Small and medium-sized enterprises (SMEs) play significant roles in most economies regarding job creation, global economic growth and development in that; they contribute about 3% of the country’s GDP according to a survey done Central Bank of Kenya (CBK). Therefore, SME development should be a high priority for all governments since by 2030, more than 500 million jobs will be needed to engross the rapidly growing workforce. Nonetheless, accessing finance and managing funds has been a significant challenge in the growth of SMEs, especially in developing countries.
The simplest way to ensure that finances in an SME are managed effectively is by understanding the essential skills required to operate a small business, such as basic accounting tasks, drafting financial statements and loan applications. Managing such tasks ensures an SME is very organized, resulting in flexible financial control and management. The business owner will thereby be able to establish a secure financial future and prevent the collapse of the enterprise in the days to come.
A majority of business owners have multiple accounts. This may include a savings account or credit card account. Therefore, it is vital to monitor spending by ensuring you know how much money you have withdrawn and spent in a whole day from each account. This prevents racking up of unnecessary bills, overspending, and misuse of finances. Keeping an eye on the spending ensures one stays on top of account balances. With the digital world we live in, this can easily be done using simple software that keeps track of accounting transactions.
Separating business funds and personal money is critical to a SME’s money management. Keeping track of deposited and withdrawn business money when you merge funds becomes an uphill task. As a result, monitoring money coming in and going out becomes complicated. Due to this mix-up, many disoriented records are birthed leading to missed growth opportunities and squandering of business finances. Therefore, it is necessary to have a separate business account to track profits easily and follow up on spending.
Setting time aside to create a budget goes a long way in ensuring funds are efficiently managed in an SME. Budgets are a great aid in setting financial goals and revenue expenses. Budgets give a clear picture of what is needed to operate a business. Knowing how much you need to spend in advance gives one an easy time when it comes to managing funds. A budget also predicts how much money your business will earn at the end of the sales. This will help you cut down on costs if the funds are lower than budgeted, thus increasing income.
To best manage small and medium business funds, always purpose to plan so you are not behind the competition, look for growth opportunities and invest in them, ensure you pay off your debts promptly, and focus on your returns on investment. ]
Kenya Climate Ventures (KCV) investments have resulted in a significant percentage of total work possibilities being developed and sustained for youth and women. By 2021, 26,672 people had access to markets and clean, affordable cooking and lighting solutions thanks to KCV’s help. KCV strives to reform market systems by supporting SMEs to provide more opportunities for youth and women. As a result, SMEs must understand the value of money management.