CDA: Absence of good books spell business failure

No matter how bright the potentials of a particular business is, it is more likely to fail unless managers maintain a good book of financial statements, according to the Commonwealth Development Authority.

CDA Executive Director Marylou S. Ada said a series of consultations with owners and managers of small- and medium-scale businesses in the Northern Marianas disclosed that a big number of failed investments were caused by their failure to keep track of their finances.

“One of the biggest problems that we have unearthed during our consultation meetings with business owners and managers is that they don’t maintain a good book of financial statements,” Ms. Ada told an interview.

She added that experts mobilized by the development authority to do consultation sessions with managers of distressed businesses who seek CDA assistance have started pointing out the value of good bookkeeping.

“Most of them don’t keep good records of their income and expenses so in the end, they could not tell where did the capital go and what really went wrong,” she explained.

Ms. Ada said CDA experts are also now on the lookout for other factors that may trigger the collapse of a business especially with the islands’ current economic conditions.

CDA recently launched a program aimed at educating its clients on ways to become better borrowers, underscoring the importance of a good credit history in their future loan applications.

Borrowers who have persistently pay their monthly dues on time in the past are less likely to obtain loans from either government or private financial institutions even if they are able to settle their existing obligation.

Financial institutions are very particular in the consistency of the borrowers’ ability to pay their monthly obligations. Those who have persistently failed to settle monthly dues are more likely to be turned down by credit companies.

This is one of the reasons behind the development authority’s decision to mobilize its people to conduct a series of consultations with existing borrowers.

Citing exchange of ideas during consultation meetings with business owners and managers, Ms. Ada said business activities that offer the brightest potentials these days include groceries, fishing and farming.

She noted that when CDA approved volumes of real estate loan packages in recent years, the economic condition of the CNMI was then conducive for the construction of commercial and residential complexes due to the influx of businesses and their foreign workers.

However, Ms. Ada said this particular sector has become one of those badly hit by the slowdown in economic activities in the CNMI which witnessed the closure of too many businesses and the departure of hundreds of guest workers who were potential occupants of residential units.

In fact, the departure of too many Korean businessmen from Saipan has left apartment complexes virtually empty with vacancy rate shooting up by as high as 40 percent, according to CDA Board Chair John S. Tenorio.

Mr. Tenorio disclosed that current vacancy rate for commercial and residential apartments is on a record-high at 35 percent, creating stiffer competition among owners for the very restrained market on Saipan.

The brewing competition has been pulling down the prevailing market fees for apartment rentals to as low as $200 for a single-bedroom fully furnished flat while a people can now get a two-bedroom semi-furnished apartment for just $500.