Over the first 5 sessions, startups participating in FAIP 2021 have been equipped with skills on how to start and operate a sustainable business model. In week 6, we dived into the real business of figuring out the numbers in their startups; and training them on how to develop formal business financial management systems.
The goal for Week 6 was to ensure that the founders appreciate the need for formal financial systems and processes as a prerequisite for business growth; as well as support them in developing effective financial management structures within their startups.
In this session, we explored the benefits of formal financial planning and management including boosting transparency and accountability which builds trust & confidence among all stakeholders. In addition, professional financial planning and management guarantees business continuity and security, which helps your startup to meet its financial obligations and achieve its growth objectives.
We further dived into the key elements of a formal financial system in a business including budgeting, book keeping, internal controls and financial reporting. Here the founders were taken through the whole accounting cycle starting with developing budgets for their start-ups, how they record their daily business transactions and how to finally generate financial reports to evaluate their performance and for decision making.
Besides the normal accounting systems and processes, the startups were further trained on all the statutory deductions and taxes they need to be aware of and how to implement them for compliance purposes. The taxes explored during the session include Value Added Tax (VAT), Pay As You Earn (PAYE) and the Income Tax. We also covered basic statutory deductions that each startup need to remit to the relevant government agencies including National Social Security Fund (NSSF) and the National Hospital Insurance Fund (NHIF).
At the end of the session in Week 6, the startups had a clear understanding of how to streamline their financial systems and process; as well as how to structure their cashflows in an effective manner, in order to be able to meet their short-term and long-term financial obligations as and when they fall due. To help them implement the lessons learnt, the founders were given a cashflow management tool to help them in tracking their cash inflows and outflows in a structured format and on a regular basis.
We also gave the founders a financial management health check toolkit for them to assess the health of their financial management within their startups. The toolkit assesses the health of six main elements in financial management in a business including: financial planning and budgeting, basic accounting system, financial reporting, internal controls, working capital management and staffing. The outputs of the assessment are customized recommendations on areas of improvements for each startup in order to strength their financial planning and management.
Financial planning and management is a continuous process in any business; and it gets more complicated as the business grows. With this understanding in mind, we are progressively supporting startups participating in FAIP 2021 in developing effective financial systems and processes that are suited for their growth stages; but also adaptable to new functionalities as they scale their businesses.