Mixing Business, Personal Matters [opinion]

Today, I look back at one of the vexing problems that most often has affected the business management in the Small and Medium Enterprises (SMEs) and sometimes has led to some businesses to go under.

While commendation of the entrepreneurs who venture into business projects can not be avoided, there is one area of great concern among the SMEs which cuts across the board in the manner the businesses are administered.

I look at the mixing of business with personal matters. Most SMEs have been the victim of this vice which threatens the smooth running of these business entities in as far as managing them is concerned.

According to the business analysts who have taken most of their time to study the way businesses ought to be run, they have pointed out that a business entity must be completely separated from those who have interest in them (business owners).

However according to the survey I have conducted in my interaction with the owners of SMEs, the notion that surrounds their thoughts is that business entities that they have founded are not separate from them.

This school of thought can be seen in the manner they control these enterprises. Most founders of these business entities prefer to be sole authorities in the signing of cheques. And this authority in most cases is abused in that they tend to issue cheques that are not even connected to the running of their businesses.

Some times they are compelled to withdraw business money and apply the same to matters that are very irrelevant to business activities. If they are asked to explain why such a withdrawal was made by the employees whom they have assigned with responsibilities to help them manage business affairs, they become bossy and threatens the employees with disciplinary action citing insubordination.

A business in actual fact is separate from the founders in that it is supposed to run its own business activities and reports its performance to the masters who happen to be founders.

However most businesses are interrupted by the founders and sometimes choked, failing to give desired results.

I saw a business that suffered constant interference from the owners by withdrawing from it, money constantly to apply the same to other personal errands and when asked, they simply say it is part of business investment.

How can it be a business investment when business money is being withdrawn to build the house for the in-laws?

It is also important for the entrepreneurs to know that entities which are incorporated as a private company Limited by shares are different from the entities that are registered as sole propriators or partnerships.

While it is easy to withdraw money from a sole proprietorship or partnership kind of businesses (drawings), it is illegal to withdraw money from the incorporated company because of his legal status as an artificial person.

Its action can be that of a neutral person in that he can sue the shareholders and take them to court if aggrieved. For example he can take the shareholders to court if he suspects that the owners are stealing from it.

Money withdrawn from it must be in the manner that is prescribed by the law as enshrined in the articles of associations.

Ignorance is no defence to act in the manner that is not right in as far as managing these small businesses are concerned.

Another area that I must mention connected to this subject is the manner of record keeping. This column is the aocate of good record keeping by the SMEs in that the picture is drawn to show how the business is being driven by the business owners. For example, how can a business owner know how much is being withdrawn for personal errands if no proper record is kept?

Sometimes such records can sound as a wake up call to the owners, the extent to which the business is being affected by such personal withdraws and brakes may be applied to such actions.

A displined business owner will ensure that he or she puts himself or herself on a salary or allowances and give the business space to perform and a period like six months or 12 months to prepare financial statements to show what profit the business has made and make informed decision how much money can be withdrawn in terms of dividends for those entities that are legal entities.

And how much profit can be withdrawn or shared in case of the sole proprietorship or partnerships.

Some business owners are impervious to aice and are only brought to their knees when they discover that their businesses start to register signs of going down.

Another area common to SMEs in the business administration is the resistance to pay debts. Even when they have enough money in the business account, it becomes hard to pay debts even when there is enough money to discharge such debts and all what you see is that they incur extra debts especially when credit facilities to get supplies are available. In the end the debt burden becomes huge and affects their business operations because that money which was in the account is not there as it has been withdrawn for personal errands.

For any comments contact 0950458228 or wklpublications699@gmail.com

Source : The Times of Zambia

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