Basic Financial Management for Cooperatives

Cooperatives in Kenya, just like in many other developing countries, are facing immense challenges introducing good financial management practices into their operations. Since time immemorial these cooperatives have been reporting reactively rather than proactively. More often than not, preparation of the reports is done as a matter of compliance with regulations rather than for decision making and future planning.

Why is reporting not done? The main reason is the lack of capacity within the staff hired by these organizations and also the absence of the willingness to plan and report. Very few people see the importance of regulator reporting to the growth of their organizations.

Most cooperatives simply look at the growth as only ensuring sufficient produce is collected from the members and marketed on its behalf by the cooperative. However much I would want to agree with them, financial reporting is indispensable and cannot be delinked from the growth plans of the organizations. Cooperative societies should move away from the blind planning and operating they are accustomed to and start the process of proactively anticipating scenarios before they unfold and get them in trouble.

In fact, poor financial performance in business is attributed to poor business planning, unrealistic and conflicting goals and targets, and absence of stringent monitoring and evaluation of activities. But, through effective budgeting and stringent budgetary control process, these activities can be efficiently and effectively managed. The situation amongst the cooperatives in Kenya is not much different. Every so often we have co-operatives closedown due to poor financial management emanating from poor planning and monitoring of the society's activities.

Fully automated financial planning and reporting system is a dream that many organizations officially aspire to realize but it still remains to be seen. It's discouraging costs of installation and maintenance implies that it is also out of reach for most societies hence forcing them to still maintain their manual inaccurate financial systems.

In addition to the discouraging costs, most of the cooperatives have also been put off by the past un-recount-able experiences they've had with software providers who are just technically "software marketers" rather than solution developers. Therefore, rather than burn their fingers and lose their little hard earned money, these cooperatives prefer to remain with their inefficient manual or semi-automated systems that only keep the accounting data but cannot produce analyzed reports.