Current asset management was found to be one of the main ingredients for the growth and livelihood of small businesses in Ghana. It was found that an effective working capital policy influences the expected future returns of a small business and the associated risks. The purpose of current asset management is to have an effective working capital policy. An effective working capital policy should exhibit the following characteristics in its code: Effective equity and credit policies, control over working capital, maintenance of current assets that can be easily converted into cash, efficient management of working capital, level of liquidity risk that management is prepared. accept, the industry in which the company operates, the type of products sold and how to finance the working capital? The ability to manage and control current assets (cash, inventory (finished goods and work in process), accounts receivable (debtors)) was very vital.
Stock or inventory is the least liquid of current assets. If the shares are managed effectively, they can be converted to cash very easily. The stock was being wasted due to the fact that most of the companies could not or did not know how to manage their stock applying even the traditional “FIFO-LIFO” method, and they were paying large sums of money because they had too much stock; some of them become obsolete with the consequence of loss of cash.
It must also be said that debt collection is a very difficult task to start in Ghana due to one or all of the following:
Yo. The fact that the address system had not been developed to include citizens in a database to facilitate debt collection,
ii. The practice of “bundle and load” in which merchants with little or no capital decide to “reverse” funds from trade loans to other businesses, and sometimes the end result is losing all the money to the detriment of the creditor, which that makes the business fail. break.
By offering trade credit, businesses expose themselves to default risk, which binds financial resources, leading to an ultimate loss of cash and consequently cash flow. Effective debtor management is therefore an antidote to current good asset management practices. SMEs in Ghana often apply trade credit policy as a tactic in their strategies to attract customers. Reasons for offering business credit include increasing sales and marketing. A staggering 85% of all data analyzed (including individuals) showed that respondents did and continue to practice financial management.
In many cases, too, because no stock control policies were in place, cash was blocked and affected the company’s cash flow. The basic needs to run the business on a day-to-day basis suffered, for example, in some cases, staff salaries became difficult to pay with attendant problems.
Effective regular banking practice is another financial capability identified through the observational case study. For example, one business was operating an overdraft service and was able to negotiate with the bank in question by ensuring that the bank had someone on site to collect daily cash sales. This improved cash flow and helped reduce the interest paid to the bank. In the event that a company cannot do the same, cash sales must be paid first thing the next day.
Through the case study, a relevant source of finance was found that plays an important role in the financial capabilities of small and medium-sized enterprises in Ghana. A business’s ability to identify the right or relevant source of funding needed, such as overdraft service, short-, medium-, or long-term loans in terms of its circumstances or type of business operations, is very helpful in increasing its profits, paying less interest to the bank, and you can expect to sustain growth and indeed the company for the long term to come. The research found that those companies that meet their obligations to banks can always raise money from the bank to expand their business or face unexpected problems.
It was also found that the effective control and monitoring of financial plans is a financial capacity. It is one thing to manage finances and another to monitor and control finances. In order for finances to be managed effectively, there must be regular checks (constraints, as some describe it) and monitoring (verifying or closely observing) the financial plans by which finances (and accounting) are managed in the company. Changes and deviations could then be made in some cases to simplify the plans. For example, if it turns out from monitoring and control that market reaction will affect ordering more products, this could be delayed or stopped altogether to save cash for the business that can ultimately save the company.
Thus, by complementing their underlying strategy and knowledge, owner-managed businesses can be a force to be reckoned with in the business environment.
