Financial Discipline for MSMEs: A Quick Guide to Build a Strong, Stable Business
Financial discipline is the backbone of a healthy MSME. It ensures stable cash flow, better control over funds, timely compliance, and stronger credibility with banks. Here’s a simple yet powerful framework to build financial discipline in your business.
1. Set Up Basic Systems
A. Accounting System
- Record sales, purchases, and expenses daily
- Update cashbook & reconcile bank entries
- Maintain proper supporting documents
Remember if it’s not recorded, it doesn’t exist.
B. Billing & Collection System
- Raise invoices just in time
- Mention clear due dates
- Send reminders at 7, 15, 30 days
- Check customer credibility before giving credit
C. Inventory System
- Monthly stock count
- Track fast- & slow-moving items
- Fix reorder levels
- Clear dead/old stock quickly
2. Simple Financial Controls
- Dual approval for payments
- Avoid excessive cash transactions
- Keep vendor rate contracts
- Monthly reconciliations (bank, GST, debtors, creditors, TDS)
- Stick to budgets before spending
3. Monthly Financial Review (Just One Hour a Month)
Receivables
- Check Debtor’s list & its ageing
- Defined follow-up action
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Payables
- Prioritise payments
- Use early-payment discounts
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Cash Flow
- Check next month’s liquidity
- Plan for EMIs, GST, TDS
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Stock
- Identify items unsold for 60+ days or as per your industry norms.
- Purchase based on demand
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Compliance
- Timely comply with GST, TDS, PF/ESI, Income Tax, MCA filings
4. Build a Finance Culture
- Record everything
- Keep documents organised
- Maintain transparency
- Avoid leakage & unplanned spending
- Discipline matters more than size of business
Financial discipline isn’t complicated. It’s about simple systems, monthly reviews, and consistent habits.
Businesses that follow this framework enjoy: - Better cash flow
- Fewer surprises
- Higher profitability
- Greater trust from banks/financial institutions
- Sustainable growth CA Ami Desai, Partner
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