Business Manual - Enjoy

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Welcome to the Zimbabwe Business Manual a simple document that seeks to guide the layman through the business maze. The business manual provides very basic guidelines on setting up a business in Zimbabwe.

 

 

Special thanks to Mr. Brian Mudumi of the Zim China Youth Forum, for his skills and services towards the compilation of this Business Manual. Special thanks to various Bishops and pastors for the prayers and encouragement. Special thanks to Mufaro Ndirayire the chief of staff. To one of the most practical financial engineers Cde. D. N. Chiwara the man who will not rest until Africa is empowered, thank you very much my brother. Farai Diana Mapokotera, Abigail Maketani , Linda K. Sibanyoni, C. Madziyauswa, Ntokozo Msipha of Dashboard Inc and Zibusiso Mbambo , thank you all and finally Diana Samkange special mention to you maNgwenya.

Register and be part of our business classes send an email to fidelfengu@gmail.com or via whatsapp +253719584327

 

Kind regards

Fidelis Fengu

Author Zimbabwe Business Manual 101

 

 

 

The Zimbabwe Business Manual 101

Hie there dear reader

Do you feel the need to set up a business in Zimbabwe and create an income generating project that will help you achieve some of your desired financial goals? This is not a motivational book or a how to get rich quick manual .The Zimbabwe Business Manual seeks to offer practical steps that can be followed to start up a business in Zimbabwe.

Through this manual you will learn how to register a business, how to raise capital to fund your business idea and make it a viable enterprise. The manual will also help prepare you mentally and emotionally for the journey of entrepreneurship in Zimbabwe. As it is not an easy task, yet the rewards are worth the hard work and time invested into making your business ventures a success.

Sibusiso Media a Private Business Corporation put this manual together to help every reader with the vital information on business in Zimbabwe which is not readily available. We realised that a lot of individuals are losing money to consultants who over charge for very simple services and information.

It is our hope that this manual will help you in your journey to a better financial life and a profitable business. Thank you for taking the time out to read through this manual, and we pray that God grants you favour and mercy to fulfil the financial desires of your heart.

Moving on to chapter 1, let business begin.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

In the Beginning – starting a business: the basics

Statistics say there is a lot of unemployment in Zimbabwe and yet reality has proven that we have a large number of entrepreneurs in Zimbabwe. While many might be unemployed, everyone is doing something to survive. The art of doing something to survive (kiya-kiya) is the epitome of being a Zimbabwean; it is also a vital skill for entrepreneurship. Entrepreneurship in our view is a Biblical principle which began in the Garden of Eden when God said " be fruitful and multiply, conquer the earth and subdue it and have dominion". Entrepreneurship in modern terms is simply finding a cost-effective and profitable way of solving the world's problems.

This manual seeks to help you turn your small venture into a formidable business that can employ others, pay tax and reward you the owner more than you could have imagined. This manual will help those who have no idea what to do to stretch their dollar. If you feel the need to improve your financial life, or the need to provide solutions that might change the life of those around you, then entrepreneurship is the place and activity for you. Entrepreneurship is not just about making profits, but it is also about improving the lives of people through profitably meeting a need. This manual is not a get rich quick guide.

The manual will help you come up with a profitable business idea, register a suitable form of business , source capital for your business and start operating your business. You might call it Zimbabwe's business manual for dummies or as we like to call Business 101.

Before you dive into starting a business there are a few serious qiestions you need to ask yourself in order to create a profitable business. The trend in Zimbabwe is that you do what you see your neighbour doing. This is a horrible trend to follow as it has created unstructured, unlicenced and disorganized businesses that short change the owner, the community and the nation at large. The prevailing breed of entrepreneurship in Zimbabwe is merely disorganized vending on steriods and it will not build a fortune for the owners or those employed in vending. Zimbabwe needs a new breed of entrepreneurs, a breed that has formal business systems, a breed that pays tax and creates employment for others while solving problems in our communities. This is truthful entrepreneurship that built the larger economies such as China, USA, Germany etc. Entrepreneurs are the bavkbone and engine of every vibrant economy. Entrepreneurship is sustainable and it creates wealth for generations to come and that is why we should be seriously engaged in structured entrepreneurship.

Is Entrepreneurship For You?

Just like the body has many parts with different functions, we cannot all become entrepreneurs, as much as we all cannot be president of this country. The business landscape in Zimbabwe is very dynamic and requires a mental and emotional fortitude that is found only in champions and conquerors.

When answering the question “is entrepreneurship for you”? You will need to be very honest with yourself and understand the road ahead in its purest form and a lot of introspection will help prepare you for the journey. There is no way to eliminate all the risks associated with starting a small business. However, you can improve your chances of success with good planning and preparation. A good starting place is to evaluate your strengths and weaknesses as the owner and manager of a small business.

 

 

 

 

 

Do you want to run a business?

1. Are you a self-starter? It will be up to you, not someone else telling you to develop projects, organize your time and follow through on details.

2. How well do you get along with different personalities? Business owners need to develop working relationships with a variety of people including customers, vendors, staff, bankers and professionals such as lawyers, accountants or consultants. Can you deal with a demanding client, an unreliable vendor or an angry staff member in the best interest of your business?

3. How good are you at making decisions? Small business owners are required to make decisions constantly, quickly, under pressure, and independently.

4. Do you have the physical and emotional strength to run a business? Business ownership can be challenging, fun and exciting. But it's also a lot of work. Can you face 12-hour work days, six or seven days a week?

5. How well do you plan and organize? Research indicates that many business failures could have been avoided through better planning. Good organization of financials, inventory, schedules and production can help avoid many pitfalls.

6. Is your drive strong enough to maintain your motivation? Running a business can wear you down. Some business owners feel burnt out by having to shoulder all the responsibility on their shoulders. Strong motivation can make the business succeed and will help you survive slowdowns as well as periods of burnout.

7. How will the business affect your family? The first few years of business start-up can be hard on family life. The strain of an unsupportive spouse may be hard to balance against the demands of starting a business. There also may be financial difficulties until the business becomes profitable, which could take months or years. You may have to adjust to a lower standard of living or put family assets at risk.

8. How disciplined are you? Starting a business requires a lot of discipline, to ensure that you carry the business through the start up phase as it is the most challenging and demanding phase of the business.

9. How well do you understand your community? Your clients are largely going to come from the community you are in , how well do you understand the needs of the community you seek to service .

10. How well do you understand Zimbabwe? Zimbabwe is a country with a unique way of doing business, sometimes people do not pay , and many a time some will try to take advantage of you and your business, how well do you understand some of the things that happen in Zimbabwe and have a direct bearing on your business and its profitability.

These are some of the few questions that we came up with to help you prepare for the exciting challenges that you might have to face in your quest to create a viable business in Zimbabwe.

 

On the Upside

It's true; there are a lot of reasons not to start your own business. However, for the right person, the advantages of business ownership far outweigh the risks; a few of the advantages are listed below.

 

 

 

• You get to be your own boss

• Hard work and long hours directly benefit you, rather than increasing profits for someone else.

• Earning and growth potentials are far less limited

• A new venture is exciting

• Running a business will provide endless variety, challenge, and opportunity to learn

• Servicing a need comes with great rewards as you see smiling customers and

• Entrepreneurship creates wealth for generations to come

• Entrepreneurship gives you an ever ending pension in case you decide to retire

• Entrepreneurship gives you freedom to be the best you want to be

• Well, let’s admit it PROFITS ARE BETTER THAN WAGES.

Entrepreneurship requires more than just vending skills. Entrepreneurship demands that you create a sustainable business system that can grow into a giant. TM shops are a good example of entrepreneurship. Thomas Meikles the owner and founder of TM created a business that has lived on longer than him . This leads us to the next topic

 

 

How to Start a Small Business

The most important part of starting a small business is asking : WHAT PROBLEMS EXIST IN MY COMMUNITY. Every problem is a business opportunity for the entrepreneur. The moment you come up with a profitable solution to a problem you have found a profitable business. If you want to have a million dollars then solve a billion dollar problem. A commuter omnibus is a solution to a transport problem and many have made a fortune from solving a transport problem in their areas.

When you have identified a problem and a profitable solution you can now start and manage abusiness. Starting and managing a business takes motivation, desire and talent. It also takes research and planning. Like a chess game, success in small business starts with decisive and correct opening moves. Although initial mistakes will not kill your business, it takes skill, discipline and hard work to fix them. Entrepreneurs are not afraid of failing or making mistakes.

To increase your chance for success, take the time up front to explore and evaluate your business and personal goals. Then use this information to build a comprehensive and well thought out business plan that will help you reach these goals. The process of developing a business plan will help you think through some important issues that you may not have considered yet. Your plan will become a valuable tool as you try to raise money for your business. It should also provide milestones to keep track of your success.

Getting Started

Before starting out, list your reasons for wanting to go into business. Some of the most common reasons for starting a business are:

• You want to be your own boss

• You want financial independence

• You want creative freedom and

• You want to fully use your skills and knowledge.

The most profitable reason is that you have identified a problem and created a solution that people will pay you for your solution.

 

 

 

 

Choosing the Type of Business?

Next you need to determine what business is "right for you." Ask yourself these questions:

• What do I like to do with my time?

• What technical skills have I learned or developed?

• What do others say I am good at?

• How much time do I have to run a successful business?

• Do I have any hobbies or interests that are marketable?

• Use the answers to those questions to then guide you to asking yourself how your answers can help solve or meet a need in the community.

What Niche Will Your Business Fill?

Finding a Niche /Opportunity

A market in its entirety is too broad in scope for any but the largest companies to tackle successfully. The best strategy for a smaller business is to divide demand into manageable market niches, or areas of special focus. Small operations can then offer specialized goods and services attractive to a specific group of prospective buyers. There are undoubtedly some particular products or services you are especially suited to provide. Study the market carefully and you will find opportunities.

While researching your own company's niche, consider the results of your market survey and the areas in which your competitors already have strong businesses. Put this information into a table or a graph to show where an opening might be for your product or service. Try to find the right combination of products, services, quality, and price that will ensure the least direct competition. Unfortunately, there is no universally effective way to make these comparisons. Not only will the desired attributes vary from industry to industry, but it also takes imagination, which cannot be learned from a book.

A well-designed database can help you sort through your market information and reveal particular segments you might not see otherwise. For example, do customers in a certain geographic area tend to purchase products that combine high quality and high price more frequently? Do your individual clients take advantage of your customer service more often than large groups from hotels? If so, consider focusing on being a local provider of high quality goods and services, or a service-oriented company that pays extra attention to individuals. If you do target a new niche market, make sure that this niche does not conflict with your overall business plan. For example, a small tour guide shop that focuses on individual clients go after the market for cruise ship tourists. Ka niche ndo ka gap kako wega. Here are some questions to help you find your niche

• Is my idea practical and will it fill a need or solve a problem

• What is my competition?

• What is my business advantage over existing firms?

• Can I deliver a better quality service?

 

• Can I create a demand for your business?

Pre-Business Checklist

• What business am I interested in starting?

• What services or products will I sell?

• Where will I be located?

• What skills and experience do I bring to the business?

• What will be my legal structure?

• What will I name my business?

• What equipment or supplies will I need?

• What insurance coverage will be needed?

• What financing will I need?

• What are my resources?

• How will I compensate myself?

 

These are important questions that must be answered realistically bearing in mind that we are in Zimbabwe . An entrepreneur must be as honest, as realistic and as practical as possible in their thought process. This helps prepare you and your business for the jungle that is called reality.

Your answers will help you create a focused, well researched business plan that should serve as a blueprint. It should detail how the business will be operated, managed and capitalized.

The planning phase is an important phase for the entrepreneur. This phase is like drawing a plan for the house you want to build, it is also like the phase when you are attracted to a girl and getting to know her and observe her before you ask her out or commit to her. This leads to the next topic the business plan.

Here are tips to writing a good business plan

 

 

 

 

 

 

BUSINESS PLANS

Imagine trying to go to Gokwe Nembudziya and you have no idea where that is, how do you get to a place you don’t know without a map or direction? A business plan is like the map to your success destination.

A business plan precisely defines your business, identifies your goals, and serves as your firm's resume. The basic components include a current and pro forma balance sheet, an income statement, and a cash flow analysis. It helps you know where to put your resources, deal with problems you don’t expect, and make good business decisions. Because it provides specific and organized information about your company and how you will repay borrowed money, a good business plan is a crucial part of any loan application. Additionally, it informs sales personnel, suppliers, and others about your operations and goals. Much depends on it: outside funding, credit from suppliers, management of your operation and finances, promotion and marketing of your business, and achievement of your goals and objectives.

Despite the critical importance of a business plan, many entrepreneurs put off preparing a written document as long as they can. They argue that their marketplace changes too fast for a business plan to be useful or that they just don't have enough time. But just as a builder won't begin construction without a blueprint, eager business owners shouldn't rush into new ventures without a business plan.

Four Core Questions

Before you can write your business plan you need to know:

What service or product does your business provide and what needs does it fill, vakomana call it “gap”, gap rako nderipi pa town?

Who are the potential customers for your product or service and why will they purchase it from you?

How will you reach your potential customers?

Where will you get the financial resources to start your business?

Business Plan Outline

The following outline of a typical business plan can serve as a guide. You can adapt it to your specific business. Breaking down the plan into several components helps make drafting it a more manageable task.

 

 

Introduction

Marketing

Financial Management

Operations

Concluding Statement

Introduction

Give a detailed description of the business and its goals.

Discuss the ownership of the business and the legal structure.

List the skills and experience you bring to the business.

Discuss the advantages you and your business have over your competitors.

Marketing

Discuss the products/services offered.

Identify the customer demand for your product/service.

Identify your market, its size and locations.

Explain how your product/service will be advertised and marketed.

Explain the pricing strategy.

 

 

 

Financial Management

Explain your source and the amount of initial equity capital.

Develop a monthly operating budget for the first year.

Develop an expected return on investment and monthly cash flow for the first year.

Provide projected income statements and balance sheets for a two-year period.

Discuss your break-even point.

Explain your personal balance sheet and method of compensation.

Discuss who will maintain your accounting records and how they will be kept.

Provide "what if" statements that address ways to solve to any problem that may develop.

 

Operations

Explain how the business will be managed on a day-to-day basis.

Discuss hiring and personnel procedures.

Discuss insurance, lease or rent agreements, and issues that apply to your business.

Account for the equipment necessary to produce your products or services.

Account for production and delivery of products and services.

 

Concluding Statement

Summarize your business goals and objectives and express your commitment to the success of your business.

Once you have completed your business plan, review it with a friend or business associate. When you feel comfortable with the content and structure make an appointment to review and discuss it with your lender. The business plan is flexible document that should change as your business grows.

Using the Plan

Three purposes of a business plan:

Communication Tool

Management Tool

Planning Tool

Communication tool

The Business Plan is used to attract investment capital, secure loans, convince workers to hire on, and assist in attracting strategic business partners. The development of a comprehensive business plan shows whether or not a business has the potential to make a profit. It requires a realistic look at almost every phase of business and allows you to show that you have worked out all the problems and decided on potential alternatives before actually launching your business.

Management Tool

The business plan helps you track, monitor and evaluate your progress. The business plan is a living document that you will modify as you gain knowledge and experience. By using your business plan to establish timelines and milestones, you can gauge your progress and compare your projections to actual accomplishments.

Planning Tool

The business plan helps you see where you want to go in the future and the steps you need to take to get there. It also makes you put down all of your ideas for your business and all of the different areas you need to work, so you know what to do right now. Having finished the idea , and having created the plan we now need to look into registering the business to give it a legal order and life.

 

 

 

Registration

Now that we have thought through the idea and what we want to do to profitably solve problems we need to find out the type of vehicle we need to deliver our solution. This vehicle becomes the legal entity that will execute your plan and help you realise your dream of financial freedom.

There are several types of business organizations and it is important to register under the most relevant that allows you to function legally and carry out your plan with less legal hustles. The next topic explores the types of businesses that you can register as.

Types of Business Organizations

When organizing a new business, one of the most important decisions to be made is choosing the structure of a business. Factors influencing your decision about your business organization include:

 

 

 

 

• Legal restrictions

• Liabilities assumed

• Type of business operation

• Earnings distribution

• Capital needs

• Number of employees

• Tax advantages or disadvantages

• Length of business operation

• Number of directors

• Budget for registration

Zimbabwe still has an inhibitive framework that makes it slightly complicated for entrepreneurs to register and operate businesses. The paperwork and process at the registrar of companies' office require patience and at times an agent is best placed to help with registration. Entrepreneurs are not scared or derailed by processes because they focus on the end game. The next topic by right should be the most exhaustive of all , and we will try to do justice and unpack it to the best of our ability.

 

 

 

TYPES OF BUSINESSES

It is important to understand the types of businesses so that you know how to register your business. Should it be a co-operative, a private business Corporation , Private Limited Company or just pasi pemuti enterprises.

How you register your business will have a bearing on what you can do with your business,and how you will expand your vision.

• Sole Proprietorship (Private Business Corporation) .This is the easiest and least costly way of starting a business. A sole proprietorship can be formed by finding a location and opening the door for business. There is a fee that is paid to search and obtain a business name, name registration and other necessary licenses .Company Registry fees for starting the business will be less than the other business forms because less preparation of documents is required. This business can have 1 director though its limited to one line of business. A private business corporation is the easiest form of company registration though faced with several restrictions. It gives you a legal platform to begin business and will allow you to expand as the business grows.

• Partnership (Private Limited) .There are several types of partnerships. The two most common types are general and limited partnerships. A general partnership can be formed simply by an oral agreement between two or more persons, but a legal partnership agreement drawn up by an attorney is highly recommended. Legal fees for drawing up a partnership agreement are higher than those for a sole proprietorship, but may be lower than incorporating. A partnership agreement could be helpful in solving any disputes. However, partners are responsible for the other partner's business actions, as well as their own. A Partnership Agreement should include the following:

  • Type of business

  • Amount of equity invested by each partner

  • Division of profit or loss

  • Partner compensation

  • Distribution of assets on dissolution

  • Duration of partnership

  • Provisions for changes or dissolving the partnership

  • Dispute settlement clause

  • Restrictions of authority and expenditures

 

• Corporation A business may incorporate without an attorney, but legal advice is highly recommended. The corporate structure is usually the most complex and more costly to organize than the other two business formations. Control depends on stock ownership. Persons with the largest stock ownership, not the total number of shareholders, control the corporation. With control of stock shares or 51 percent of stock, a person or group is able to make policy decisions. Control is exercised through regular board of directors' meetings and annual stockholders' meetings.

The manual will not touch on co-operatives or associations as these are a complex organ and are not regulated under the Companies Act of Zimbabwe. That being said , a lot of would be business owners lose heart at this stage of registration , there are several consultants who claim to register companies and charge too much money , which then kills the entrepreneur’s dream. As an entrepreneur you need to be street smart and understand processes and procedures to ensure that you are not fleeced of your money by other entrepreneurs.

As the Zimbabwe Business Manual we have a company that is well organised and affordable to register your company and serve as your accountants, and company secretaries. This company is able to advise and refer you to all the relevant places regarding company registration and regulation. Also understand that there are city licences that are necessary depending on where the business is operating from and what line the business is involved in and these are variables that cannot be expounded in a single chapter. We therefore recommend consulting the following:

HARARE CONTACT : UNIGLOBE ZIMBABWE P/L

Mr. E. Nyakabau , 7th Floor Throgmorton House Cnr. S. Machel Ave. And J. Nyerere in Harare

Tel : (+263 4) 751 714 / 756 730 or cell : 0773440174 or email: edie@uniglobe.co.zw

www.uniglobe.co.zw

Uniglobe Zimbabwe specialises in Company Formations , Registrations, Accounting Services, Taxation, Auditing .

BULAWAYO CONTACT: RATIDZO MAKONI

Ratidzo is a private Finance and Accounting consultant who also does cashflows, and company registration, she is highly educated and honest young woman that we highly recommend for start-ups in Bulawayo

TEL: 0772872949 OR Email: ratimakoni@gmail.com

 

 

Once your business is registered you are allowed to and can source start up capital. Properly registered and constituted companies can attract and source capital which is vital to operations and the functionality of the business. Investors and financiers tend to find a bit of comfort in investing in a registered entity versus an individual with just an idea and a dream yet without any legal registration. The next topic will help you raise capital or finance for your business.

FINANCING YOUR BUSINESS

Financing Your Business Start up

Before we get into this topic , a number of people claim that muZimbabwe hamuna mari, imi , Zimbabwe is a $4billion economy , meaning kuti pane $4 billion in value be it in cash or assets ikutenderera mu Zimbabwe moti hamuna mari imi ka.......On a serious note there is always enough money for a profitable idea. No sane banker or investor will miss an opportunity to invest in a profitable and sustainable business. The important thing is to get your ducks in a row and you will be forever bankable.

Allow me to recommend a financial partner, there are some banks that take clients seriously, they care about individuals and they like to build a long term relationship with their clients. The banks I am about to recommend went through a tough time just like the Zimbabwean economy and they managed to come up.The Banks recently met the operating requiremnets from the RBZ. These banks are applauded for their pro people innitives. We hereby recommend business startups to utilize the METBANK Business startup initiatives.

CONTACTS: E-mail: info@metbank.co.zw, www.metbank.co.zw Tel: (04) 773401/ 7734506/774964/777256

Metbank has interesting products and services for the entrepreneur, they have facilities to help you buy your own stand , and they have business facility that they call Agency banking. We would like to recommend that entrepreneurs try registering for the METBANK Agency banking program. It has very good opportunities for business persons.

POSB is a pro poor and pro people bank that has accessible banking products for entrepreneurs. The advantage of POSB is that it is a nationwide bank and is easily accessible at community level. Contacts (0242) 252595/6; 0732200888; Toll-Free - 08004271

 

 

 

Empower Bank is a newly established banking institution that specializes in banking products for the entrepreneur with a deliberate bias towards young people. www.empowerbank.co.zw for more information or visit the nearest ministry of youth office:  Contacts. Branch: Tendeseka Park, Block 4, First Floor Samora Machel Avenue, Harare. Tel: +263 242 709 550 - 709 555. Email: info@empowerbank.co.zw.

The Women's bank is another powerful institution that focuses on helping female entrepreneurs. www.womensbank.co.zw for more information or visit the nearest ministry of women's office in your area Contacts - (0242) 252595/6; 0732200888; Toll-Free - 08004271

One key to a successful business start-up and growth is your ability to obtain and secure appropriate financing. Raising capital is the most basic of all business activities. But, as many new entrepreneurs quickly discover, raising capital may not be easy; in fact, it can be a complex and frustrating process. However, if you are informed and have planned effectively, raising money for your business will not be a painful experience.

This information summary focuses on ways a small business can raise money and explains how to prepare a loan proposal.

Finding the Money You Need

There are several sources to consider when looking for financing. It is important to explore all of your options before making a decision.

• Personal savings: The primary source of capital for most new businesses comes from savings and other forms of personal resources. While credit cards are often used to finance business needs, there may be better options available, even for very small loans.

• Friends and relatives: Many entrepreneurs look to private sources such as friends and family when starting out in a business venture. Often, money is loaned interest free or at a low interest rate, which can be beneficial when getting started.

• Banks and credit unions: The most common source of funding, banks and credit unions, will provide a loan if you can show that your business proposal is sound.

• Venture capital firms: These firms help expanding companies grow in exchange for equity or partial ownership.

Additional Sources of Capital

• Credit Cards

• Customer Financing

• Employee Stock Ownership (ESOP)

• Factoring Accounts Receivables

• Home Equity Loans

• Mergers and Acquisitions

• Purchase Order Financing

• Strategic Partnering

Borrowing Money

It is often said that small business people have a difficult time borrowing money. This is not necessarily true. Banks make money by lending money. However, the inexperience of many small business owners in financial matters often prompts banks to deny loan requests. Requesting a loan when you are not properly prepared sends a signal to your lender. That message is: High Risk! To be successful in getting a loan, you must be prepared and organized. You must know exactly how much money you need, why you need it, and how you will pay it back. You must be able to convince your lender that you are a good credit risk.

 

Types of Business Loans

Terms of loans may vary from lender to lender, but there are two basic types of loans: short-term and long-term. Generally, a short-term loan has a maturity of up to one year. These include working capital loans, accounts receivable loans and lines of credit.

Long-term loans have maturities greater than one year but usually less than seven years. Real estate and equipment loans may have maturities of up to 25 years. Long-term loans are used for major business expenses such as purchasing real estate and facilities, construction, durable equipment, furniture and fixtures, vehicles, etc.

 

 

 

 

 

ALTERNATIVE FINANCIERS

Allow us to recommend another business financier, there is a company called VANTAGE HOLDINGS, they own VANTAGE MICROFINANCE AND CREDIT COMPANY

VANTAGE HOLDINGS

CONTACTS 10 Bates Street , Milton Park, Harare

Tel: (04) 251651/3 www.vantageholdings.com

Approval of your loan request depends on how well you present yourself, your business, and your financial needs to a lender. Remember, lenders want to make loans, but they must make loans they know will be repaid. The best way to improve your chances of obtaining a loan is to prepare a written proposal.

 

 

 

 

 

Loan Proposals

A well written loan proposal contains the following:

• General Information

• Business Description

• Management Profile

• Market Information

• Financial Information

General Information

• Business name, names of principals, ID number for each principal, and the business address.

• Purpose of the loan (exactly what the loan will be used for and why it is needed)

• Amount required (the exact amount that you need to achieve your purpose)

 

 

 

 

 

 

Business Description

• History and nature of the business (details of what kind of business it is, its age, number of employees, and current business assets)

• Ownership structure (details on your company’s legal structure)

Management Profile

Develop a short statement on each principal in your business providing:

• Background

• Education

• Experience

• Skills

• Accomplishments

 

Market Information

• Clearly define your company’s products as well as your markets.

• Identify your competition and explain how your business competes in the marketplace.

• Profile your customers and explain how your business can satisfy their needs.

Financial Information

• Financial statements, balance sheets, and income statements for the past three years. If you are starting out, provide a projected balance sheet and income statement.

• Personal financial statements on yourself and other principal owners of the business.

• Collateral that you would be willing to pledge as security for the loan

How Your Loan Request Will Be Reviewed

When reviewing a loan request, the lender is primarily concerned about repayment. To help determine this ability, many loan officers will order a copy of your business credit report from a Bank or payslip statement.Therefore, you should work with these agencies to help them present an accurate picture of your business.

What the Lending Officer looks for:

Using the credit report and the information you have provided, the lending officer will consider the following issues:

• Have you invested savings or personal equity in your business totalling at least 25% to 50% of the loan you are requesting? (Remember: a lender or investor will not finance 100% of your business.)

• Do you have a sound record of credi-tworthiness as indicated by your credit report, work history, and letters of recommendation? This is very, very important.

• Do you have significant experience and training to operate a successful business?

• Have you prepared a loan proposal and business plan that demonstrates your understanding of and commitment to the success of the business?

• Does the business have sufficient cash flow to make the monthly payments?

The Financial Six C’s

Loan Officers also evaluate you on the following:

• CHARACTER: The degree to which a borrower feels a moral obligation to pay his/her debts, measured by the credit and payment history.

• CAPACITY TO PAY: A subjective determination made by a lender based upon an analysis of the borrower’s financial statements and other information.

• CAPITAL: The amount of capital in a business is equal to the total of capital from debt and equity. Lenders prefer low debt-to-asset and debt-to-worth rations and high current ratios.

These indicate financial stability.

• COLLATERAL: An asset owned by the borrower, but promised to a lender against nonpayment of the loan. The amount of collateral varies from lender to lender. The closer the collateral value is to the loan amount, the more comfortable the lender will be that the loan will be repaid.

• CONDITIONS: General economic, geographic, and industry

• CONFIDENCE: A successful borrower instills confidence in the lender by addressing all the lender’s concerns on the other Financial C’s. Their loan application sends the message that the company is professional, with an honest reputation, a good credit history, reasonable financial statements, good capitalization, and adequate collateral

 

 

 

BASIC FINANCING

Financing Basics

While poor management is cited most frequently as the reason businesses fail: inadequate or illtimed financing is a close second. Whether you're starting a business or expanding one, sufficient ready capital is essential. But it is not enough to simply have sufficient financing; knowledge and planning are required to manage it well. These qualities ensure that entrepreneurs avoid common mistakes like securing the wrong type of financing or asking for too much or too little.

Before Financing, Ask:

• Do you need more capital or can you manage existing cash flow more effectively?

• How do you define your need? Do you need money to expand or as a cushion against risk?

• How urgent is your need? You can obtain the best terms when you anticipate your needs rather than looking for money under pressure.

• How great are your risks? All businesses carry risks, and the degree of risk will affect cost and available financing alternatives.

• In what state of development is the business? Needs are most critical during transitional stages.

• For what purposes will the capital be used? Any lender will require that capital be requested for very specific needs.

• What is the state of your industry? Depressed, stable, or growth conditions require different approaches to money needs and sources. Businesses that prosper while others are in decline will often receive better funding terms.

• Is your business seasonal or cyclical? Seasonal needs for financing generally are short term. Loans advanced for cyclical industries such as construction are designed to support a business through depressed periods.

• How strong is your management team? Management is the most important element assessed by money sources.

• Perhaps most importantly, how does your need for financing mesh with your business plan? If you don't have a business plan, make writing one your first priority. All capital sources will want to see your plan for the start up and growth of your business.

Not All Money Is the Same

There are two types of financing: equity and debt financing. When looking for money, you must consider your company's debt-to-equity ratio- the relation between dollars you've borrowed and dollars you've invested in your business. The more money owners have invested in their business, the easier it is to attract financing. If your business has a high ratio of equity to debt, you should probably seek debt financing. However, if your company has a high proportion of debt to equity, experts advise that you should increase your ownership capital (equity investment) for additional funds. That way you won't be over-leveraged to the point of jeopardizing your company's survival.

Equity Financing

Most small or growth-stage businesses use limited equity financing. As with debt financing, additional equity often comes from non-professional investors such as friends, relatives, employees, customers, or other people in the tourism industry. However, the most common source of professional equity funding comes from venture capitalists. These are institutional risk takers and may be groups of wealthy individuals, government-assisted sources, or major financial institutions.

Most specialize in one or a few closely related industries.

Different venture capitalists have different approaches to management of the business in which they invest. They generally prefer to influence a business passively, but will react when a business does not perform as expected and may insist on changes in management or strategy. Giving up some of the decision-making and some of the potential for profits are the main disadvantages of equity financing.

Debt Financing

There are many sources for debt financing: banks, savings and loans, and commercial finance companies are the most common. The government has developed many programs in recent years to encourage the growth of small businesses in recognition of their positive effects on the economy. Family members, friends, and former associates are all potential sources, especially when capital requirements are smaller.

Traditionally, banks have been the major source of small business funding. Their principal role has been as a short-term lender offering demand loans, seasonal lines of credit, and single-purpose loans for machinery and equipment. Banks generally have been reluctant to offer long-term loans to small firms.

In addition to equity considerations, lenders commonly require the borrower's personal guarantees in case of default. This ensures that the borrower has a sufficient personal interest at stake to give paramount attention to the business. For most borrowers this is a burden, but also a necessity.

Estimating Costs

In order to determine how much money you will need to start, you must estimate the costs of your business for at least the first several months. Every business is different, and has its own specific cash needs at different stages of development, so there is no universal method for estimating your start up costs. Some businesses can start on a shoestring budget, while others may require considerable investment in inventory or equipment. It is vitally important to know that you will have enough money to start your business.

To determine your startup costs, you must identify all the expenses that your business will incur during its startup phase. Some of these expenses will be one-time costs such as the fee for incorporating your business or price of a sign for your building. Some will be ongoing, such as the cost of utilities, inventory, insurance, etc.

While identifying these costs, decide whether they are essential or optional. A realistic start up budget should only include those things that are necessary to start that business. These essential expenses can then be divided into two separate categories: fixed and variable. Fixed expenses include rent, utilities, administrative costs, and insurance costs. Variable expenses include inventory, shipping and packaging costs, sales commissions, and other costs associated with the direct sale of a product or service.

The most effective way to calculate your start up costs is to use a worksheet that lists all the various categories of costs (both one-time and ongoing) that you will need to estimate before starting your business. The following tool will assist you in performing that task:

Cash Management

Business analysts report that poor management is the main reason for business failure. Poor cash management is probably the reason most businesses do not work. Understanding the basic concepts of cash flow will help you plan for the unforeseen eventualities that nearly every business faces.

 

Cash vs. Cash Flow

Cash is ready money in the bank or in the business. It is not inventory, it is not accounts receivable (what you are owed), and it is not property. These can potentially be converted to cash, but can't be used to pay suppliers, rent, or employees.

Profit growth does not necessarily mean more cash on hand. Profit is the amount of money you expect to make over a given period of time. Cash is what you must have on hand to keep your business running. Over time, a company's profits are of little value if they are not accompanied by positive net cash flow. You can't spend profit; you can only spend cash.

Cash flow refers to the movement of cash into and out of a business. Watching the cash inflows and outflows is one of the most pressing management tasks for any business. The outflow of cash includes those checks you write each month to pay salaries, suppliers, and creditors. The inflow includes the cash you receive from customers, lenders, and investors.

Positive Cash Flow: If its cash inflow exceeds the outflow, a company has a positive cash flow. A positive cash flow is a good sign of financial health, but by no means the only one.

Negative Cash Flow: If its cash outflow exceeds the inflow, a company has a negative cash flow. Reasons for negative cash flow include too much or obsolete inventory and poor collections on accounts receivable (what your customers owe you). If the company can't borrow additional cash at this point, it may be in serious trouble.

Components of Cash Flow

A Cash Flow Statement shows the sources and uses of cash and is typically divided into three components:

• Financing Cash Flow

• Investing Cash Flow

• Operating Cash Flow

Financing Cash Flow: Financing cash flow is the cash to and from external sources, such as lenders, investors and shareholders. A new loan, the repayment of a loan, the issuance of stock, and the payment of dividend are some of the activities that would be included in this section of the cash flow statement.

Investing Cash Flow: Investing cash flow is generated internally from non-operating activities. This includes investments in plant and equipment or other fixed assets, nonrecurring gains or losses, or other sources and uses of cash outside of normal operations.

Operating Cash Flow: Operating cash flow, often referred to as working capital, is the cash flow generated from internal operations. It comes from sales of the product or service of your business, and because it is generated internally, it is under your control.

How Do I Practice Good Cash Flow Management?

Good cash management is simple. It involves:

• Knowing when, where, and how your cash needs will occur

• Knowing the best sources for meeting additional cash needs

• Being prepared to meet these needs when they occur, by keeping good relationships with bankers and other creditors

Cash Flow Management

The starting point for good cash flow management is developing a cash flow projection, or estimate of how much money will flow through your business. Smart business owners know how to develop both short-term (weekly, monthly) cash flow projections to help them manage daily cash, and longterm (annual, 3-5 year) cash flow projections to help them develop the necessary capital strategy to meet their business needs. They also prepare and use historical cash flow statements to understand how they used money in the past.

Break Even Analysis

Break even analysis is a tool used to determine when a business will be able to cover all its expenses and begin to make a profit. For the startup business it is extremely important to know your startup costs, which provide you with the information you need to generate enough sales revenue to pay the ongoing expenses related to running your business.

A startup business owner must understand that $5,000 of product sales will not cover $5,000 in monthly overhead expenses. The cost of selling $5,000 in retail goods could easily be $3,000 at the wholesale price, so the $5,000 in sales revenue only provides $2,000 in gross profit available for overhead costs. The breakeven point is reached when revenue equals all business costs.

To calculate your breakeven point you will need to identify your fixed and variable costs. Fixed costs are expenses that do not vary with sales volume, such as rent or administrative salaries. These costs have to be paid regardless of sales and are often referred to as overhead costs. Variable costs vary directly with the sales volume, such as the costs of purchasing inventory, shipping, or manufacturing a product.

The formula for determining your breakeven point requires no more than simple mathematics, iyo svomhu yakatizwa ne vamwe kuchikoro..

The next topic is marketing.

BUSINESS MARKETING

Marketing Basics

To succeed in any business, entrepreneurs must attract and retain a growing base of satisfied customers. Marketing programs, though widely varied, are all aimed at convincing people to try out or keep using particular products or services. Business owners should carefully plan their marketing strategies and performance to keep their market presence strong.

 

 

 

What is Marketing?

Marketing is based on the importance of customers to a business and has two important principles:

1. All company policies and activities should be directed toward satisfying customer needs. 2. Making a big profit is more important than having your business earn more money, but with smaller profits.

To best use these principles, a small business should:

• Determine the needs of their customers through market research

• Analyze their competitive advantages to develop a market strategy

• Select specific markets to serve by target marketing

• Determine how to satisfy customer needs by identifying a market mix

 

 

 

 

 

Market Research

Successful marketing requires accurate market information. An inexpensive research program, based on questionnaires given to current or prospective customers, can often uncover possible new products or services. Market research will also identify trends that affect sales and profitability. Keep population changes, legal developments, and the local economic situation in mind to quickly identify problems and opportunities. It is also important to keep up with competitors' market strategies.

Marketing Strategy

A marketing strategy identifies customer groups, which a particular business can better serve than its target competitors, and fits product offerings, prices, distribution, promotional efforts, and services to these people. Ideally, the strategy should allow you to fill your niche and make money too. A good strategy helps a business focus on the target markets where it can do well.

Target Marketing

Owners of small businesses usually have limited resources to spend on marketing. Concentrating your efforts on one or a few key market areas - target marketing – will get you the most for your money.

There are two methods used to break down areas of a market:

1. Geographical areas - Specializing in serving the needs of customers in a particular geographical area. For example, a bird-watching guide would focus on areas where people would come who want to see birds.

2. Customer areas - Identifying those people most likely to buy the product or service and targeting those groups, such as divers or fishermen.

Managing the Market Mix

Every marketing program contains four key components:

1. Products and Services

2. Promotion

3. Distribution

4. Pricing

These key ingredients are combined into an overall marketing program.

 

 

Products and Services Product strategies may include:

• Concentrating on a narrow product line, such as sport fishing

• Developing a highly specialized product or service, such as fly-fishing, or

• Providing a product or service package containing unusually high-quality service.

Promotion- Promotion strategies include advertising and direct customer interaction. Good salesmanship is essential for small businesses because of their limited ability to spend on advertising. Good telephone book advertising is also important. Direct mail is an effective, low-cost medium available to small business. There are also flyers and business cards you can make cheaply.

Price - The right price is very important for getting the most total revenue. Generally, higher prices mean fewer customers and vice-versa; however, small businesses can often command higher prices because of their personalized service.

Distribution- The manufacturer and wholesaler must decide how to distribute their products. Working through established sellers generally is easiest for small businesses. Small retailers should consider cost and traffic flow in site selection, especially since advertising and rent can be reciprocal:

A low-cost, low-traffic location means spending more on advertising to build traffic.

Market Mix

The nature of the product or service is also important in where deciding where to put your business. If purchases are based largely on impulse, then high traffic and visibility are critical. On the other hand, location is less a concern for products or services that customers are willing to go out of their way to find.

Marketing Performance

After implementing a marketing program, entrepreneurs must evaluate its performance. Every program should have performance standards to compare with actual results. Researching industry norms and past performance will help to develop appropriate standards. Entrepreneurs should audit their company's performance at least quarterly. The key questions are:

1. Is the company doing all it can to be customer-oriented? 2. Do employees ensure the customers are satisfied and leave wanting to come back and tell other people to come? 3. Is it easy for the customer to find what he or she wants at a competitive price?

What is Marketing?

In plain and simple terms, marketing activities and strategies result in making products available that satisfy customers while making profits for the companies that offer those products. That's it in a nutshell!

Marketing produces a "win-win" because:

1. Customers have a product that meets their needs, and

2. Healthy profits are achieved for the company. (These profits allow the company to continue to do business in order to meet the needs of future customers.)

Stated another way: A focus on what the customer wants is essential to successful marketing efforts. This customer-orientation must also be balanced with the company's objective of maintaining a profitable volume of sales in order for the company to continue to do business. Marketing is a creative, ever-changing orchestration of all the activities needed to accomplish both of these objectives.

 

 

How Are The Customer And Business Objectives Met?

The American Marketing Association's definition of marketing is: “the process of planning and executing the conception, pricing, promotion and distribution of ideas, goods, and services to create exchanges that satisfy individual and organizational objectives.” You can see in this definition that the process of marketing begins with discovering what product customers want to buy. Providing the features and quality customers want is a critical first step in marketing. You'll be facing an uphill battle if you provide something you want to produce and then try to convince someone to buy it. The marketing process then continues with setting a price letting potential customers know about your product, and making it available to them.

What Activities are Included in Marketing?

• Sales

• Packaging

• Promotion

• Information

• Public Relations

 

Marketing Ideas

• Local newspapers

• Internet

• Guidebooks

• Word of Mouth

• BTB Publications

• Flyers and business cards

• Radio

• Brochures in hotels, restaurants, etc.

In Summary

These are the fundamentals of a true marketing mindset:

• Producing what the customer wants should be the focus of business operations and planning.

• Creating profitable sales volume, not just sales volume, is a necessary goal.

• Coordinating between marketing activities and all other functions within a business that affect marketing efforts.

 

 

 

CUSTOMER SERVICE

Customer Service

The Golden Rule, "do unto others as you would have them do unto you," may seem self-evident in the way we try to conduct our personal lives. Yet this axiom is assuming new importance as a guiding principle in the world of business. The growing significance of meeting -- or exceeding -- customer demands for quality service has special implications for small business. For it is in this arena that small companies can, in the least expensive way, set themselves apart from the competition.

Golden Rule #1: Put the Customer First

Quality customer service begins with your employees. The first person that a customer will see is you and your employees. You all should be good ambassadors. If you take care of your employees then they are more likely to take care of your customers. Try offering service bonuses to increase employee morale and make them pay attention to customers.

 

 

Golden Rule #2: Stay Close To Your Customer

Asking questions and listening carefully to the answers is an important part of customer service. You lose money when you lose customers, so keeping them is what is going to make your business run.

You can see the evidence in these facts:

• 65% of a company’s business comes from existing customers

• It costs 5 times as much to attract a new customer as it does to keep an existing customer happy

• 91% of customers will never use a company who has disappointed, failed, or offended them

• The best business owners are not only committed to staying close to their clientele, but also identify with them. They give their customers the level of service they themselves would expect to receive.

 

 

 

 

 

 

Golden Rule #3: Pay Attention to the Little Details

Some of the most effective "extras" are really very basic adages of conducting good business, although customers are often surprised when they take place. These include:

• Answering the phone by the third ring;

• Treating customers respectfully and courteously at all times;

• Greeting them by name;

• Promptly answering their questions and, if you can't, getting back to them with an answer as quickly as possible;

Five Rules of Customer Care

Understanding customers and the way they think is critical to keeping them. For example, customers do business on the basis of emotional desire: they want what they want -- when they want it. Customers also tend to gravitate toward a company or group of people they like. Plus, most customers have a strong tendency to stick with businesses with which they are familiar, and are slow to change buying habits unless given a very good reason. However, when they are displeased, even by a small disappointment or discourteous word, various surveys have revealed that customers tell from seven to 11 people about their dissatisfaction. An important key to serving customers well is this: don't try to change them.

Steps to help you take full advantage of the critical element of customer care:

1. Rule 1: Research- Conduct your own survey. Profit from the ideas, suggestions and complaints of your present and former customers. Talk and meet with your customers. Ask questions. Learn their attitudes, what they want and what they dislike.

2. Rule 2: Manners- Check employees' telephone manners periodically. This link is particularly important for small businesses, as bad telephone handling can undermine other constructive efforts to build a profitable enterprise.

3. Rule 3: Positive Attitudes- Rules such as prompt answering and a cheerful attitude of helpfulness are of critical importance. Have someone whose voice is unfamiliar play the role of a customer or prospective customer, preferably a difficult one.

4. Rule 4: Team Work- Make customer service a team effort. Use group meetings, memos, posters and in-house publications to build customer consciousness throughout the organization. Continually drive home the crucial rule that getting and holding customers requires team play, and invite employee ideas.

5. Rule 5: Never Stop Working- Extend your efforts after hours. It's the friendly feelings people have that draw them to you and your business. Take advantage of the relaxed atmosphere of social occasions or a neighborly chat to turn friends into customers, or to reinforce the loyalty of existing ones.

Extra information: BUSINESS MANAGEMENT

Financial Statements

Understanding financial statements is critically important to the success of a small business. Financial statements can be used as a roadmap on your business journey to economic success. Using numbers can steer you in the right direction and help you avoid costly mistakes. Most business owners don't realize that financial statements have a value that goes far beyond their use to prepare tax returns or loan applications.

 

 

 

The Balance Sheet

The balance sheet is a snapshot of the company's financial standing at an instant in time. The balance sheet shows the company's financial position, what it owns (assets) and what it owes (liabilities and net worth). The "bottom line" of a balance sheet must always balance (i.e. assets = liabilities + net worth). The individual elements of a balance sheet change from day to day and reflect the activities of the company. Analyzing how the balance sheet changes over time will reveal important information about the company's business trends. In this section, we'll discover how you can monitor your ability to collect revenues, how well you manage your inventory, and even assess your ability to satisfy creditors and stockholders.

Liabilities and net worth on the balance sheet represent the company's sources of funds. Liabilities and net worth are composed of creditors and investors who have provided cash or its equivalent to the company in the past. As a source of funds, they enable the company to continue in business or expand operations. If creditors and investors are unhappy and distrustful, the company's chances of survival are limited.

Assets, on the other hand, represent the company's use of funds. The company uses cash or other funds provided by the creditor/investor to acquire assets. Assets include all the things of value that are owned or due to the business.

Liabilities represent a company's obligations to creditors while net worth represents the owner's investment in the company. In reality, both creditors and owners are "investors" in the company with the only difference being the degree of nervousness and the timeframe in which they expect repayment.

 

ASSETS

As noted previously, anything of value that is owned or due to the business is included under the Asset section of the Balance Sheet. Assets are shown at net book or net realizable value (more on this later), but appreciated values are not generally considered.

 

 

 

 

Current Assets

Current assets are those that mature in less than one year. They are the sum of the following categories:

• Cash

• Accounts Receivable (A/R)

• Inventory (Inv)

• Prepaid Expenses

• Other Current Assets

Cash

Cash is the way to go. Cash pays bills and obligations. Inventory, receivables, land, building, machinery and equipment do not pay obligations even though they can be sold for cash and then used to pay bills.

If cash is inadequate or improperly managed the company may become insolvent and be forced into bankruptcy. Include all checking, money market and short-term savings accounts under Cash.

 

 

 

Accounts Receivable (A/R)

Accounts receivable are dollars due from customers. They arise as a result of the process of selling inventory or services on terms that allow delivery prior to the collection of cash. Inventory is sold and shipped, an invoice is sent to the customer, and later cash is collected. The receivable exists for the time period between the selling of the inventory and the receipt of cash. Receivables are proportional to sales. As sales rise, the investment you must make in receivables also rises.

Inventory

Inventory consists of the goods and materials a company purchases to re-sell at a profit. In the process, sales and receivables are generated. The company purchases raw material inventory that is processed (a.k.a. work-in-process inventory) to be sold as finished goods inventory. For a company that sells a product, inventory is often the first use of cash. Purchasing inventory to be sold at a profit is the first step in the profit making cycle (operating cycle) as illustrated previously. Selling inventory does not bring cash back into the company -- it creates a receivable. Only after a time lag equal to the receivable's collection period will cash return to the company. Thus, it is very important that the level of inventory be well managed so that the business does not keep too much cash tied up in inventory, as this will reduce profits. At the same time, a company must keep sufficient inventory on hand to prevent stockouts (having nothing to sell) because this too will erode profits and may result in the loss of customers.

Other Current Assets

Other Current Assets consist of prepaid expenses and other miscellaneous and current assets.

Fixed Assets

Fixed assets represent the use of cash to purchase physical assets whose life exceeds one year. They include assets such as:

• Land

• Building

• Machinery and Equipment

• Furniture and Fixtures

 

 

 

 

 

 

 

Intangibles

Represent the use of cash to purchase assets with an undetermined life and they may never mature into cash. For most analysis purposes, intangibles are ignored as assets and are deducted from net worth because their value is difficult to determine. Intangibles consist of assets such as:

• Research and Development

• Market Research

• Goodwill

• Organizational Expense

In several respects, intangibles are similar to prepaid expenses; the use of cash to purchase a benefit which will be expensed at a future date. Intangibles are regained, like fixed assets, through incremental annual charges against income. Standard accounting procedures require

Most intangibles to be expensed as purchased and never capitalized (put on the balance sheet). An exception to this is purchased patents that may be amortized over the life of the patent.

 

 

Other Assets

Other assets consist of miscellaneous accounts such as deposits and long-term notes receivable from third parties. They are turned into cash when the asset is sold or when the note is repaid. Total Assets represent the sum of all the assets owned by or due to the business.

LIABILITIES AND NET WORTH

Liabilities and Net Worth are sources of cash listed in descending order from the most nervous creditors and soonest to mature obligations (current liabilities), to the least nervous and never due obligations (net worth). There are two sources of funds: lender-investor and owner-investor. Lender- investors consist of trade suppliers, employees, tax authorities and financial institutions. Ownerinvestor consists of stockholders and principals who loan cash to the business. Both lender-investor and owner investors have invested cash or its equivalent into the company. The only difference between the investors is the maturity date of their obligations and the degree of their nervousness.

 

 

Current Liabilities

Current liabilities are those obligations that will mature and must be paid within 12 months. These are liabilities that can create a company's insolvency if cash is inadequate. A happy and satisfied set of current creditors is a healthy and important source of credit for short term uses of cash (inventory and receivables). An unhappy and dissatisfied set of current creditors can threaten the survival of the company. The best way to keep these creditors happy is to keep their obligations current.

Current liabilities consist of the following obligation accounts:

• Accounts Payable -- Trade (A/P)

• Accrued Expenses

• Notes Payable -- Bank (N/P Bank)

• Notes Payable -- Other (N/P Other)

• Current Portion of Long term Debt

• Proper matching of sources and uses of funds requires that short-term (current) liabilities must be used. Only to purchase short term assets (inventory and receivables)

 

Notes Payable

Notes payable are obligations in the form of promissory notes with short-term maturity dates of less than 12 months. Often, they are demand notes (payable upon demand). Other times they have specific maturity dates (30, 60, 90, 180, 270, 360 days maturities are typical). The notes payable always include only the principal amount of the debt. Any interest owed is listed under accruals.

The proceeds of notes payable should be used to finance current assets (inventory and receivables). The use of funds must be short term so that the asset matures into cash prior to the obligation's maturation. Proper matching would indicate borrowing for seasonal swings in sales, which cause swings in inventory and receivables, or to repay accounts payable when attractive discount terms are offered for early payment.

Accounts Payable

Accounts Payable are obligations due to trade suppliers who have provided inventory or goods and services used in operating the business. Suppliers generally offer terms (just like you do for your customers), since the supplier's competition offers payment term. Whenever possible you should take advantage of payment terms as this will help keep your costs down. If the company is paying its suppliers in a timely fashion, days payable will not exceed the terms of payment.

Accrued Expenses are obligations owed but not billed such as wages and payroll taxes, or obligations accruing, but not yet due, such as interest on a loan. Accruals consist chiefly of wages, payroll taxes, interest payable and employee benefits accruals such as pension funds. As a labor related category, it should vary in accordance with payroll policy (i.e., if wages are paid weekly, the accrual category should seldom exceed one week's payroll and payroll taxes).

 

Non-current Liabilities

Non-current liabilities are those obligations that will not become due and payable in the coming year. There are three types of non-current liabilities, only two of which are listed on the balance sheet:

• Non-current Portion of Long Term Debt (LTD)

• Subordinated Officer Loans (Sub-Off)

• Contingent Liabilities

Non-current portion of long-term debt is the principal portion of a term loan not payable in the coming year. Subordinated officer loans are treated as an item that lies between debt and equity. Contingent liabilities listed in the footnotes are potential liabilities, which hopefully never become due. Non-Current Portion of Long Term Debt (LTD) is the portion of a term loan that is not due within the next 12 months. It is listed below the current liability section to demonstrate that the loan does not have to be fully liquidated in the coming year. Long-term debt (LTD) provides cash to be used for a long-term asset purchase, either permanent working capital or fixed assets.

Contingent Liabilities

Contingent Liabilities are potential liabilities that are not listed on the balance sheet. They are listed in the footnotes because they may never become due and payable. Contingent liabilities include:

• Lawsuits

• Warranties

• Cross Guarantees

If the company has been sued, but the litigation has not been initiated, there is no way of knowing whether or not the suit will result in a liability to the company. It will be listed in the footnotes because while not a real liability, it does represent a potential liability, which may hurt the ability of the company to meet future obligations.

Total Liabilities

Total liabilities represent the sum of all monetary obligations of a business and all claims creditors have on its assets.

Equity

Equity is represented by total assets minus total liabilities. Equity or Net Worth is the most patient and last to mature source of funds. It represents the owners' share in the financing of all the assets.

Income Statement

Known also as the profit and loss statement, the income statement shows all income and expense accounts over a period of time. That is, it shows how profitable the business is. This financial statement shows what how much money the company will make after all expenses are accounted for. Remember that an income statement does not reveal hidden problems like insufficient cash flow problems. Income statements are read from top to bottom and represent earnings and expenses over a period of time.

 

Conclusion

Nyaya yedu is very simple, mari irimo muZimbabwe and yakati wandei, inongoda kushandirwa and inoda vakangwara. Go out there and seek your share of the billion dollar economy. Get involved in the economic revolution and your chance is now. Entrepreneurship is God's gift to mankind and it is a clear cut tool to end poverty. When you do business use the Bible as a textbook there are several valuable lessons that will help the entrepreneur.

Sibusiso Media thanks you for reading and purchasing our basic manual on business in Zimbabwe. We look forward to hearing from you sibusisomedia4@gmail.com.

Important Contacts

Every entrepreneur needs support and we have put together a few contacts that can help you in your journey to starting up a business in Zimbabwe or growing your current business

 

 

1. Zwelibanzi Ndlovu : He is a Motivational Speaker and the CEO of Stop to Start International , he specialises in transformation, and leadership and investor relations. He can be contacted on :E-mail: zwelibanzi@stoptostart.biz or landline : (09) 247602/1

2. Fidelis Fengu is a skilled business development consultant and coach who will help you navigate through the challenges of entrepreneurship. He is the owner of Sibusiso Media and can be contacted on email : fidelisfengu@gmail.com whatsapp or calls +263719584327 www.fidelisfengu.com 

3. Nyasha Mandeya: She is the Director of Economic Affairs at ZANU PF HQ. She is well versed in Government and party programs that can benefit the Entrepreneur and she can be contacted on (04) 781382

4. Metbank E-mail: info@metbank.co.zw , www.metbank.co.zw Tel: (04) 773401/ 7734506/774964/777256

 

1. Empower Bank Contacts. Branch: Tendeseka Park, Block 4, First Floor Samora Machel Avenue, Harare. Tel: +263 242 709 550 - 709 555. Email: info@empowerbank.co.zw.

1

 

Impressum

Tag der Veröffentlichung: 05.01.2019

Alle Rechte vorbehalten