Micro Enterprises Success: Could it Be About Value Based Business Management

Cerulean Blue Consulting has been working with a client over the past three weeks. Initial impromptu consultation was based on our pitch that we could work together to obtain financing for this particular buisness to enable it expand its Heavy Machinery and Spare Parts sales operations. This of course was before any initial assessment had been done. According to the owner the main role of Cerulean Blue Consulting was to set up a system to handle all financial transactions and records to bring them up to speed and then use the financial statements to obtain the necessary financing.

The assessment was done and working on a financial policy document together with the directors became a good starting point for the directors to effect an efficent and effective finance system. This has taken a while to begin implementing even though the business is a small company with less than 5 employees. Meanwhile part of Cerulean Blue's other role was to try and get in more cash into the business through the available venues. 

After consultation we settled on a few avenues that included Invoice Discounting, Local Purchasing Order financing and seek long term finance options.

Consultation with local Micro Small and Medium Enterprise financiers yielded both expected and unexpected results. The expected as is always the case required the business to present a business plan with all the cash flow and other financial projections. The other turned out to be about values: what was being termed "UTMOST GOOD FAITH".

Deep in me I knew the owner had not showed utmost goood faith. This after advising that we prepare two different cash flow statements for "öutsiders" and different ones for internal use!

Here is Cerulean Blue representing a client who does not show a value that is oxygen to the MSME financial sector. What would be the next logical step, given that our reputation was also on the line?

We did further due diligence and this time involved a potential LPO financier. After poring over the clients bank statements for just about fifteen minutes interrogating every transaction  it was evident that something was not right. The whole picture was wrong. It did not paint Utmost Good Faith. The information I had over the days received from our client did not quite satisfy the financier in comparison with what the statements spoke.

The huge cash withdrawals warranted further explanations. The financier asked for audited financial statements (Cashflow Statement, Profit, Loss Statement and a Balance sheet). We are yet to present these since we ran into another obstacle. Incomplete Records.

These raised questions such as What would happen if my client really could not provide proof of the use of the transactions for the reasons they were taken? (These were to finance an LPO type transaction)

What is the problem really is not with the financial system but with the owner's value system?

How can these be instilled in a business right at start up so a business or its owners and employees develop a competitive advantage through delivering and practising value based business management?

If this were the case, could it minimize costs related to due diligence processes by banks and other financial intermediaries and investors?

What are the possibilities of value based business management?

What would constitute value based business management in such a set up?

Is it possible then to detect the lack of this very important ingredient in entrepreneurs needing finance for their businesses for whatever business need?

We would be on the look out for answers. Maybe there is solution out there somewhere.