There has been an unusually long gap between my last post and this one. Many reasons, the main being indifferent health, thanks due to the Bangalore weather and the road repair in my locality leading to dust allergy caused on this account. We see many persons sniffing and sneezing in our Ooru. Well these are some of the pains of living in this vibrant city.
Reliable, useful journalism needs your support.
Over 600 readers have donated over the years, to make articles like this one possible. We need your support to help Citizen Matters sustain and grow. Please do contribute today. Donate now
The infrastructure makes one want to cry. The sheer entrepreneurial energy makes one want to celebrate! Do check an earlier post : Networking in this city of contrasts.
Just this weekend we celebrated with an Alumni Meet attended by participants of various batches of the Management Programme for Women Entrepreneurs (MPWE) at IIMB. This was some meet! The sheer enthusiasm for business was visible. Many deals and hand shakes took place. In fact the meet was kicked off by a participant who said that after she attended MPWE she turned so confident that she bought out the business from the owners and she is now The Proud Owner and doing well! There were many more success stories as well as stories of failure. Some women talked about the closure of their businesses and about learning to take tough decisions. Then there were those who said that they had not yet tried their hand at entrepreneurship, but intended to in the future. Watch out for these ladies, they are ready to take on and conquer the world!
Well, on to the theme of this post… as promised in my previous post … Forward looking to prevent fraud.
Imagine that there is a pot with water. You keep filling this regularly and also remove water from this on a periodic basis. Once in a while when the pot is not full, you assume that this is because of increased consumption. Over time, the pot develops cracks and leakages occur. You do not notice this for sometime; till suddenly one fine day the leakage becomes too much and you get taken by surprise!
Money in your business can be likened to water being stored in the pot. You put some in, you store it; you take some out. If you do not track what goes in and out, you do not know how much is consumed and how much has leaked out.
Misappropriation of money in a business often starts small, like a leak from a crack that is not fixed in time. Over time, the crack widens and soon much more can disappear from this.
As an entrepreneur, you not only have to work hard to earn money, you need to keep it safe and use it well. Earning is just one part of the story, one dimension, albeit a critical one. There are many more dimensions to success, there is profitability, value creation and prevention of unnecessary wastage and loss.
It is useful to put in some controls, particularly in the management of cash and bank accounts. Sometimes, if you are founder of a start-up, you may be CEO to clerk in the business. Even in such a situation, if you want to make a purchase, you need to know how much money you have earned, how much of that has been received by you and how much you owe. Without these basic details, you may be caught on the wrong foot when it comes to making a payment for services availed of by you.
In one case an entrepreneur received an advance towards a project. He and his employees did not keep track of money spent on the project. At the end of the year, much after the project had closed, when his accountant tallied the records, he realized that while his company had been profitable during the year; on this project, he had spent much more than he earned. In hindsight, he realized that he should have kept his records upto date. This could have helped him take corrective measures in time such as asking for increased fees from the client or better cost management for this project.
Cash is a critical component of any business. Here is a basic measures for cash management in a company. This can help minimize loss and inefficiency, either due to lack of systems and processes or due to carelessness and fraud.
Cash should be handled by select persons who may be insured for this. The cash balance should be tallied at the end of each day and details noted in a register on a daily basis. One may even have two persons assigned for different roles – one to maintain cash and one to make entries in the register. This is a simple way of putting in place a system to monitor and maintain cash. At the end of the day, both persons involved should append their signature, with the date and time in the register, mentioning details of cash balance on hand. The roles of these two may be periodically interchanged, i.e. the person maintaining cash in one month, may make entries in the register the next month.
Often when one starts a process of having two persons in charge there may be differences noticed between the actual cash on hand and the amount in the register. There is also, typically, a tendency to ignore small amounts of difference. However it is important to emphasize to the persons in charge that the balance on hand must tally with those as per the register on a daily basis. Thus a systematic process is put in place in the organization and by signing the register, the commitment level of the persons on the job increases. As some of the readers may be aware, CEOs and CFOs are asked to attest the accounts in the annual report of companies.
Some more simple systems and controls will follow in another post.