Financial Inclusion of Small and Medium Enterprises (SME’s) in the Eastern Caribbean Currency Union


The German Savings Banks Foundation for international Cooperation (SBFIC) of Bonn, Germany with the St. Lucia Chamber of Commerce Industry and Agriculture as a Partner is implementing an ECCB endorsed project which seeks to help in the strengthening of the financial sector and improving access to financial services in the Eastern Caribbean Currency Union by SME’s. The Pilot Phase is in St. Lucia.

The main focus of the project include inter alia:

  • Widening loan services supply to private SME by local financial institutions by strengthening the sustainability, know-how and the product range.
  • Strengthening of business literacy, the financial education for individuals, and entrepreneurs of private SME.

The overall objectives are as follows:

  • Improve SME’s access to financial services by strengthening the sustainability, know-how and the product range of selected financial institutions.
  • Increase the Financial Literacy of Small Enterprises by providing business training and business coaching.
  • Increase synergies among indigenous banks by establishing a joint service provider for the financial sector as a potential cooperation model.


Introduction to KPIs

Through Key Performance Indicators, which are calculable figures, SME‘s can determine how successful it is at accomplishing key business aims. Thus the performance of a company at achieving goals can be measured.

 In the following few months we will introduce several KPIs out of the following categories

They are important for your company or a business no matter the size your enterprise:

·         KPI‘s can measure your targets.

·         You receive important information about your performance.

·         KPI’s encourage accountability.

·         Boost morale and help to grow your business

·         Create an atmosphere of Learning.



They can be calculated by the accountant or controller of your company in weekly, monthly or yearly intervals in order to establish the above mentioned advantages.

KPI‘s are not only useful for companies. Investors and creditors, (e.g. banks) use KPIs in order to assess whether it is feasible to invest in a company or give loans to a company.

In the explanation of these KPI’s, a short example of how to calculate the respective KPI is firstly provided. The importance of this KPI is shown on the one hand for a company and on the other hand for a bank or investor. Finally there are some hints on how a company can improve its financial statements in order to improve a KPI.

Cash flow KPIs

Introduction to cash flow KPIs


This chapter looks at cash flow as a KPI. This KPI focus on the cash being generated, specifically how much is being generated and the safety net that it provides to a company. These ratios provide an indication of the financial health and performance of a company.

As we are all aware, profitability is critical to the continued existence of a company. However, through the magic of accounting and transactions that are non-cash based, a business that appears very profitable can actually be at a financial risk. This is the case when a company is generating little cash from profits. If a firm makes a lot of sales on credit for example, it will look profitable but has not actually received cash for the sales. Thus the financial health of a business can be at risk as it attempt to meet its obligations.

Leading and lagging, a commonly practised accounting technique utilized in the process of cash management is an effective way to maintain good financial health. Operating cash flow and its importance to business success and creditors is also explained as well as accounts receivables turnover and accounts payables turnover. A few simple tasks are provided to enable you the reader to calculate the ratios explained. In the end of the section the solutions of the tasks can be found in order to check if the calculations were correct.

Cash management and Leading/ Lagging

Cash management

The treasury function of a company amongst others is represented by cash management. One of its main tasks is accomplishing optimal efficiency for receivables, which is cash inflow, as well as payables, which is cash outflow.

When a firm issues an invoice it is reported as a receivable. This is cash earned but yet to be received. The enterprise may have to wait 30, 60 or 90 days for the cash to be received, depending on the terms of the invoice. It is common for a company to report increasing sales, yet still run into a cash crunch because of slow or badly managed receivables. In order to accelerate its receivables and reduce payment float, there are a number of things a firm can do. This include:

       •    Clarifying billing conditions with clients.

       •    Using a programmed billing service to bill customers immediately.

       •    Using electronic payment processing through a bank to control payments.

       •    Staying on top of collections with an aging receivables analysis.

 A company can improve its cash flow by controlling its payables through various means.  This include:

       •    Lower costs and keep more cash working in the enterprise by improving the overall efficiency of the payables process.

       •    Electronic payment processing.

       •    Direct payroll deposit and controlled disbursement are payables management solutions. These can streamline and automate the payable function.

The receivables and payables management functions can often be automated by using business banking solutions. Due to the digital age smaller firms have access to the same large-scale cash management technologies used by bigger enterprises. More efficient cash management tools often easily cover the costs that they cause. This allows management the ability to reallocate precious resources to grow the business. 

Small business owners typically have less access to affordable credit. Moreover they have a significant amount of upfront costs to manage while waiting for receivables. Because of these challenges, successfully management of cash is an essential skill for SME‘s. Intelligent cash management makes it possible for a company to meet unexpected expenses as well as regular expenses such as payroll distribution.


Leading and lagging

In order to gain a business advantage leading (expediting) or lagging (delaying) receipts and payments of cash is an accounting technique. For example a manufacturer has to pay $1 million on a certain date for imported material. At the same time, the manufacturer receives an export order for $1 million. The cash inflow from export can be used as cash outflow for imports by delaying the payment for imports or pressing for an early payment by the buyer, or both. Thus the firm could try to escape devaluation risk in import-payment and default risk in export-receipt by juggling two cash flows. Cash discounts and trade allowances are instruments used to get customers to pay earlier.