By Sylvester Enoghase, Lagos
The 1st National Deputy President of Association of Banks, Insurance and Financial Institutions (ASSBIFI), Comrade Oyinkansola Olasanoye (Mrs.) has stated that an aspiring entrepreneur must have a firm financial control of his business to survive the test of time
Olasanoye, in an exclusive interview with Business Editor, Sylvester Enoghase said, there are plenty of ways aspiring entrepreneurs can capitalise on business opportunities, especially with new trends popping up constantly in the country.
She said: “As an entrepreneur, it’s important that you have your personal finances in order because you can never know what may happen with your business ventures tomorrow.
“There’s no doubt about it that being a successful entrepreneur requires a lot of expertise in a lot of different areas. Arguably, one of the most important aspects to becoming a successful business owner is having your finances in order; after all, with no money, you do not have business”
According to the financial expert, an actual entrepreneur must begin to apply the needed budgeting tools that would help him get a grip of the business finances to survive the challenges that may confront the business.
She noted that budgeting is actually a familiar word, and must do, that would make the entrepreneur to succeed, adding that “not all potential entrepreneur, however understand the concept in a precise sense”.
“Budgeting can get technical, like when professional accountants are working on one, but nobody expects an entrepreneur to become an accountant before enjoying the benefit of personal budgeting. So, an entrepreneur need a simple personal budgeting that can help him plan and control his spending, track his progress and identify areas of difficulty which he need to beat into shape”, she said .
How To Identify What You Spend
Olasanoye, who argued that the entrepreneurs require a lot of expertise to best manage his business said: “As an entrepreneur, before you can knock out a personal budget, you will need to identify what you spend money on. The serious business of expenditure planning, which you are getting into, does not admit of your continuing to recycle your current spending pattern, unless it’s perfectly okay for your financial needs.
“Whatever the case, you need to track your current spending, as a starting point, and if you don’t keeps any record of your spending as your best starting point: spend the next few months recording your spending, classified you records into various expenditure categories. In that way, you can determine what you spend your money on, and the average monthly outlay in the business”, she added.
Commenting further she said: “Your budget will need to work with your income details as well as the sources and levels of income available to you. This, for most entrepreneurs, won’t prove too difficult as income sources are neither too many, especially in Nigeria where the marginal propensity to save is very low”
The Budget Objective
The labour leader, in her argument said the aim of budget objective of an entrepreneur is not planned as classification of his income sources and expenditure heads, but a planning tool, a personal finance management instrument that is needed in clear terms during business proposal.
“As an entrepreneur, ideally, you want to identify and curb waste, you want to shift spending as much as possible to priority needs, you want to stretch your income to clear any interest-bearing debts you owe, especially those at commercial rates, you should want to excise a sizeable sum to set aside as saving for investment, and you would want to provide something for known future commitments that are not due, but cannot be met out of the income of the period when they are expected to occur”, she said.
She specifically said: “as an actual entrepreneur, you would want some provision against the unknown; contingencies of life that cannot be ruled out, you want to tinker with income, where possible, to see what new streams or increases you can engineer for the raining day as the objectives you define for yourself will, understandably, colour the shape of the budget you prepare.
“Your budget in this case is taken to be for a monthly rolling timeframe, though; nothing stops you from doing a budget for one year, for instance”.
Putting Your Budget Together
According to Olasanoye, the necessary preparation done by an entrepreneur, would determine the next step for him to work out a good budget to drive his business
She said the first step is for the entrepreneur to tabulate his income streams, knowing that only the net figures are useful to drive the business.
“As an entrepreneur, your gross pay, for instance, is not fully available to you since tax and other statutory deductions will be netted off. The total income gives the monthly sum that is available for spending and any other purpose”, she said.
She emphasised that other necessary steps for the entrepreneur must take to succeed includes: evaluating the current spending figure on each item, taking into account what it grosses to in one year, and decide what he realistically think he will like to have that figure at.
“As an entrepreneur, you should endeavour to slice off whatever you can, provided you remain realistic, knowing that the true test of success is in operating within the budget.
“Never forget to include lines for provisions you want to make against special non-recurrent items that will occur at future dates which you need to begin to set money aside for.
“You can’t leave out contingencies, because they are a part of life. Make a reasonable provision. Since it’s not an expenditure head, it’s no basis to increase any particular expenditure and will be creamed off to saving if unutilized”, she said.
On budget implementation, she said: “having set up your budget, the next challenge is to implement it faithfully. You didn’t take all the trouble for nothing, so it is expected that you will strive to operate within your budget.
“Monitoring your budget requires tracking your spending since you need to know if, and when you are overshooting. A simple statement of variance analysis will help you see how you have performed. That statement simply compares the actual figures of income and expenditure with the budget figures you have set”.
“Where any significant differences have occurred, you will need to evaluate the reasons as a basis for improving your budgeting or the expenditure control process”, she however said
Source : Independent