| As the World economic forum kicks off in Cape | | | | Since the market is young and still growing, a policy of |
| Town, South Africa, this article suggests simple ways | | | | increasing market share should be continuously |
| that small businesses in the poor countries of the world | | | | pursued so that stock turnover is increased and |
| could keep their businesses above water. | | | | slower moving items are reduced. Market share in |
| I. Keeping Proper financial records. | | | | export markets could be gained through a more |
| The figures that a business generates are an index of | | | | pro-active and targeted-marketing orientation. This |
| its health and growth. However, many managers in | | | | system would be far more efficient than the current |
| small businesses tend to be positively scared of them | | | | shot-run approach of random selection of clients. |
| and therefore do not keep control or update them on | | | | Being a small company, it is at an advantage as it can |
| regular basis. | | | | become more flexible to meet the demand of its |
| It is not good enough to monitor the state of health of | | | | customers. Areas in which this could be exploited |
| the business by using the Annual accounts. This is | | | | include, for example, delivery times, quality, order |
| normally not available until the following year which in | | | | processing and new product launches and customer |
| terms of knowing the financial position of a business is | | | | service. It can also sustain the business by reinforcing |
| quite a long time away. | | | | quality and maintaining it at a high level. If people find |
| There are good reasons why the Owner should make | | | | out the quality in the product, the business will be able |
| sure that good business records are kept, providing | | | | to generate more sales through product knowledge, |
| information for example to, the Inland Revenue, | | | | training and development programmes. |
| Customs and Excise (for VAT), and the Bank | | | | A very rare tactics in the Ghanaian business circles, |
| Manager. However, the most important reason above | | | | the company could maintain market share and |
| all is that properly kept accounts, summarised at the | | | | increase it by providing its distribution channels with an |
| end of each month and combined with a stock take or | | | | efficient after-sales-service. This can be done by |
| an estimate of the value of the stock, will provide the | | | | improved customer service to differentiate products |
| Owner-Manager with an up-to-date information about | | | | via speedy delivery, order taking and processing, quick |
| the business. By doing so, this would enable the | | | | response to enquiries, product availability. |
| Owner-Manager to spot danger signs and to react | | | | VIII. The creation of new organisational structure. |
| whilst there is still sufficient time to take corrective | | | | Some financial institutions consider the calibre of |
| action and to plan ahead for future. | | | | personnel they are dealing with in order to broker a |
| II. The Development of Modern Financial Management | | | | deal in a transaction. The employment of skilled |
| Practices. | | | | workers outside of the family, or a motivated |
| This is necessary in order to evaluate the working | | | | workforce. For example, a Finance Manager, |
| capital requirements of the business. Discounted cash | | | | Accounts Clerk, Financial Administrator who could |
| flow analysis could be used to support investments | | | | double as a Secretary. The limited financial resources |
| decisions (i. e. importing and exporting of goods). | | | | of small companies usually make it difficult for them to |
| Financial management practices like discounting cash | | | | attract top-quality people in the early years. However, |
| flow analysis could be added to Ghanaian primary | | | | as the company grows, its managerial requirements |
| school curriculum at an early school years since most | | | | will often increase beyond the capabilities of the original |
| small businesses or small medium enterprises(SMEs) | | | | staff. The added workload is normally transferred to |
| employ many drop outs from school. In the event | | | | the Owner who may simply not be able to handle all |
| where majority of products are imported from | | | | the tasks at hand. If a company's survival and growth |
| suppliers overseas, managing currency properly is very | | | | depends on mature judgment, then having the best |
| vital. As mentioned previously, foreign currency hedging | | | | possible decision-makers with adequate financial |
| could be used to reduce or lower the cost of | | | | background is vital. |
| purchasing imported products. This is not to say that | | | | IX. Development of new management style to fit the |
| the Small business should grow overnight but it is to let | | | | company's vision. |
| small businesses identify with the practices of modern | | | | In small companies, it is often the Owner who has a |
| financial management in its early stages of | | | | vision for the company and to take care of every |
| development if it is sustain any growth gained. | | | | detail. Unfortunately, this 100% hands-on style of |
| III. Appropriate Financial management strategy | | | | management does not usually permit staff to develop |
| This is how to utilise the funds available to achieve the | | | | their talents and skills. Staffs are not encouraged to |
| desired goals. In other words, the setting of goals so | | | | think the boss has not got all the answers. |
| that the various financial obligations are met with the | | | | Inadvertently, an Owner usurps employee's |
| best available financial practices involving working | | | | responsibilities. There is a danger that Staff may not |
| capital and current asset management. This would | | | | be able to use their initiative when the Owner is away. |
| involve keeping good records of the assets owned by | | | | To this end, it is proposed that the Owner develops an |
| individuals which are used by the business. Periodic | | | | organisational style of leadership. This would enable |
| estimates of the market value of these assets would | | | | employees to fulfill their potential and his expectation of |
| be more appropriate. This is to know the real value of | | | | them. This can be achieved through training so that |
| the business at any point in time. | | | | they can carry out their roles and responsibilities |
| The introduction of an appropriate financial and | | | | effectively. |
| investment strategy would provide steady and | | | | X. Development of a financial plan to address the |
| sustainable growth for the company in the future. The | | | | following: |
| dependence on overdrafts as a form of working | | | | Sales and Distribution This mechanism is used to get |
| capital could be eased by the Owner-manager making | | | | the products and services to customers, - i. e. the |
| arrangements with his Bankers to have a fixed term | | | | company's own sales force should be used for direct |
| loan agreement. Other sources of finance like having | | | | marketing. Alternatively, other distributors and retailers |
| business relationship with more than one bank and | | | | could be used or set-up own retail outlets. This is |
| engaging business angels should be explored. It should | | | | envisaged to boost distribution which was found to be |
| have a strategy. | | | | a problem for most SMEs. |
| The company should seek take advantage of some | | | | Pricing & discounting strategy- The current |
| of the Government schemes in existence, like | | | | practice within the business is for the Owner and Staff |
| Business Assistance Fund (BAF) and ask for financial | | | | to charge different prices to different customers |
| management consultant to assist it in the formulation | | | | based on their judgment of the client's ability to pay. |
| and implementation of strategic financial management | | | | This creates some confusion amongst some |
| plan. Following on from the above, it is imperative that | | | | customers. Whilst an actual price list is not critical, the |
| professional Managers become involved in managing | | | | general pricing structure and the rationale behind this |
| the organisation. This provides the company with the | | | | structure should be provided. Policy regarding |
| opportunity to achieve its objective of entering the | | | | discounting and price changes should be addressed as |
| wider economy and the ability to sustain its gains. | | | | well as the impact of a pricing strategy as a whole on |
| IV. Negotiations and dealings with Bankers | | | | gross profit (revenue less cost of goods sold). |
| There should be negotiations with Bankers, not only to | | | | Homestretch Venture for instance proposed to |
| discuss rates and loan maturities, but also to protect | | | | indirectly recover the charge from hairdressing |
| the personal wealth of the Owner-manager. -i. e. by | | | | services by providing free drinks to clients on very |
| persuading the bank to agree to new terms so that he | | | | busy days including Sundays when the competition is |
| no longer acts personally as a guarantor for the | | | | keen in the hairdressing business. |
| business. Also, the Owner could agree to pay a | | | | Future Marketing Activities and Related Budget This is |
| percentage point or higher interest in order to make it | | | | meant to show how the overall marketing effort will |
| possible to separate those assets which belong to him | | | | be organised and how the resources within the |
| and to the business. V. Set up appropriate | | | | business will be allocated amongst the various |
| Management Information System (MIS) | | | | marketing tools. Sales strategies should be formulated |
| The use and introduction of information technology | | | | in each market to perpetuate future growth. Eg. the |
| within the business to facilitate accurate information or | | | | setting up of agencies in other parts of the country |
| data gathering, and the keeping of business records, | | | | and extending links with suppliers and so on. This |
| could act as a powerful competitive weapon. i. e. the | | | | strategy would be a copy-cat of large retail and |
| introduction of computer hardware and relevant | | | | manufacturing firms in Ghana which have been |
| financial management software, EPOS (Electronic | | | | successful using such a strategy. Advertising, public |
| Point of Sales) machines, accounting software and so | | | | relations and promotions-This will play an important role |
| on. This should be based on financial planning and | | | | in the company's attempts to generate sales. The |
| forecast. | | | | business's intentions in this regard should be conveyed |
| VI. Developing a financial management benchmark for | | | | in concise basic terms. One way of accomplishing this |
| SME | | | | is to focus on the concept and creative content of the |
| The growth of the company, however, is to some | | | | communications campaign. For example the |
| extent hindered by the structural weaknesses inherent | | | | equipments to be used, and the vehicles to be utilised, |
| in the particular industry. These include for example, | | | | such as electronic media, print media, or direct mail. |
| fragmentation, limited distribution channels, lack of a | | | | The services of an outside agency should be explored |
| concerted effort and co-ordination and most | | | | to assist in promotion and advertising. Though the FM |
| importantly no standard financial policy. By standard | | | | stations are popular, other means must be sought to |
| financial policy, it is meant a benchmark for a financial | | | | build the corporate image of the SME. Contacts should |
| management discipline to be embedded somehow in | | | | also be made with the local media who write or |
| the small business owner-managers. For example, a | | | | broadcast information on businesses within the |
| strict code of avoidance in over trading, overstocking | | | | Community - i. e. newspapers, radio, and television. This |
| and understocking must be outlined and enforced. | | | | is believed to cut down cost but generate required |
| VII. Introduce more differentiated products and be cost | | | | sales and returns, thereby providing needed cash flow. |
| effective | | | | |