Business analyst Ebunoluwa Ashley-Dejo has warned that financial literacy holds the key to SME survival. Without it, she says, small businesses collapse even when demand remains strong.
Ashley-Dejo spoke at the SME Hangout forum organized by BusinessDay Newspapers. The session focused on financial literacy for entrepreneurs.
Many SMEs fail during recessions not because products are weak or customers disappear. Rather, they lack visibility into how money flows through their operations, she explained.
"Cash flow becomes critical during tough economic periods," Ashley-Dejo told the audience. "A business survives slow sales, but broken cash flow kills operations fast."
She urged entrepreneurs to first understand their money movements in detail. Which customers delay payment?
What expenses are wasteful? Which products sell fastest?
These questions matter because answers drive smarter decisions quickly. Business owners who know their numbers survive downturns better than those who guess.
Ashley-Dejo advised against chasing growth during uncertain times. Stability should come first, she stressed.
"Forget aggressive expansion for now," she said. "Protect your cash instead.
Cut waste. Manage inventory tight.
Keep customers loyal."
Customer relationships matter even more during crises, according to Ashley-Dejo. Loyal customers buy again and again, keeping revenue stable when new sales dry up.
But which numbers should SME owners actually track? Ashley-Dejo has a clear answer.
Revenue alone misleads businesses, she noted. A shop can sell plenty but still lose money if expenses are too high.
Instead, entrepreneurs should monitor cash flow, profit margins, expense trends, customer retention, inventory turnover, and debt levels. These metrics reveal true business health.
"Focus on whether operations are sustainable," Ashley-Dejo explained. "Not just whether sales are climbing."
Financial literacy transforms how entrepreneurs think about their work. It shifts owners from simply "running" a business to truly understanding it.
Consider a small food vendor, she illustrated. Strong daily sales don't guarantee profit when supplier costs keep rising and customers pay late.
"That's where financial literacy saves you," Ashley-Dejo noted. "It teaches owners to ask harder questions about what the numbers actually mean."
Africa's SMEs face brutal economic conditions that test every business idea. Without financial knowledge, even solid enterprises collapse under pressure.
With it, entrepreneurs navigate storms successfully and build lasting companies. The difference often comes down to understanding numbers, not luck.