Telema was at her wits end. She really didn’t know what to do about her catering business anymore. She started “Delicious Food Catering Services,” two years ago, to cater for the middle lower segment. This group largely comprised early and mid-level career workers, and small business owners. She did not want her business to be labelled “elitist.” The intent was to serve the target market delicious food, prepared with fresh ingredients, herbs, spices, and no cube seasoning.

Naturally, Instagram was the perfect social media platform to market the business. The business incurred huge marketing expenses. Telema had a professional photo shoot of new products, every quarter, and also hired a social media expert to handle Instagram postings. She was convinced the gorgeous pictures, would attract a lot of customers, and she was right, the orders flowed in. Telema had also kept product prices low, when compared to the prices of foodstuff. Her focus was on having a huge customer base. After a few months in business, Telema realized that it was difficult to tell if the business was making money. Product sales were very strong, but business expenditure was huge. Her personal funds were also interwoven with business funds.

The kitchen was well equipped with two large cookers (with ovens), two large deep freezers, one large refrigerator, and two large gas cylinders (situated outdoors). Telema had also invested in outdoor catering equipment; crockery, table cloths, chargers, napkin holders, centre pieces, coolers, and chaffing dishes. She considered buying a delivery van for the out-door catering business, but could not afford to, and rented one whenever the need arose. The business used a 165kVA diesel generator, and a 10kVA fuel generator. It employed three cooks, two kitchen assistants, and a cleaner. ”Delicious Food” had no formal accounting records, and relied on the bank statement for financial data.

After eighteen months of business operations, “Delicious Food Catering Services,” was unable to pay staff salaries, and Telema approached her bank for a temporary overdraft. The bank assigned a relationship manager, to appraise Telema’s business. After two weeks of appraisal, the relationship manager, stated that the business could only be recommended for a loan, if certain changes were made.

Telema would need to employ an accountant, to sort out the books and accounts of the business. She would also need to re-evaluate the business strategy, which focused on the middle-lower segment, using expensive raw food materials, while prices of finished products, were kept low. Telema was advised to de-emphasize fresh food products, spices and herbs, introduce cube seasoning, use frozen food for some dishes, and increase prices. The relationship manager would monitor the cash flow from the business, over a three month period. Based on the account turnover, in three months (after changes are made), he would decide whether to process the loan, and make recommendations for management approval.

Telema borrowed money from her husband to pay staff salaries, while she made sweeping changes in the business. She did not bargain for the backlash from customers. They complained that the food was no longer fresh, nor delicious. Many loyal customers stopped buying the food, worsening the cash flow problem at “Delicious Food Catering Services.” Telema had to lay off some employees, and sold some of the outdoor catering equipment, to keep the business afloat.

The accountant was finally able to put the books of the business in order, after three months of scrutinizing bank statements, receipts and invoices. He prepared financial statements, which revealed a negative cash flow, and a slightly profitable business. Telema had used some of the money generated by the business, to acquire fixed assets. She did not understand the accrual concept, or the matching principle in accounting. It was difficult to understand how her business could be profitable, yet have insufficient cash for day to day operations.

The bank did not approve her loan request, her customers were leaving in droves, and the business was haemorrhaging terribly. Telema was tired and frustrated. This wasn’t what she signed up for when she started the business. Running her own business was supposed to give her financial freedom. Her entrepreneurial journey had become a nightmare.