How Audit Based Funding Can Increase 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 in order to reduce the burden and effects of unemployment in Nigeria.
What comes to mind is that the support provided for these small businesses should produce a cumulative effect in job and wealth creation as well as contribute to national and economic development by moving most Nigerians out of the poverty line into the empowerment line.
However, there are concerns about whether this very goal is being achieved and brings us to clearly evaluate whether there has been an improvement in the activities of SMEs or not. Here are procedures to follow in order to ensure that government interventions are properly utilised
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. Due to the fact that most SMEs would like to benefit from any ongoing intervention, they do everything possible to qualify for funding opportunities and some do not have an existing business. When they receive the funding by establishing a miniature business to look like an existing one, they take the funds and misappropriate for their personal lifestyles.
Audit of their financial statements
The healthiness of a business can be determined from its financial records. There are important records to look out for when auditing a small business. They are
Cash flow statement
Balance sheet
Profit and loss statement
A business with these financial statements that are generated based on a proper day-to-day recording of every single transaction shows that their ability to gather useful data and pay attention to happenings around their business is important and this is a major criterion before receiving funding, especially recent financial statements of between 3-6 months.
Business Development Training
Certified business development professionals with a deep understanding of the metrics to track what improvements need to be made in a business to make it competitive should be recruited to work with a number of prospective beneficiaries of financial interventions and note what challenges they are facing. The reports for each business would then be the framework to release financing after evaluating the needs of such businesses 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)” which means until the organization produces the expected result of solving a particular challenge in their businesses, they would not qualify for another round of funding.
These measures would enable the expectations of creating jobs and proper utilisation of the funding to be achieved.
Emmanuel Otori is the co-founder at Abuja Data School and has worked on the GEM Project of the World Bank Bank and has over 8 years of experience working with over 50 SMEs across Nigeria.
