As we are approaching the festive season, managing our finances can sometimes become very difficult. In this column I will give you a few guidelines about how you can avoid common challenges when managing your personal and business finances.
First keep your personal and business finances separate. One of the biggest mistakes most entrepreneurs make is using their personal account as a business account. If you adopt this style, you will be unable to keep track of the business and its profitability, especially when you use debt to fund it. Not having a clear understanding of your profits will make it very difficult to actually increase them.
You must ensure that you have a plan. You need to craft a clear and sound financial plan and check against facts on a monthly basis. This will help you to rectify problems as they occur.
Think about your personal budget and estimate roughly how much revenue you expect to bring in this festive season and also estimate your expenses.
There are a lot of self-help books and software on business planning. If all fails, it is advisable that you use the services of a professional accountant.
Another critical point to look at is reviewing your monthly plan. If you make a conscious effort to draw up a strategic plan, do not leave it to gather dust in a file. Ensure that you look at it now and then and make changes as required by your circumstances.
Think before you spend. When making expenses in your business, always make sure that your sales and marketing activities are accounted for. Make an evaluation of increased earnings that you expect to bring in and compare these with the costs before you hastily make a purchase.
One lesson you need to learn as a great citizen of this country is to do away with personal pride. Asking for help from your neighbour does not take away anything from you, but can only make you a much better and stronger Namibian.
On a personal and business level most of us suffer from the fear of getting help. Most businesses are understaffed. Despite this, we neglect the use of external expertise and services.
If you really want to develop and expand your business it is high time that you spent time on developing the business and not devote most of your time filing or driving around. Start with small things such as mastering a new accounting package.
It is important that you allocate an amount to yourself so that your financial and personal objectives are attainable. Each month that your business meets the required target, pay yourself a full amount.
When you miss your target, remember to reduce your pay accordingly, but not to the extent where you cannot meet commitments. For example, if you have allocated N$3,500 for entertainment in your personal budget, you can surely cut back on that. During the months when you exceed the target you can pay yourself a bonus. If you reward yourself a monthly salary, it gives you a very strong incentive to keep your business profitable.
Owning an enterprise can be profitable but success does not come cheap. Use all resources and tools at your disposal and ensure that you use your talent and skills in the right areas.
By Dr Wilfred Isak April
• Dr Wilfred Isak April holds a PhD (Entrepreneurship). He currently lectures Entrepreneurship and Principles of Management at the University of Namibia.