FINANCIAL LITERACY FOR ALL-SOURCES OF FINANCE

1.


FINANCIAL LITERACY FOR ALL-SOURCES OF FINANCE

Many individuals who want to or have already established their small organizations mostly do have problems with funding even though they might have a bright future; they are not getting the necessary funding to grow and expand.

Some of these entrepreneurs might not know that there are various ways to raise the needed funds to help drive their organizations to their destinations.

Funding come from various sources, mostly depending on the size and category of the organization.

People and investors for that matter do look for some vital information from the organization before they give their money to it to do business. Investors expect returns on their capital invested and they have to be sure that organization can do that now or in the future. Nobody wants to lose money.

It is on this backdrop that even smaller organizations should keep their financial records in good shape to facilitate easier and faster funding when the need arises. Investors would only invest after they have got the appropriate information they are looking for and if the organization does not keep such pieces of information, then nobody would invest in it. Proper records keeping, leading to audited financial statements for the organization is what will invite and bring investors.

All organizations, irrespective of their size can and should have its financial statements audited by a credible, registered audit firm. They are many audit firms, especially, the smaller audit firms in Ghana and so they are in almost every country on earth. The auditors would charge just a small fee and do their work for your organization so that your organization can use that audited report to support itself strongly in getting big time funding. The auditors can also give some financial advice free of charge or for a fee. Investors look for some accounting and investment ratios to determine if the organization has a future and if it’s worth investing in. some of these ratios are: Price /earnings ratio, earnings per share, net profit ratio, dividend cover in cash terms, interest cover, net free cash flow, current ratio, equity/debt ratio, debts collection period, credits repayment period, wages & salaries of managers, directors’ fees, ( huge wages & salaries to owners and managers mean owners are into business to enrich themselves to the detriment of the organization, this drives away potential investors). There are accounting formulas used to arrive at these ratios but the necessary information must be readily available before these ratios could be calculated. The accountants would do the calculations for your organization as part of their routine work or for a fee. So you can employ one accountant or consult one if your organization does not have the capacity to employ one.
Various sources of funding come from:

• Sale of idle assets for cash

• Family members

• Friends

• Business angels ( rich individuals who look for potential organizations to invest)

• Venture capital trusts

• Non-bank financial institutions and many micro-finance organizations

• Banks

• Leasing and or sale and leaseback

• Plough back profits ( internal funding)

• Credit finance and hire purchase

• Shares at Alternative Investment Market (AIM, is the stock exchange market for smaller companies in the UK where they can also get listed to raise funds). Ghana needs one.

• Shares at the main stock exchange market

• Mortgage facilities

Get your records in good shape. Get the necessary funding easily.

© 2010,Godwin-Xavier Ayeebo

Email: gayeebo@gmail.com