By Emmanuel Otori
There are many reasons why companies fail, and one reason for failure in business is the lack of funds, the exchange of money for the goods or services provided. There is no point in having a great product when its market value is zero, sooner or later, the competition for market share would shift to those who get enough cash flow regardless of whether they make a profit.
When a business has cash flow, that is a sign of viability, that it has the capacity to cover its running cost over time, but needs to go through the phases of growth until it is able to begin to add some percentage which can now be kept aside as profit, for reinvestment.
The need for cash in the business is so enormous that without some activities running, a total collapse might be inevitable.
Why Cash flow is Important To Business Sustainability
Primarily, cash flow generates the working capital for running the day-to-day affairs of a small business and why is considered optimum in the life cycle of a small business. A business can be making high volumes of sales and no profit, but needs to be careful with servicing debt, because if it takes a large part of this money before the business breaks even, the cash flow will dry up and the business will eventually fail. Efforts should be made to ensure that wholesalers or retailers make some payment before delivering the goods, a payment that comes in long after it is
Profit is what remains of the sales when the expenses of a small business are deducted. The data that constitute the production cost of an item should be known as this can be reduced in other to generate the profit that can cover other costs of running the business. A business owner should also be mindful of rapid growth, as it comes with unexpected circumstances that might need to correctional measures.
These are factors that might impede profitability
- Operational Problems
Operational problems occur when there is an increase in the volume of production, and this is because the amount of communication, staff, and energy supply that was needed to produce one thousand units of a good per day would definitely increase when demand is high and volume moves to a production of 2000 units per day.
- Increased Corporate Spending
It is necessary to avoid spending that has no direct impact on the business in its early stage of growth. Services such as facilities management, staff hiring, delivery services, promotions, and advertisement can be handled in-house by the business instead of making payments that are way ahead of the expenses that should be incurred.
- Human Resource Problems
Workers unfamiliar with the corporate goal of the organization can make grave mistakes that could cause business losses whether, with direct interaction with the customer or negligence to standard operating procedures, staff not having the necessary motivation to work as their salary might just be a way of staying alive, problems with the payroll are potential issues that could hinder productivity.
FG Raises N130bn from Sukuk Sales for Road Infrastructure
By Aduragbemi Omiyale
A total of N130 billion has been raised from the sale of Sukuk for the construction and rehabilitation of road infrastructure across the country.
Business Post reports that on November 21, 2022, the Debt Management Office (DMO) opened for subscription N100 billion Sovereign Al ’Ijarah Sukuk.
However, because of the strong appetite shown by the diverse investors, the size of the offer was increased to N130 billion.
According to a statement issued by the DMO, the exercise recorded over 165 per cent subscription level.
The agency described this as “evidence of investors’ confidence in the use and impact of Sukuk in the construction and rehabilitation of road infrastructure across the country.”
It stated that offers were received for the debt instrument, sold at a rental rate of 15.64 per cent per annum, from retail investors, banks, pension fund administrators, assets/fund managers, insurances companies, ethical funds, Takaful operators/non-interest banks, stockbrokers, government agencies, high net worth individuals, trustees and unit trusts.
The DMO assured subscribers of the Sukuk that “the proceeds of the 2022 Sovereign Sukuk, like the previous Sukuk issue proceeds, will be used solely for the construction and rehabilitation of key road projects through the Federal Ministry of Works and Housing and the Federal Capital Territory Administration.”
It thanked the investors for supporting the federal government’s infrastructure development efforts through Sukuk financing.
“The strong participation of retail investors, ethical funds and non-interest financial institutions in this Sukuk offering attest to the fact that the Government’s objective of promoting financial inclusion through admitting more retail investors and ethical funds into the financial system is being achieved,” it stated.
The debt office promised to “work to sustain the laudable achievements recorded so far in the use of Sukuk issue proceeds for the construction and rehabilitation of Nigerian roads, and thereby, continue to enhance ease of commuting and doing business, safety on our roads, job creation, economic growth, and prosperity of our nation.”
Nigeria Sells Retail Bonds for 13.26% at N1,000 Per Unit
By Modupe Gbadeyanka
The Debt Management Office (DMO) has commenced the sale of the Federal Government of Nigeria (FGN) savings bonds for December 2022.
The retail bonds are sold monthly to low-income earners and other interested investors as a way to raise funds from the capital market to finance budget deficits.
For this month’s sale, the debt office is offering the papers in the usual 2-year tenor and 3-year tenor at a coupon rate of 12.255 per cent and 13,255 per cent per annum, respectively.
Subscriptions for the notes started on Monday, December 5, 2022, and will close on Friday, December 9, 2022, according to details of the exercise released by the DMO.
The interest would be paid to subscribers quarterly, i.e., March 14, June 14, September 14, and December 14, while the bullet repayment would be made at the maturity date.
The savings bond is sold at N1,000 per unit, and investors are required to purchase at least N5,000 and a maximum of N50 million.
Intending investors would be expected to contact their brokerage companies on how to purchase the debt instrument.
The retail bonds are backed by the full faith and credit of the Nigerian government and are charged upon the general assets of the country.
The investment tool qualifies as a security in which trustees can invest under the Trustee Investment Act.
It is also a liquid asset for liquidity ratio calculation for banks and qualifies as government securities within the meaning of the Company Income Tax Act (CITA) and Personal Income Tax Act (PITA) for tax exemption for pension funds, amongst other investors.
New Cash Withdrawal Limits Will Expose Tax Evaders—Oyedele
By Adedapo Adesanya
The Fiscal Policy Partner and African Tax Leader at one of the country’s leading consultancy companies, PwC, Mr Taiwo Oyedele, has said the new cash withdrawal limits introduced by the Central Bank of Nigeria (CBN) would expose tax evaders, individuals and micro, small, and medium enterprises (MSMEs) in Nigeria.
In a series of tweets seen by Business Post, the tax maverick said that with the restrictions placed on cash withdrawals, many people would be forced to carry out transactions using electronic payments, and small businesses that currently operate mostly on cash would become visible to the tax authorities.
It had been reported the apex bank on Tuesday moved to limit the amount of cash withdrawals Nigerians can make with benchmarks placed at several channels, including over-the-counter, point of sales (POS), and automated teller machines (ATMs).
He explained that the policy would trigger various tax obligations, including income tax, value-added tax (VAT), and Pay-As-You-Earn for small businesses and individuals.
On Income tax, he wrote that “If your business is registered as a company, you may be liable to CIT depending on your annual turnover (i.e. no CIT if your turnover below N25 million, 20 per cent if your turnover is between N25 million to N100 million 30 per cent if your turnover is more than N100m) in addition to Education Tax at 2.5 per cent.
“If your business is not registered as a company, then you will be liable to personal income tax based on graduated taxable income bands between 7 per cent and 24 per cent.”
On VAT, he explained that, “All businesses are required to register for VAT and charge 7.5 per cent on their goods and services except those with annual turnover below N25 million.”
For PAYE, Mr Oyedele explained that employees earning more than N30,000 per month are liable to PAYE, which must be deducted and paid to the tax authority by the employer on a monthly basis.
To this, he noted, “You may also be liable to other statutory contributions such as pension depending on your staff strength.”
For individuals, he noted that as they carry out more transactions, this will make them susceptible to transparency as it will make it easier for the government to track those who are tax evaders.
“The more transactions you make electronically, the more the tax authorities will get the intelligence to track your income and net worth, making it easier to fish you out if you are a tax evader.”
He then advised small business owners to register with relevant tax authorities like the Federal Inland Revenue Services (FIRS) and the state internal revenue services where they operate.
Further, the PwC official called on SME operators to open a separate bank account for their business, “or dedicate one for that purpose if you already have a business account) and don’t mix business with personal transactions.”
The government, on its part, he said, needs to sensitise the general public, especially small business owners, adding that the CBN should ensure a proper handshake with the fiscal authorities.
“For instance, the conditions for excess cash withdrawals could include Tax Identification Number,” he opined.
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