Necessity of financial Advice to SME

Doing business has become a fad among st the young minds especially youths who are in their twenties and early thirties. The UAE in general and Dubai in particular offers many free-zones where it is easy to set up a business entity within a week. Most of these entities come under the SME category.

The idea of starting a business is good. But it should be after doing proper homework. Many potential entrepreneurs do half of their homework by gathering information from various sources which may not be very authentic or reliable.
Once the line of business activity is identified, the most important requirement before exploring into the business venture is financial advice. The financial information should be discussed with a financial expert who has the expertise and is capable of carrying the potential entrepreneurs through his gestation period. It is like navigating the boat through the turbulent waters to the other side of the shore.

Majority of the new SME entrepreneurs are career oriented businessmen who wants to become good and successful entrepreneurs visualizing a great future in the business domain. It is an established fact that a sensible and discreet approach is imperative to new entrepreneurs who are venturing into the business realm submitting their body, mind and head into the endeavor with great hope of success. This anticipation of success is so vital and sacred for them not only because their caliber is questioned but their very survival hinges on its success. A prudent financial planning coupled with good market knowledge will definitely contribute significantly in the success of a new venture.

The survival of a business entity depends on its careful and sensible utilization of its financial resources. How to achieve this objective? This is where the role of a financial advisor/expert comes in being.

In the beginning itself a good financial advisor/expert will be able to guide the entrepreneur as
to how the initial contribution of funds should be prudently employed so that wasteful and
unwanted expenses could be avoided. This will also help to minimize the initial financial burden.

The role of a good financial advisor/expert is a continuous process and it should be so if the
business entity has to have a smooth sailing.

“A sensible, vigilant and cautious financial
approach is the essence of a successful and
blossoming business venture. To achieve
this objective both the entrepreneur and the
financial consultant have equal role to play.”

A good financial advisor/expert can easily prioritize the important areas where the financial
resources have to be deployed. The area of deployment depends on the type of industry. In
some cases it could be in inventory, sometimes in human resources, elsewhere it will be fixed assets and so on. In the same industry or in the same business the priority may change from time to time as this depends on a significant number of factors both external and internal.

In the initial stage, the business progress should be evaluated on a monthly basis. This helps not only in comparing the actual with the budget (variance analysis) but also provide important insight into the various types of recurring expenses needed for the business in the future. These types of information will help in planning the future business strategy, avoiding any future trouble. Timely and pertinent intervention could go a long way in stabilizing and consolidating the business in the initial phase itself.The role of a good financial advisor/expert is crucial
and inevitable at this critical phase.
In this part of the world the role of a good financial advisor/expert has not been taken seriously by many SME units. Business units which could have been survived and business units which are still struggling could have easily overcome their misfortune had they been able to seek and utilize the expertise of a good financial advisor/expert. Similarly there are many SME units who are running their business for years without any significant progress due to lack of financial guidance. These entities could have grown into big entities had they been guided judiciously. Lack of awareness of financial guidance could be one of the reasons.

Continuous financial advice and guidance is akin to continuous education program. Financial advisory and consultancy firms should take bold initiative in popularizing the need, benefits and necessity of financial guidance. They should conduct seminars, meetings, discussion groups, etc. amongst the business community to enhance their awareness. This will not only help the business community in a long way but also understand the important and significant role of financial advisor/expert in the field of business enhancement. Financial advisors and experts can play a decisive role in the society as a mentor to the business community just like a doctor to a patient –identifying the illness and providing the right cure.

Financial consultants can also be a fellow traveler with the business community. This will be beneficial to both of them. There are many areas where the business community can be provided advice or guidance on some of the following matters of which they are not even aware of like:

1. Financial benefits or advantages from a new government guideline.
2. Economic benefit from a new credit policy outlined by the Central bank.
3. Advice on an impending financial or economic crisis so as to take the necessary precaution to
reduce or eliminate its impact.
4. Providing prudent financial advice to take advantage of the credit facilities provided by the banking sectors to SME.

In short a sensible, vigilant and cautious financial approach is the essence of a successful and
Blossoming business venture. To achieve this objective both the entrepreneur and the financial
Consultant have equal role to play.

Prem Kumar Nambiar

Senior Consultant

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