Facilitate Entrepreneurial Skills For Micro Small Medium Enterprises Msmes
Facilitate Entrepreneurial Skills For Micro Small Medium Enterprises Msmes
ENTREPRENEURIAL
SKILLS FOR MICRO-
SMALL-MEDIUM
ENTERPRISES (MSMEs)
THIS UNIT COVERS THE OUTCOMES REQUIRED TO
BUILD, OPERATE AND GROW A MICRO/SMALL-SCALE
ENTERPRISE
What is Micro-Small-Medium
Enterprise?
A Micro, Small, and Medium Enterprise (MSME) refers to a business classification based on size,
encompassing micro-enterprises with minimal scale, small enterprises with intermediate size,
and medium enterprises that, while not large corporations, fall within a defined range of
employees and revenue.
To apply budgeting and financial management skills, one must develop detailed budgets aligned
with organizational goals, monitor financial performance regularly, and make informed decisions
to allocate resources efficiently. This process involves strategic planning, forecasting, and risk
assessment, contributing to sound financial practices that enhance overall business stability and
success.
1. Enterprise is built up and sustained
through judicious control of cash flows
A key component of establishing and maintaining an organization is maintaining effective control over the
inflow and outflow of funds through careful cash flow management. This is necessary to support growth,
maintain operations, and promote financial stability.
How do you sustain cash flow?
Invoice Management - Send out invoices promptly and follow up on overdue payments to ensure a steady inflow of
cash.
Payment Terms Negotiation - Negotiate favorable payment terms with suppliers to align outgoing payments with the
business's cash generation cycle.
Customer Credit Policies - Implement clear credit policies for customers, conducting credit checks and setting
appropriate credit limits to minimize the risk of late payments.
Expense Control - Monitor and control expenses through strategic budgeting, cutting unnecessary costs, and ensuring
that spending aligns with business priorities.
Emergency Fund - Maintain a financial buffer or emergency fund to handle unexpected expenses or disruptions without
affecting daily operations.
Inventory Management - Efficiently manage inventory levels to prevent overstocking or stockouts, optimizing the use of
working capital and reducing holding costs.
2. Profitability of Enterprise is Ensured
through appropriate Internal Controls
Effective internal controls reduce risks, thoroughly monitor and manage financial operations, and
guarantee the accuracy and reliability of financial reporting, all of which contribute to an organization's
profitability.
What Internal Control measures must be put in place to improve the profitability of the business?
Expense Approval Procedures - Enforce strict protocols for authorizing and monitoring expenses to guarantee that all payments
are in line with the budget and strategic goals, thus decreasing unnecessary expenses.
Inventory Management Controls - Create efficient inventory controls, such as regular audits and real-time tracking, to avoid
overstocking, lower holding costs, and boost overall productivity.
Segregation of Duties - To avoid possible fraud or errors, clearly identify and divide roles within the company and make sure that
important financial operations have a checks-and-balances method in place.
Financial Reporting Accuracy - Establish procedures to ensure the dependability and correctness of financial reporting, such as
frequent settlements, in order to preserve stakeholder trust and facilitate well-informed decision-making.
Budgetary Controls - Create an effective budgeting procedure with strong controls to keep an eye on spending, track
errors, and make sure funds are distributed effectively in line with strategic priorities.
3. Unnecessary or Lower-priority Expenses
and Purchases are Avoided
A company can optimize its financial resources by avoiding lower-priority or unnecessary costs and purchases. This
allows cash to be allocated toward strategic goals and essential operations, which eventually improves financial
efficiency and profitability.
Practical Advice on Cutting Costs:
Budgeting and Expense Tracking - Create a detailed budget that outlines all expenses and regularly track spending to identify
areas where costs can be trimmed.
Prioritize Spending - Differentiate between essential and non-essential expenses, prioritizing spending on critical activities that
directly contribute to business success.
Negotiate with Suppliers - Negotiate favorable terms with suppliers and explore opportunities for bulk discounts or long-term
contracts to lower the cost of goods and services.
Negotiate with Suppliers - Negotiate favorable terms with suppliers and explore opportunities for bulk discounts or long-term
contracts to lower the cost of goods and services.
Remote Work Policies - When possible, implement remote work arrangements to cut down on overhead relating to
utilities, office space, and other facilities-related expenses.
END OF DISCUSSION
QUIZ #