Current asset management was found to be one of the main ingredients for the growth and sustenance of small businesses in Ghana. An effective working capital policy was found to influence 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 must exhibit the following characteristics in its code: Effective share 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 working capital? The ability to manage and control current assets (cash, inventories (finished goods and work in process), accounts receivable (debtors)) was very vital.
Stock or inventory is the least liquid of current assets. If shares are managed effectively, they can be converted into cash very easily. Stock was being wasted due to the fact that most companies couldn’t or didn’t know how to manage their stock by applying even the traditional “FIFO-LIFO” method, and were paying large sums of money because they had too much stock; some of them become obsolete with the consequence of losing cash.
It should 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 “plenty and load” practice in which merchants with little or no capital decide to “reverse” trade credit funds to other businesses, and sometimes the end result is to lose all the money to the detriment of the creditor, which which causes the business to fail. break.
By offering trade credit, companies expose themselves to default risk, which ties up financial resources, leading to a final loss of cash and consequently cash flow. SMEs in Ghana often apply trade credit policy as a tactic in their strategies to attract clients. Reasons for offering business credit include increasing sales and marketing. A staggering 85% of all data analyzed (including individuals) showed that respondents practiced and continue to practice financial management.
In many cases, too, because stock control policies were not in place, cash was blocked and affected the company’s cash flow. Basic necessities 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 company was operating an overdraft service and was able to negotiate with the bank in question by ensuring that the bank had someone on the premises to collect daily cash sales. This improved cash flow and helped reduce interest paid to the bank. In the event that a company cannot do the same, cash sales must be paid for 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 company’s ability to identify the appropriate or relevant funding source needed, such as overdraft facility, 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 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 (restrictions, as some describe) and monitoring (verifying or closely watching) financial plans by which finances (and accounting) are managed in the business. Changes and deviations could then be made in some cases to simplify the plans. For example, if in monitoring and control it turns out that the reaction of the market will affect the ordering of more products, this could be delayed or stopped altogether to save cash for the business which, in the long run, can save the company.
Therefore, by complementing their underlying strategy and knowledge, owner-managed businesses can be a force to be reckoned with in the business environment.