Efficient Book-keeping is Prerequisite to MSMEs Creditworthiness

During the National Credit Reporting Conferences, which was organized by the Credit Bureau Association of Nigeria (CBAN), members have advised operators of micro, small and medium sized enterprises (MSMEs) in Nigeria to ensure efficient book-keeping to enhance access to finance and for them to expand their businesses.

At the conference 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 on the “ABC of Effective Bookkeeping for MSMEs,” said efficient book-keeping could help enterprises to secure business loans, detect banking errors quickly, show were their money is going and ensure that they enjoyed favourable tax deductions.

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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’ current financial state, and allows them to make financial projections about your company’s ability to pay off its loan in the future.”

He therefore advised MSMEs to always separate their businesses from personal expenses, choose a book-keeping system and accounting method that are suitable, categorise their transactions, organise 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 emphasise this because most MSMEs ignore this vital area,” he said.

In his own 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 realisation that less than four per cent 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.

He stated that it is important to have a record that will show your business performance to have access to loan, emphasizing that there is an important relationship between credit worthiness and accounting (book-keeping).

He said, “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.”

Contributing to the discussion, 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 credit worthiness.

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

Apart from giving your business credibility through identifiable address, online presence and capital, Sherrieff-Ayedun said, “Book-keeping can help you to demonstrate character by showing your past records monthly repayment of goods received on credit. Also paying your bills as when due shows your character.”