Businesses must effectively manage debts to remain competitive, according to Mr Charles Ocici, the Enterprise Uganda executive director.
Speaking during an entrepreneurship training on how to manage business cash flow, Mr Ocici said entrepreneurs must comprehensively review all debts and prioritise settlements that have a potential to undermine the stability of the business.
He also cautioned entrepreneurs against being drawn into taking up debts that they have not planned for.
“You must be able to control the appetite of running for money. That is a sign of maturity. Bankers will always call you for money but learn to resist if you have not planned for that money,” he said, noting that before borrowing, entrepreneurs must evaluate how much they need and if they have the capacity to effectively pay back.
Many Ugandan businesses have suffered under the weight of debts that are acquired for unplanned business expansions and lavish expenditures.
This, according to experts, has been a key driver that has seen a number of businesses go under due to cash flow constraints.
“Don’t rush to expand before consolidating. Unplanned expansion will get your business into cash flow constraints, delay paying your suppliers [before collapsing],” Mr Ocici said.
Experts warn that while, business expansion is good for profitability and growth, it should be done carefully, after putting in place the right strategy that can deliver stability, security and long-term profits.
According to Mr Ocici, entrepreneurship must know that opportunities never end, therefore, businesses must use market intelligence to know when and how to expand.
“Don’t be tempted to pick money from another source yet you had not planned for it,” he said.
Signs of business failure
Cash flow challenges: According to Mr Ocici, business failure is manifested in challenges related to cash flow. Cash flow challenges come in different forms such as absence of internally driven growth, drawing loans from multiple sources and failure to meet statutory obligations such as paying taxes.