MSMEs Need Efficient Bookkeeping to Enjoy Creditworthiness

Members of the Credit Bureau Association of Nigeria (CBAN) have advised operators of micro, small and medium-sized enterprises (MSMEs) in Nigeria to embrace efficient book-keeping in order to enhance access to finance as well as for them to expand their businesses.

The advice was given during the National Credit Reporting Conference, which was organized by the CBAN with the theme “Promoting MSMEs Credit Worthiness: Effective Bookkeeping and Loan Accessibility.”

The Managing Partner of Taisha Associates, Mr. J. Taiwo Popoola, who made the key presentation during the conference on the “ABC of Effective Bookkeeping for MSMEs,” said efficient bookkeeping could help enterprises to secure business loans, detect banking errors quickly, the show where their money is going and ensure that they enjoyed favorable tax deductions.

Taiwo said: “Book-keeping can be tedious work, but the sweat equity buys you something priceless: financial insight into your business. Without bookkeeping, you’re driving blind like a car without a gas gauge.

“Sure, the car is driving fine, but who knows how long before you have to pull over and wait for a friend to bring a jerry can?

“Book-keeping is the process of tracking all of your company’s financial transactions, so you can see exactly where your business is spending money, where your revenue is coming from, and which tax deductions you’ll be able to claim.

“If you need financing of any kind, having well-kept books give lenders or investors a clear idea of your business’s current financial state, and allows them to make financial projections about your company’s ability to pay off its loan in the future.”

He also advised MSMEs to always separate their businesses from personal expenses, choose a book-keeping system and accounting method that are suitable, categorize their transactions, organize and store their documents and prepare potential deductions.

“Organising and storing your documents like invoices and vouchers are crucial because the only language the taxman understands is business documents. We need to emphasize this because most MSMEs ignore this vital area,” he said.

In his contribution, the Chairman of CBAN and the Chief Executive Officer of the CRC Credit Bureau, Dr. Tunde Popoola, said the theme of this year’s conference was informed by the realization that less than four percent of more than 40 million SMEs in Nigeria have access to credit.

He said the focus of the conference was to build the capacity of MSMEs through efficient bookkeeping.

According to him, “to have access to loan, it is important for you to have a record that will show your business performance. There is an important relationship between creditworthiness and accounting (book-keeping).

“Even by law, once you register your business you are bound to keep records to make annual returns and pay taxes,” adding that digital storage of records would enhance their chances of accessing government intervention funds, and those from international financial institutions.”

The Managing Director/Chief Executive Officer of the Credit Registry, Mrs. Jameelah Sherrieff-Ayedun, also told operators of MSMEs that three “Cs,” namely capacity, character and capital, are essential for their creditworthiness.

She said: “You need a consistent flow of income to demonstrate that you have the capacity to repay loans. Another one is a character, which is your willingness to pay.

“Book-keeping can help you to demonstrate character by showing your past records monthly repayment of goods received on credit. Also, pay your bills as when due shows your character.

“Let your business have credibility through identifiable address and online presence where people can easily find you and have the confidence to offer you credit. The last one is capital.”