How Audit Based Funding Can Increase the Impact of Government’s Interventions for SMEs
In the history of providing financial interventions for the Small and Medium Enterprises (SMEs) in Nigeria, a mix of funding in different areas, to support the textile, manufacturing, agriculture, pharmaceuticals, and housing sectors have received a boost to ensure the growth and sustainability of these industries to reduce the burden and effects of unemployment in Nigeria.
What comes to mind is that the support for small businesses should result in job and wealth creation. It should also contribute to National and Economic development by moving most Nigerians above the poverty line. However, there are concerns about whether this very goal is being achieved or not. It brings us to clearly evaluate whether there has been an improvement in the activities of SMEs or not.
Here are procedures to follow to ensure that government interventions are properly utilized:
Conduct an on-site verification of SMEs
The sustainability of any financial intervention is based on the authenticity of the existence of an actual business. Most SMEs would like to benefit from any ongoing intervention especially those by the government. As such, they do everything possible to qualify for funding opportunities.
The challenge is that some of them do not have an existing business. Some of these individuals receive the funding by establishing a miniature business to look like an existing one. In the end, they misappropriate the funds for their lascivious lifestyles.
Audit of their financial statements
You can determine the health of a business from its financial records. There are important records to look out for when auditing a small business. They include:
- Cash flow statement
- Balance sheet
- Profit and loss statement
A business generates these financial statements from proper day-to-day recording of every transaction. Doing this shows their ability to gather useful data and pay attention to happenings around their business. This is important and it is a major criterion before receiving funding, especially recent financial statements of between 3-6 months.
Business Development Training
We must recruit certified business development professionals with a deep understanding of business metrics. These professionals understand what improvements are necessary for a business to become competitive. This way, the professionals can work with prospective beneficiaries of financial interventions and note what challenges they are facing. The reports for each business would be the framework to release financing. Of course, this will be after evaluating their needs rather than giving out an equal amount to all beneficiaries.
Funding Should Be Given Based on Performance
Implementation of the solutions to the challenges found should be made into phases. This is to enable the release of funding to solve a certain challenge in the business per time. A good recommendation is called “Payment by Result (PBR).” This means that an organization doesn’t qualify for another round of funding until it produces the expected results.
These measures would enable the expectations of creating jobs and proper utilization of the funding to be achieved.
Emmanuel Otori is the Co-founder at Abuja Data School