Part Three (3): IMPROVING PERFORMANCE VIA INCREASED UNDERSTANDING OF BASIC FINANCIAL AND ACCOUNTING CONCEPTS AND TERMINOLOGIES BY THE MICRO, SMALL AND MEDIUM ENTERPRISE OPERATORS IN NIGERIA

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This piece like the ones before it is a continuation of previous publications on the topic of this write up. I did promise that the topic will trend on this platform for some time. It has and will still be trending here for a while. 

In case you did not read Part Two (2) of this Publication, please click the link below to read it:

https://www.belfordscorelines.com/2023/09/improving-performance-via-increased_25.html#more

In that previous publication, I made assertion that access to finance by the MSME operators is crucial to their success in business, and stated also that accounting and finance induced challenges faced by the MSMEs, are of interest in business enabling environment (BEE) discussions. Following this development, I noted that improved knowledge, understanding and sound application of basic financing and accounting terminologies, principles, concepts and conventions will redefine in major ways operations of the MSMEs, and reduce some of the challenges associated with lack of proper financing, record-keeping and documentation skills. 

I noted also that proper financing, record-keeping and documentation skills will lead to improvement in the internal and external environment of most businesses, a condition precedent for the MSMEs generating higher income and increasing their chances of attracting higher Return on Investment (ROI).

It is important to observe that generation of higher income to increase the chances of the MSMEs attracting higher Return on Investment will contribute significantly to positioning them to appreciate better the world of business and what goes on around them. This is necessary as the lessons accruing from this development will embolden, empower and prepare them to respond to business dealings in more appropriate and acceptable ways, and raise them to ask the right questions most of the time, especially when situations change and new challenges emerge.

Moving forward, let me draw attention of the reader to the fact that beyond asking the right questions, in this case asking fundamental or basic accounting and financing related questions, it is very vital that the MSME operators develop deep interest, understanding and demonstrate consistently greater commitment about application of knowledge of basic financing and accounting principles, concepts, terminologies and conventions in their respective businesses.

The experience that will ensue from the above will no doubt help to strengthen their impression, build their confidence and brighten their vision and general perspective of business. The combination of these factors in business operations will in several ways impact the activities of the MSME operators positively. The benefits include increased analytical capacity, enhanced ability to take informed decisions based on conclusions arising from accurate records and verifiable data backed by adherence to basic finance and accounting principles, concepts and conventions. 

 

With increased knowledge, understanding and skillful application of finance and accounting principles, terminologies, concepts and conventions MSMEs will grow substantially 

 

Put succinctly, increased understanding of basic finance and accounting principles, terminologies, concepts and conventions illuminates the mind of business operators, and increases their ability to generate, use and provide data for useful purposes. Considering that these factors are the major drivers of business success, I am moved to note that they serve as indicators and tools that showcase business performance: success (Profit) or failure (Loss).

Success in this instance implies creation of long term values (return on investment and/or improvements of various kinds). In the case of failure (loss), the same tools if effectively deployed can be relied upon as decision making guides to perform basic operations that can produce results capable of transforming or changing the status of a business from a low performing type to a booming/high income generating outfit.

Before concluding this piece, let me deposit here that increased understanding and effective application of the basic financial and accounting terminologies, principles, concepts and conventions are of major input to business, and are recognized as aids to decision making in business. They are not only crucial but fundamental to business success considering that they have enduring effect on businesses.

Nnabugwu Chizoba