Entrepreneurs' Guide to Financial Management: Essential Concepts and Practical Approaches for Long-Term and Success

“When you are thinking of starting a business, you are supposed to be familiar with the basics of marketing, the basics of finance, and all the legal matters” Mohamed Qais

Effective financial management is crucial for entrepreneurs to thrive in the constantly shifting and competitive business landscape. It involves strategic planning and the efficient utilization of financial resources to meet the enterprise's objectives. Through shaping financial strategies and implementing cash management and financing techniques, entrepreneurs can ensure their projects' sustainability and growth. Essential elements of financial management include careful financial planning, thorough financial analysis, effective risk management, and transparent, reliable financial reporting. This Deraya webiner hosted Mr. Muhammed Qais, a finance management expert to share his knowledge and experience in navigating the complexities of financial management in today's entrepreneurial environment.

The role of financial management for startups' long-term sustainability:

Managing the finances of startups is a critical process for their continuity and sustainability in a competitive industrial market. This process includes a set of strategic financial actions aimed at balancing revenues and costs and achieving efficiency in the use of available financial resources. Through guiding appropriate financing strategies and managing cash flow wisely, financial management can support the continued growth of startups and enhance their resilience in the face of financial challenges. In this context, Muhammad Qais stated that “seminars and workshops refer to the use of financial flow and planning in the incoming and outgoing cash aspects and an attempt to ensure the provision of liquidity for the sustainability and continuity of the institution.”

Additionally, financial management can also help startups make informed decisions regarding investments and expansion opportunities, ensuring long-term success. By closely monitoring financial performance and implementing effective budgeting techniques, startups can better navigate economic uncertainties and achieve their long-term goals. Furthermore, accurate and transparent financial reporting helps to build trust with partners and investors, increases access to additional funding, and improves the financial sustainability of future startups. Mohammed Qais also added that "The primary goal of the institution's money management is to balance profitability and liquidity, meaning that there is profit but it is necessary to provide liquidity at the same time."

The Deraya facilitator aimed to continuously ask the experts for advice on the best practices for financial management in order to ensure that startups are equipped with the necessary tools to succeed in a competitive market. An important question raised was how the concept of a structured financial management strategy improves startups' ability to attract investors and secure the necessary funding. According to Mohammed Qais, "organizations and investors look at two needs: they look at papers, notebooks, and records, and besides that, the person's conviction of the idea and the project, and how to present the idea or project to the investor or the organization that wishes to finance it. Even if your idea is only partially convincing, your attention to detail will get

you funded, whether the investor is local or international. International investors place a high value on these factors since they will closely monitor even the smallest details."

This attention to detail and thorough preparation can make a significant difference in attracting investors and securing funding for your project. By demonstrating a strong understanding of your idea and presenting it effectively, you can increase your chances of success in obtaining the necessary financial support. Mohammed Qais also recommended "resources that a person can use as a novice entrepreneur (websites, applications) to help him stay on track. Microsoft Excel is sufficient as a starting point."

Indicators of finances to guarantee startups' success:

Using financial forecasting tools, creating a detailed budget, and routinely monitoring cash flow. Furthermore, obtaining advice from experienced mentors and networking within the entrepreneurial community can provide vital insights and assistance in reaching financial success. To achieve long-term viability and profitability in a changing corporate environment, vital financial indicators must be monitored. Startups that have positive cash flow can improve their ability to fund their activities and meet financial obligations more effectively. Sustainable profitability allows the firm to produce consistent financial gains, improving its market position and contributing to its long-term viability. Continuous expansion enables the organization to extend its operations and gain additional prospects and customers, resulting in increased revenue and profits. Mohammed Qais highlighted that "Indicators are not built out of nowhere, indicators are based on the average of a pre-prepared study. The more accurately you calculate the indicators, the closer they are to reality and the more you benefit from them."

Good financial liquidity contributes to providing stability and the ability to control difficult financial situations, while the debt ratio decreases, which reduces financial risks and enhances the confidence of partners and investors in the company. "Liquidity as a first class is an indicator, but there are other indicators, including the profit index. Focus on indicators of liquidity, profitability, and activity. For example, the movement of expenses, are expenses increasing significantly or not? What is the reason for its increase, if any? So, the index will draw attention first, and then it will come with the reasons involved."

Common financial management mistakes for startups:

During this Deraya webinar, it was mentioned that startups frequently make financial management blunders, which have a detrimental impact on their market performance and longevity. Common problems include not properly recording spending, failing to develop a realistic budget, and neglecting to check cash flow on a regular basis. By correcting these financial management flaws, companies can increase their chances of long-term market success and sustainability. Without a good financial plan, a company is exposed to unforeseen financial fluctuations, and cost inflation can put further strain on liquidity. Inefficient investments and an overreliance on external capital can expose the company to severe financial risks and lead to a drop in financial performance. Mohamed Qais stressed that "data is absent in the Libyan environment."

Furthermore, ignoring cash flow might result in a deficit in meeting daily financial obligations, putting the organization in a tough situation. Furthermore, failing to correctly analyze financial statements might result in poor judgments that are detrimental to the organization in the long run. It is crucial for companies to prioritize financial literacy and ensure that decision-makers have access to accurate and timely financial information. By implementing proper financial management practices, organizations can mitigate risks and improve overall performance.

Muhammad Qais also explained: Always when the price of the product is determined, what does the buyer expect? He expects that the costs are the raw material he bought and the value he paid to the person who worked on it. They usually neglect that machines are consumed, that electricity must be carried, that rent must be borne by them.

Improving financial management strategy of startups:

Improving startups' money management approach entails creating clear and effective financial policies that assure compliance with financial laws and regulations. Communication and coordination between the company's many divisions, such as finance, sales, and marketing, is essential to guaranteeing that financial objectives are met in tandem with operational business objectives. It is important for startups to also establish a budgeting process that includes regular monitoring and analysis of financial performance to identify areas for improvement and ensure long-term sustainability. Additionally, seeking guidance from financial experts or consultants can provide valuable insights and help startups make informed decisions regarding their financial management strategy. A startup must develop techniques for effectively managing financial risk, which include analyzing risk and devising mitigation strategies. Adopting these steps can help startups improve their money management approach and achieve long-term financial stability and success.

The role of financial planning in mitigating risks and challenges:

Financial planning is critical for reducing the risks and problems that startups face in unpredictable markets. It can identify the necessary financial resources, guide financial strategies to meet goals while minimizing risks, effectively manage cash flow, minimize expenses, and assess and manage financial hazards. Startups can attain stability and success in a competitive environment by examining financial statements and implementing effective financial plans. Financial planning also helps to provide counsel and direction on making wise financial decisions, as well as improving connections with investors and financiers.

Mohammed Qais mentioned the following: "As for the overall obstacles that startup founders may encounter in the future: It is critical for a person to begin in the business sector and become acquainted with the financial and business environment, the risks involved, and the factors that interact with one another. All these elements are connected, both within and outside of the country. One of the most prominent risks that company founders can be exposed to is the rise in prices as a result of global social conditions. For example, the war between Russia and Ukraine and its repercussions that reach us. We don't even have an active stock exchange (it was down for a while), let

alone if we had an existing financial market. The whole economy depends on these markets, and this further complicates matters. Any movement in the world directly affects us here in Libya."

Future challenges for startups:

Startups will face numerous challenges in the future, influenced by current global developments such as digital transformation, market changes, changing legal and regulatory regulations, increased global competition, the growing demand for sustainability and social responsibility, as well as environmental challenges and natural disasters. To compete in today's rapidly changing business climate, entrepreneurs must innovate, adapt swiftly, and establish strong strategies.

Muhammad Qais replied in this context: The change in prices and conditions within the state requires that my eyes always be on legislation and laws that directly affect me. This is one of the challenges in legal, regulatory, and legislative matters within the state, and these matters must be based on a strong foundation so as not to accumulate some obligations to the state without me being aware of them, which may lead to me reaching a stage that requires me to pay large amounts of fines or my inability to meet them. This is in relation to the economy and legislation.

It is crucial to stay informed and updated on any changes in legislation that may impact my financial obligations and responsibilities. By staying proactive and knowledgeable about legal matters, I can avoid potential financial setbacks and ensure compliance with state laws. In short, financial planning plays a crucial role in mitigating the risks and challenges facing startups in volatile markets and contributes to their long-term stability and success. It is also important to seek professional advice from legal and financial experts to ensure that all legal requirements are met. By doing so, startups can avoid costly fines and legal issues that may arise due to non-compliance with regulations. Ultimately, staying informed and seeking guidance will help startups navigate the complex legal landscape and thrive in the competitive market.