environment. Many a well-established and performing business have failed dramatically because they failed to update their business concept. In this modern business environment, you either innovate or die. The strategy is to create a competitive advantage continuously. This can be achieved by monitoring the changes and dynamics in the market place and upgrading to match the changes. Being an entrepreneur is your choice, so make it work.

THE INTERNET

Business digitisation is the way forward in business development and success. Automation and speed of delivery is critical in entrepreneurship. It is incredible powerful and very cost efficient, but it takes time and small skill. It is about creating a community, using social media networking such as Facebook, YouTube, Twitter and blogging to build rapport with your market. You need to be computer literate and savvy.

FINANCIAL DATA

Financial information is crucial for business decision making. Financial literacy is the difference maker in terms of understanding the financial performance and position of the business. If you want to sustain your business then monitor the cash flow. The financial reports impact on quality decision making. Know your numbers and check them daily for quality decision making.     – Johnny Quarshie, The Spectator

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This 29-year-old startup founder shares her advice for entrepreneurs

     

 

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