In a study conducted by Pradeep Brijlal, Samuel Enow and Eslyn B.H. Isaacs of the University of the Western Cape, South Africa, (titled The use of financial management practices by small, medium and micro enterprises) research showed that the majority of SME directors and owners lacked the appropriate level of interpretation skills and the fundamental awareness of how to strategically use information from financial statements.
Compiling your financial information and seeing net profits is the first of many steps. One of the outcomes of the research was to urge policymakers, business support organizations, banks and academic institutions to focus on educating SMEs in the dire need to get assistance from financial advisory companies and recruitment agencies. This would drive better and more effective financial management as well as greatly reduce the risk of business failure in Lagos, Nigeria, and across the globe.
Why Focus Financial Advisory Company Services On SMMEs?
The OECD (Organisation for Economic Cooperation and Development) shared global statistics which show that SMEs and entrepreneurs are recognized worldwide as key economic factors which drive vital net job creation, productivity and economic growth. Their dynamism, innovation and flexibility are natural ‘kick-start’ tools for economic prosperity in a country “and alleviation of poverty” (Berry et al., 2002). Those are profound statements which should make entrepreneurs (which includes SMEs) sit up and take notice of the importance of their role in the economy.
The sad truth is that the failure rate is very high amongst SMEs, usually within 24 months. Research has shown that the contributing failure factors were lack of education, lack of training, lack of management skills and a lack of access to financial management competencies or assistance.
It is an established fact that financial management skills and advice are needed to avoid failure in business. It is a typical characteristic of SMEs versus what you find in large businesses. In the latter, you will find specialists employed and modern technology, providing big data that allows agile strategies.
What Does The SME Owner Need To Adjust?
Anyone who owns and manages an SME usually has a visionary personality. This makes for good ideas, flexibility in decision-making but a lack, or indeed a disinterest, in draining business and HR. management. Some business owners have thrown in the towel because they have found HR. management too tasking. This would not happen if a recruitment company was engaged to manage that portfolio.
The general management of the business can be affected by delayed decision making – especially financial decisions. This is largelydue to unstructured bookkeeping and a lack of properly presented accounting information.
A lot of business owners try to stretch themselves across all functions which makes them lose focus of what is truly critical to the business. The latter is not due to lack of skills in some areas but because they spread themselves too thinly. No one can effectively attend to marketing, human resource management, operations, public relations and financial management and excel in all.
The listed areas are all important but financial management is very critical to the growth and profitability of the business. Financial management affects:
- The selection, implementation (heavy workload) and management of an appropriate accounting system.
- Collating and preparing strategic financial information to facilitate agile decision-making purposes.
- The company’s attractiveness to financial institutions or VCs.
- Projections of future performance and strategies around this.
ALL research confirms that top quality financial management practices will hugely affect the growth of SMEs and the surrounding economy.
Are you on top of your game with financial management? Do you get the best financial information out of your finance systems? Do you know how to strategically use it to redirect the business short, medium and long term?
If you have answered no to any of these questions contact Kennedia Consulting today for a financial advisory companies in Lagos, Nigeria, and start growing your business. With our recruitment agency division in Lagos, Nigeria, we take the complexity of H.R. off your hands so you can focus on the big numbers and the growth.
We are your go-to company for driving growth from strong, stable bases. Should you have any questions about the above and would like to make an appointment.