Its important for any small business in Nigeria to develop a strategy on how to improve their cash flow, because cash is relevant when it comes to the operations of the business. For How to Improve Your Cash Flow in Nigeria, you have to minimize some variable costs and increase revenues.
The ability for you to understand and manage the amount of cash, flowing in and out of your business in Nigeria is termed as having the knowledge of cash flow management. In the current Nigerian business landscape, the numbers don’t look good:
- 120 million people are living on less than 1 dollar a day,
- Interest rate for businesses looking to obtain loans are pegged at double digits,
- Dollar hikes.
You get the picture right?
However, it’s at such times that businesses and Nigerian entrepreneurs should get creative rather than depressed.
Cash flow is key to the sustainability of Nigerian businesses. This article’s aim is basically to help business owners think of creative ways to fund their processes.
5 Ways to Increase Your Cash Flow in Nigeria
How to Improve Your Cash Flow in Nigeria
1) Minimize costs
This is often the last place businesses look. They believe that by improving their revenue drive, cash will flow. They fail however, to deal with the back end and effectively plug leakages.
“Cutting costs doesn’t mean you’re not bold or enterprising. It means that you are wise and objective.” I call the recent shut down of the Dangote Industries tomato processing facility wise not foolish. It was a significant but necessary step.
You may not have a million dollar plant to shut down but you can be creative in:
- Travel: Who doesn’t like to travel business or first class? Nobody. If it’s at the expense of your business then there is something wrong. “Groom your business to be able to fund your lifestyle but till then focus on the basics.” The basic goal of traveling by air is to get to your destination FASTER and on time. You can fly on a lower budget and take advantage of the benefits of online advance booking and discounts on travel miles for seasoned air milers.
- Advertising : This is usually a very sensitive area. Therefore wisdom should be applied. Most businesses do generic ads believing that their customers will always find their product and pitch in. Generic ads work more for multinationals and big businesses with substantial ad budgets.
Not all clients reside on Linda Ikeji or Bella Naija. It’s important you ask specific questions like:
– where do a critical mass of my market congregate?
– how can I reach them and guarantee value for every Naira of ad spend?
- Machine Acquisition and Maintenance: If you’re in the textile, poultry or processing industry then pay attention. In purchasing equipments and machines, you can’t underestimate due diligence. Most costs arise from frequent maintenance of low grade machinery. If you can’t get quality then you can purchase on friendly lease terms. In doing this make sure that your payment plan is flexible and that you have a market that can fund such purchase and help you break even.
2) Staff costs
After cutting costs, you need to pay attention to your HR department. Certain banks have been vilified recently for sacking personnel. While I wouldn’t advice such, you should be proactive.
“Your staff is an extension of you the owner. Essentially they help you get work done.”
Accenture recently disclosed in a report that a company could manage cost of close to 50% by taking care of staffing issues. You can apply the following :
- Don’t employ if you don’t have a clearly defined role for that position. Guard against duplicity of job descriptions.
- Engage the services of outsourcing platforms like fiverr. This helps to reduce man cost such as insurance and bonuses and help boost revenue.
- Automate when you can. Not all functions need human effort. Technology has helped make this happen. Certain softwares can help with basic accounting and bookkeeping activities.
- Create in-house freelance culture . Many youths are looking for IT placement in organizations with the view of gaining exposure and experience. Care should be applied here and should be for routine and less technical processes with little or no training demands.
3) Joint ventures
The future of businesses in Nigeria is increasingly collaborative. On the macro-level, we see competing brands sharing a resource pool in other to deepen market share. You too can collaboratewith other businesses in other to improve your cash flow.
Are you a speaker? You can decide to partner with a renowned authority in your field and up your speaking fees. Are you into poultry business? You could partner with the milling plant near you to help reduce your cost of buying feed.
In brokering JV deals, make sure what you are bringing to the table is substantial. Also be sure to state terms of collaboration and rules of engagement CLEARLY.
Engage the services of a lawyer in such cases to have a legal backing in case things go south.
4) Idle assets
Analysts say that 40 percent of the Nigerian middle class currently have sufficient income for discretionary spending. You can play in this space! How?
- Leasing: If you are a music equipment dealer or events planner with access to necessary equipments, you’d make a kill here. Everyone wants to celebrate! Despite the financial constraints, weddings and ceremonies carry on. You wonder where the money comes from. Hey, people can’t kill themselves. Life is lived once. Put your music equipments on lease but be certain to make contract provisions for damages.
- Office space: Co-working spaces are springing up everyday and you too shouldn’t be left out. You could re-invent your guest house into a work area with access to Internet, a suitable workspace and front desk customer relation officers. Also, you could rent some of your stores which are idle during off season for customers who need extra space to store their in-season products.
- Car rental: Why have 3 cars staying in the garage when they can be put to work for you? Welcome to the ride sharing economy. You can enlist your private vehicles with known outfits like easy taxi or uber and make money. Also if all your kids are grown up, you could put those two family buses in the inter state vehicle business. As with other points earlier stated, apply discretion.
5) Customers
Your customers shouldn’t be left out at all! Many Nigerian businesses leave money on the table when they refuse to pay attention to their customers.
- Work the list: “There is free money in the list, work it.” You can aggregate your clients email contacts and send them reminders on special discount offers and new products on the shelf. Digital marketing analysts say that for every #10 you spend on your email list you could reap as much as #4,300 depending on the strategy applied. Thought leaders and personal brands use this medium often to sell products and services like online courses, webinars, tele-seminars and workbooks to their followers.
- Affiliates: You don’t have to do your marketing linearly. You can make your customers your brand crusaders and leverage on their network to improve your cash flow. Create affiliate programs that can help them get discounts on your products or shopping vouchers or coupons for every new paying customer they bring in. It’s win win trust me.
This list is just to get you started in improving your cash flow in Nigeria and is by no means exhaustive.
Share your thoughts with me on other avenues not mentioned that can help improve the entrepreneur’s cash flow:
