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Credit Awareness Nigeria

CAPACITY BUILDING/ACCESS TO FINANCE FOR WOMEN ENTREPRENEURS Committee of Women Leaders LAGOS CHAMBER OF COMMERCE 25th OCT. 2013. Credit Awareness Nigeria. Credit Awareness Nigeria. DON’T LIMIT YOURSELF. MANY PEOPLE LIMIT THEMSELVES TO WHAT THEY THINK THEY CAN DO.

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Credit Awareness Nigeria

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  1. CAPACITY BUILDING/ACCESS TO FINANCE FOR WOMEN ENTREPRENEURS Committee of Women Leaders LAGOS CHAMBER OF COMMERCE 25th OCT. 2013 Credit Awareness Nigeria

  2. Credit Awareness Nigeria DON’T LIMIT YOURSELF. MANY PEOPLE LIMIT THEMSELVES TO WHAT THEY THINK THEY CAN DO. YOU CAN GO AS FAR AS YOUR MIND LETS YOU. WHAT YOU BELIEVE, REMEMBER, YOU CAN ACHIEVE. …….Mary Kay Ash, founder Mary Kay Cosmetics

  3. CASHFLOW MANAGEMENT FOR FEMALE ENTREPRENEURS BY: NNEKA ENELI CREDIT AWARENESS Credit Awareness Nigeria

  4. POINTS OF DISCUSSION • Introduction • The Focus on Women • Spending Patterns • The need for financial literacy • Definition of Cashflow • Sources of Cashflow • Types of Cashflow • How to manage your Cashflow • A Simple Cashflow Projection

  5. INTRODUCTION • Nigeria is the most populous nation in Africa with a population size of about 162.5m. It accounts for half of West Africa’s population and over 25% of sub-sahara Africa. • Of this 162.5m, 49% are women; 80.2million girls and women. • Over half of the population (15-64) is young and active.

  6. THE FOCUS ON WOMEN Female entrepreneurs and managers appear to be instinctive CASHFLOW MANAGERS but is this ENOUGH?

  7. This is because: • They play multiple roles at home, at work, in the community, etc. • Prudence and cash management seem to be a natural part of the socialization process for the female child and woman

  8. WOMEN • Nearly 6m young men and women enter the labour market each year but only 10% are able to secure a job in the formal sector and just one third of these are women. • 1 in every 5 businesses is run by a woman but the major constraint is lack of capital and they have to rely on their savings. • 1 in every 3 employees in the non-agricultural formal sector is a woman. • Girls and women have the potential to transform Nigeria. As female entrepreneurs, women: • Contribute to economic growth • Contribute to creation of employment • Have been increasingly recognized to enhance the diversity of entrepreneurship in any economic system. • Provide avenues for female expression and self-fulfilment. • Verheul et al, 2006, Jamali, 2009, Eddleston and Powell, 2008

  9. SPENDING PATTERNS OF WOMEN Efina 2012 Gender Survey Report

  10. SPENDING PATTERNS OF WOMEN Efina 2012 Gender Survey Report

  11. In business, while instinctive cash management may be a necessary asset, it is not sufficient. • It is often affirmed that women have less financial knowledge and lower access to financial products than men • although • More commonly, women are said to be better borrowers and more likely to pay back loans than men. • HOW TRUE IS THIS???

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  13. STATISTICS • Only 36.3% of the adult population in Nigeria are included in formal financial services. • 46.3% of the adult population are formally excluded. • 17.4% save but informally. • Efina Access to Financial Services in Nigeria 2010 survey

  14. According to the finscope survey carried out by EFInAin 2010 • 53.5% of the Unbanked population are females • 78.3% of the Unbanked population live in rural areas. • 9.7% of the adult population currently have loans. • 3.8% of the adult population use microfinance services. • Further revelations • People lack information about banks • Never think about banking • Can’t read or write • Prefer dealing with cash • No proper identification

  15. THE NEED FOR WOMEN TO BE FINANCIALLY LITERATE • A business run by a woman can fail just as much as a business run by a man when cashflows are mismanaged. • Problems arising from mismanagement of funds are not gender biased so a woman needs to be on top of her game just as much as any of her male counterparts. • Women in business often face peculiar situations and even social pressures which make them especially vulnerable to poor cashflow management and its consequences. • This ranges from the more sublime (need to care for a sick relative from business proceeds to the mundane (aso-ebi for a big social event). • It is important for women to understand the impact of cashflow cycle (deficits and surpluses) on their business and to know how to manage this cycle effectively.

  16. THE NEED FOR WOMEN TO BE FINANCIALLY LITERATE • To be able to make informed financial decisions for yourselves and your families • For better management of household and personal finances • To gain confidence • For empowerment • To enable you make the right choice among an array of financial products and better access to financial services. (Consumer Protection). • To develop and properly manage entrepreneurial activities • To properly utilize programmes promoting women’s entrepreneurial activities.

  17. WHAT IS FINANCIAL LITERACY? • The combination of awareness, knowledge, skills, attitude and behaviour necessary to make sound financial decisions and ultimately achieve individual financial well-being.

  18. FURTHER CONSIDERATION FOR WOMEN • One of the targets of the Microfinance Policy for Nigeria is to eliminate gender disparity by ensuring women’s access to financial services increases by 15% annually. • VARIOUS INITIATIVES FOR WOMEN: • BOI - Financing Scheme for female entrepreneurs • AGOA (African Growth Opportunity Act) • YouWin • Goldman Sach’s 1,000 Women Initiative

  19. Credit Awareness Nigeria CASH???

  20. KEEPING YOUR EYE ON THE BALL – WHY IS CASH SO TRICKY EVEN FOR WOMEN? • Cash is Liquid. • It is fungible (so it can easily get mixed up with other things and purposes if not properly accounted for). • Cash inflows are easily misconstrued as profit. • POINT TO NOTE: More businesses are likely to fail due to lack of cash than for want of profit.

  21. NOTE! • ‘CASH IS KING’ • THE CRITICAL LIFEBLOOD OF YOUR BUSINESS • CRITICAL FOR THE SUCCESS OF ANY BUSINESS • CASH PROFIT

  22. NOTE! • The ultimate aim of running a business is to make profit. • Profit = Total Revenue - Total Cost • Net Cashflow = Total Cash Inflow – Total Cash Outflow • For your cash to grow, you must be making profit.

  23. What Is Cashflow? • Cashflow is the movement of cash in and out of your business at any given time. • It should be tracked regularly; it could be on a daily basis, weekly, monthly or quarterly. • A good cashflow is necessary to ensure a business remains liquid and is able to meet its obligations. it must be planned and managed properly.

  24. SOURCES OF CASH INFLOWS INTO YOUR BUSINESS • SALES – Receipt of proceeds from sales of your goods and services. • BANK LOAN – Receiving and drawing down on a bank loan. • INVESTORS – Receipt of fresh or additional funds from investors, donations, etc. • PROFIT PLOUGHED BACK • INTEREST ON INVESTMENTS

  25. SOURCES OF CASH OUTFLOWS FROM YOUR BUSINESS • PURCHASES – Payment for the purchase of goods (raw materials, etc.) and services. • SALARIES & WAGES – Payment of salaries and wages to your staff. • PURCHASE OF FIXED ASSETS • RENT • OPERATIONAL EXPENSES (OFFICE SUPPLIES, FUEL, etc.) • PAYMENT OF DEBTS OWED

  26. TYPES OF CASHFLOWS • 2 BASIC TYPES: • POSITIVE CASHFLOW: When the Cash inflows to your business from the various sources are more than the cash outflows from your business. • NEGATIVE CASHFLOW: This is when the cash outflows are greater than the cash coming into your business.

  27. IMPLICATIONS OF A NEGATIVE CASHFLOW??? Credit Awareness Nigeria

  28. Insolvency • Bankruptcy

  29. WHAT DO YOU DO? Credit Awareness Nigeria

  30. BASICALLY……. • PLAN! PLAN!! PLAN!!! • PROJECT! PROJECT! PROJECT! • Manage inflows so that they are faster than payments.

  31. HOW? Credit Awareness Nigeria

  32. HOW TO MANAGE YOUR CASHFLOW • Keep proper records – Petty cashbook, etc. • Imbibe the culture of safe savings, responsible borrowing. • Engage with the banking sector - Search for a supportive bank that offers services to support SMEs and open a bank account. • Increase your sales BUT • Watch your sales - sell more on C.O.D basis or with a reasonably short credit window.

  33. HOW TO MANAGE YOUR CASHFLOW 2 • Aggressively pursue, track and collect your accounts receivable (Avoid slow paying • customers) • Offer discounts to those who pay early –. • Strengthen relationships. • Collect deposit payment upon orders taken, issue invoices promptly and follow up • Closely monitor your credit sales policy and customers. Carry out credit checks on new non-cash customers

  34. HOW TO MANAGE YOUR CASHFLOW 3 • Issue monthly statements to remind customers of their outstanding payments • Always deposit cheques immediately you receive them and cash from sales before the close of the banking day. • Regularly carry out a forecast of your cashflow • Review your pricing strategy • Regularly dispose of outdated and old inventory.

  35. HOW TO MANAGE YOUR CASHFLOW 4 • Manage your accounts payable: • Negotiate credit facilities with your suppliers and use them maximally • Prepare a cashflow projection before agreeing to any suppliers’ payment plan • Be cautious with taking up suppliers’ offer of discount for early payment.

  36. HOW TO MANAGE YOUR CASHFLOW 5 • Go cashless – Use e-banking platform to make payment and aim to make it on the due date of your credit facility. • Take advantage of CBN’s Cashless Policy : • (Individual) • Deposits above N500,000.00 – 2% Charge • Withdrawals above N500,000.00 - 3% Charge • (Corporate): • Deposits above N2M – 3% Charge • Withdrawal above N2M - 5% Charge

  37. HOW TO MANAGE YOUR CASHFLOW 5 • Suppliers’ payment terms - lowest price Vs. more flexible payment terms. Which is better? • Have multiple supply sources • Prioritize your payments • Always communicate with your suppliers about the true situation of things – You need the relationship/trust

  38. HOW TO MANAGE YOUR CASHFLOW 6 • Manage your costs: • Manage and reduce your personal expenditures (travelling, aso-ebi). • Manage and reduce your operating expenses (outsource, etc.) • Consider leasing options for equipment, etc. rather than outright cash purchase. • Consider leasing options for equipment, etc. rather than outright cash purchase.

  39. HOW TO MANAGE YOUR CASHFLOW 7 • Reduce additional capital expenditures • Evaluate and review your expenses and ROI on advertisements and promos. • Only restock the fast-moving items. • Work with a shelf-life for your products – sell off goods that are staying too long on the shelf before they expire. • Try as much as possible to reduce inventory holding cost.

  40. HOW TO MANAGE YOUR CASHFLOW 8 • Be careful with purchase of fixed assets – tying down funds. • Review your inventory levels regularly. • Get a bank that is willing to support your business and that offers good services. • Consider selling off or trading-in assets that are not needed • Avoid diversion of the funds of the business to personal use. • Get more equity into the business.

  41. HOW TO MANAGE YOUR CASHFLOW 9 • Apply for a bank loan but ensure the terms are favourable. • Do your account reconciliation on a regular basis. • Prepare and review your cashflow projections regularly. • Ensure strict cash handling in the system with controls.

  42. A WORD OF ENCOURAGEMENT • Most women are afraid of figures. • Do not be afraid of the complexities of drawing up a cashflowporjection or of completing it. • The Golden Rule??? • SIMPLY, WRITE EVERYTHING DOWN!!!

  43. A Simple Cashflow Projection • Cash on hand/ Cash at Bank as at October 25, 2013 • Add: Cash from Sales, Interest on Investments, Donations, etc. • Less: Salaries & Wages, Operating Expenses, Cost of Stationery purchased, rent, etc. • Balance c/d as at 31st October, 2013

  44. In Summary • Have a roadmap for your business - develop a business plan. • Keep proper records. • Develop a good banking and savings culture and borrow responsibly. • Operate with a high level of ethics and obey regulatory and statutory requirements. • Seek expert advice/support (Auditors, Consultants, etc.)

  45. CREDIT AWARENESS: An Organisation established by SIAO IN 2008 as a result of identifying extreme gaps in the financial sector with a desired need for the underserved to have access to finance Vision To contribute to sustainable development of the Nigerian private sector and the microfinance sector and support socially and geographically balanced growthand economic development. Mission To create a major platform to support the continuous growth of Micro, Small, Medium Enterprises (MSME’s)

  46. Nneka Eneli Credit Awareness nneka.eneli@creditawarenessnigeria.com 01-4631098, 07045038048

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