adminheld behind closed doors.
The main object of the association was to create a deliberate networking and lobbying platform for bassfishermen.
At inception most fishermen were very enthusiastic about the association. They complemented their commitment with generous donations to the association.
The attendance of the members was also commendable. The executive recruited office bearers based on the donations they were receiving.
However, time is the most accurate indicator of people’s characters. As days progressed into months and years, the commitment of most members nose-dived.
As is common with most people, they want to get tangible benefits within the shortest possible time. Recruiting new members was not easy either as new members always questioned what was in it for them.
Some of the members migrated to well-established associations hoping to benefit from those associations’ goodwill.
Another category of members quickly vanished when they discovered that there was nothing to gain at the association even though they had not contributed anything. Consequently, the association could not meet most of its obligations such as rent, rates, water electricity and salaries.
Enforcing payments of subscription was a mammoth task given that it was a voluntary organisation. No one wants to be associated with failure, so when the remaining members noticed signs of overtrading they vanished into thin air.
The executive of the association remained the only active members and their subscriptions were not adequate to cover the running expenses of the association.
Eventually the cashflow constraints became over- bearing for the executive forcing them to quit. Though most managers overlook sashflow management, it is the number one killer of most businesses if it is not accorded the attention that it deserves.
No one is immune to cashflow management. Even schoolchildren cannot avoid cashflow management.
Cashflows are the pulse of any business. It is the heartbeat of any organisation be it business or a non- profit-making organisation.
It is like the human heart that sends one to the graveyard when it stops beating. Likewise sustained negative cashflows can lead to the extinction of any business enterprise even if the business is customer focused.
The mistake which people make is that they pay attention to profitability at the expense of prudent cash management. Sometimes very profitable companies collapse due to cashflow-related challenges.
Symptoms of Cashflow Challenges
Any organisation operating under the sun has fixed and variable costs in its operating environment. Among the fixed costs are: rent, salaries, electricity, rates, water, Zimra, Zimdef and NSSA remittances.
An organisation is said to be having cashflow constraints if it is continually failing to meet its commitments as and when they fall due. Some of the symptoms of potential cashflow challenges are slow-moving stock and a non-performing debtor’s book.
At times businesses are so desperate to push stock in the market (to clear the warehouse) by relaxing prudent trading terms which inevitably lead to businesses trading with potentially dubious and unscrupulous business people. An organisation will fail to honour its obligations if most of its cash is trapped in stock or credit sales. The failure to meet obligations can seriously damage the reputation of the organisation.
Most businesses particularly in Third World countries believe in hedging their currency risks in real estate. Research has proved that real estate maintains value (most of the times) except in abnormal conditions such as serious recession.
However, concentrating on acquiring assets, which are not cash or near cash, can result in organisation failing to service its debts or obligations as and when they fall due.
Basic Rules of Cashflow Management
Businesses are encouraged to invest in cash or near cash assets to enable them to quickly liquidate their assets should the need be. If there is need to spread the risk, investment in other assets should be considered after taking into consideration the company’s cashflow.
At any particular time in business cash or near cash resources must be greater than their commitments.
Companies or individuals must not spend what they don’t have. In fact, companies are encouraged to spend less than what they earn. Regularly there is need to compare what one spends versus what one receives, compare this to the budget and take appropriate action on the variances. Cashflows give a guideline on commitments and where possible to take action to ensure that the company meets those commitments.
Companies are encouraged to have a cash budget covering 30 to 60 days ahead. Cash management is not just about waiting for people to pay, but it is about taking proactive steps to ensure that debtors pay up.
The Bassfishermen Association of Harare waited for its members to pay up their subscriptions and they ended up winding their operations.
Stock management one of the methods of managing cashflows. The company should actively identify slow movers and fast movers. The company should have a bias towards fast movers even if they command lower margins compared to slow movers.
Methods of Improving Cashflow
One of the popular methods of improving cashflow is by selling goods on consignment.
A company can also explore methods of improving its cash position by selling its debtors’ book through factoring with a financial institution. Depending on the magnitude of cash deficiency within your organisation, there might be serious need to invite other investors to inject fresh capital, new ideas and business contacts.
This reduces your equity and power, but it helps the business to live longer. Most African businessmen find it difficult to surrender control of their businesses until it’s on the verge of collapse. New ideas and contacts from the new investors can be very valuable in reviving the business.
Thriftiness must not be confused with buying cheap goods, but rather competitively priced goods. Most businesses lose money by looking for the cheapest solutions without considering whether the purchases are value for their money.
The cost that comes with monitoring the asset must also be considered when purchasing an asset, down- time is also a major cost to the business as it affects the cashflows. Most businesses are encouraged to negotiate for favourable credit terms while they sell their goods for cash.
The writer is a managing consultant at CLC Training International. E-mail [email protected].
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