-Mauritz Bekker-

Bad financial management and planning was singled out in many investigations as the biggest contributor towards entrepreneurial project failures. Proper financial ability is therefore a core competency needed in all entrepreneurial activity and specifically in successful business start-up operations.

The anchor tools needed by the entrepreneur in the process of effective financial planning and management, are indeed proper knowledge of costing, pricing and the cash flow forecast.  These skills are not only core in viability assessment and planning activities, they are also the foundation of the entrepreneur’s budget. When compared to the entrepreneur’s bank statement, the cash flow forecast becomes the barometer of where the new business venture is, in comparison to where it should be.

When the cash flow forecast is not in synchronization with the bank statement, the entrepreneur needs to investigate the reasons for the deviations.  If actual sales are down in comparison to what was forecasted, the entrepreneur has to do something to boost sales and/or cut spending.  Never, but never, spend more than you have budgeted for.  It is also important for the entrepreneur who is funding the entrepreneurial activity with own or borrowed capital, to keep personal expenses as low as possible and not to take money out of the new business enterprise before it is really flying high. The more money you can plough back into the business, the bigger the chances are for growth and stability.  Successful entrepreneurs always think long-term!

The other part of successful financial management is to keep all records, on actual income and expenditure up to date.  If not, there will be ugly surprises, because people are inclined to forget what they have actually spent.

Keeping  records up to date can be compared to what a medical doctor does in keeping a close eye on the blood pressure and pulse rate of a patient.  These are the indicators, warning about possible complications.  If the doctor detects deviations too late, the patient might die.  By the same token, if the entrepreneur is too slow in picking up changes regarding income and/or expenses, it could be too late and the new business venture will go under.

The bottom line is that all successful entrepreneurs need financial planning and management skills. People without the necessary financial skills, even when all other entrepreneurial abilities are present, will never become successful entrepreneurs.