#Travel Friendly Airbnb and Guest House - Vacationing in #Accra and looking for an Airbnb to stay? We Got You! Vacation rentals in Greater Accra Region Whatsapp +1 747 4779581 @Charlesfrize This is important because it relates to #AburibotanicalGardens #Senchi #TravelTours #KakumNationalPark #KwameNkrumahMemorialPark #WliWaterfalls #ElminaCastle #VisitGhana #AccraAccommodation #Africandiaspora

Small Business Advice

7 Critical Errors In Business Funding

(1) Lack of Regular Monthly Accounting. No matter the scale of your enterprise, inaccurate record management can cause numerous problems with cash flow, strategic planning, and making informed business decisions. Although every service comes with a price, bookkeeping services are remarkably affordable compared to most other expenses a company might face.

Once a bookkeeping system is established, costs typically decrease or become more economical, as there is no unnecessary effort in documenting all business activities. This single oversight often triggers a cascade of other issues and should be avoided at all costs.

(2) Lack of Cash Flow Forecasting. Inadequate record-keeping results in a lack of awareness of past activities, while the absence of a projected cash flow leads to uncertainty about future directions. When businesses fail to monitor their financial performance, they often veer off course, only to be jolted into action by an impending financial crisis that necessitates adjustments in monthly expenditures. Even with a cash flow forecast, it must be grounded in reality. A degree of prudence is essential; otherwise, it quickly loses its relevance.

(3) Insufficient Working Capital. Proper documentation won't be of much use if you lack the necessary working capital to effectively run your business. Therefore, it's crucial to develop a precise cash flow projection before launching, purchasing, or growing a business. Unfortunately, the working capital aspect is often overlooked, with the main emphasis placed on investments in capital assets. When this oversight occurs, a cash flow shortage is likely to be felt swiftly, as there aren’t enough resources to navigate through the typical sales cycles.

(4) Ineffective Payment Handling. Without sufficient working capital, accurate forecasting, and proper bookkeeping, you're likely to encounter issues with managing cash flow. This often leads to the need to delay and postpone payments that are due. This situation can be precarious. If you don't identify the root cause of the cash flow issues, putting off payments might end up worsening the problem. The main areas affected are government dues, trade liabilities, and credit card bills.

(5) Ineffective Credit Handling. Delaying payments can lead to significant negative impacts on your credit, whether the delay is brief or prolonged. Firstly, overdue credit card payments are among the most frequent ways that both companies and individuals harm their credit scores.

Secondly, bounced checks, or NSF checks, are also reported in business credit histories and serve as another kind of negative remark. Thirdly, if you procrastinate too much on a payment, a creditor might secure a judgment against you, further tarnishing your credit record.

Fourthly, when seeking new credit, being delinquent with government dues can automatically disqualify you with many lenders. The situation can deteriorate further. Every time you request credit, the inquiries are noted on your credit report.

Here are two additional issues that may arise. Firstly, numerous inquiries can negatively impact your overall credit score or rating. Secondly, creditors might be less inclined to extend credit to a business with a high number of inquiries on its credit history. If you find yourself facing temporary cash shortages, it is important to proactively communicate with your creditors, discussing the situation and negotiating repayment terms that are manageable for both parties and do not endanger your credit standing.

(6) Lack of Documented Profitability. For startups, a key priority from a funding perspective is to achieve profitability as swiftly as possible. Most financial institutions require at least one year of profitable financial records before they will consider providing loans based on the business's financial health. Until short-term profitability is established, business funding primarily relies on personal creditworthiness and individual net worth.

For established businesses, historical financial performance must demonstrate profitability to secure additional funding. The evaluation of repayment capacity depends on the net income reported for the business by an accredited, independent accountant. Often, businesses collaborate with their accountants to minimize taxes, which can inadvertently limit their borrowing capacity if the business's net income is inadequate to cover additional debt.

(7) Lack of a Clear Funding Plan. An effective funding strategy involves 1) securing the capital needed to sustain current and future business cash flows, 2) establishing a debt repayment plan that aligns with the cash flow capabilities, and 3) ensuring there are reserves for unexpected or special business requirements. In theory, this approach sounds ideal, but it often falls short in practice.

Why is this? Because acquiring financing tends to be an afterthought and occurs without prior planning. Typically, businesses seek funding only after everything else has been settled. There are numerous reasons for this, such as entrepreneurs having a stronger focus on marketing, the common belief that obtaining funding is straightforward when necessary, and the less immediate consequences of postponing financial matters compared to other priorities.

No matter the cause, lacking an effective financial strategy is undoubtedly a misstep. Yet, an effective financial strategy is unlikely to be developed if one or more of the other six errors are present. This underscores the fact that all the mistakes mentioned are interconnected, and when multiple errors occur simultaneously, the adverse outcomes can be amplified.