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Why financial management is critical to the ASM sector

By Features Reporter – Wednesday 22 April 2020

HARARE (Mining Index) – MOST Artisanal and Small-scale Miners (ASM) operate without any financial track of their mine performance. In most cases, miners dig into their mining revenue fulfilling their personal expenses.

Non-existent or poor financial management is one of the internal business challenges that are faced by ASM in which they lack proper management of handling business finance to fulfil financial goals of the mine.

Financial management is viewed as the raising of funds for the purposes of buying assets for the mine to generate output. It also involves allocation of scarce financial resources against competing priorities of the mine to achieve the goals of the business.

Four important dimensions artisanal and small-scale mine owners must adopt include short-term finance of the mine which should be concerned with the net working capital, investment, financial reporting, and financial decisions that are in favour of the development and growth of the mine.

Working capital management is an important aspect which includes accounts receivables, inventory, cash management and accounts receivable management.

Miners also need to be equipped with various cash management strategies. Cash management is the process of planning, controlling and utilising cash; cash forecasting; investment of surplus cash and control of the usage of cash, without diverting it to personal use.

Here is advice on why artisanal and small-scale miners must keep financial records for their mining operations, regardless how small:-

Accounting helps miners track how much money they have in the business.

The money could be in the form of the minerals such as gold, chrome, emeralds, tantalite, vermiculite, tourmaline, and lithium among other minerals. The money could be currency, unpaid sales or even cash.

Know your asset value.

Miners must be aware of the current value of all their assets on the mine. It is advisable to secure the future of the mine by insuring such assets so that in case of unfortunate incidents at the mine, insurance cover will rescue them, and enable them to continue in business.

Books of accounts help ASM keep track of income versus expenditure.

Each week, as a miner you must be able to account for incoming revenue and expenditure. You must be able to account for each cent that comes in and out of your business. Your net profit/loss will reveal how well your mining operations are going.

Miners must be able to make budgets and predictions based on historical data and evidence from previous mining operations.

Previous financial records show your income, expenses and profit/loss for prior years. This helps you predict how much you are likely to make in the incumbent year and project your production and earnings for the forthcoming year.

Without accounting books, miners use estimations to make financial decisions, a fatal way of managing finances if business is to grow.

Financial records help miners keep a track of creditors and debtors.

Financial records help to manage creditors and debtors. With all debtors recorded, there is less risk of losing revenue. There is also reduced risk of forgetting your debtors and the exact amounts they owe you and payable dates.

The majority of ASM do not prepare formal books of accounts; hence they face challenges of accessing financial loans from the banking sector.

Likewise, it is also good for miners to keep a clean financial record by paying all suppliers and any creditors on time to avoid being blacklisted.

Remember, once blacklisted with the Financial Credit Bureau (FCB), you will not be able to access loans from financial institutions, until you repay the debt.

You are able to track your budget and make financial plans.

The essence of opening a mine is to make money. Miners need to budget and have financial plans which will focus on the growth of the mine.

Mining equipment to be purchased must be budgeted for. All expenses including salaries must fit within the performance of the mine and generated revenue.

Loans borrowed must be properly used for the benefit for the mine not for personal use, and repayment strategy clearly put in place.


Good record keeping for production, sales and all financial paper trail are a bait to lure prospective investors to pour capital in your business.

No matter how small your operations, the profit and loss account, balance sheet and cash flow statement must be available for all historic years as authenticity that your mine is worth investing in. Genuine investors are keen to know your mine’s historical financial performance.

Maintain records for legal and tax purpose.

Keeping financial records enables government to capture revenues and tax from ASM activities.

Also, understand various taxes you are required by law to pay. Different sectors have different taxes and know when they are due before you get into unnecessary trouble.

The Zimbabwe Revenue Authority (ZIMRA), Environmental Management Agency (EMA), Ministry of Mines and Mining Development, Rural District Councils (RDCs) and various state institutions from time to time need their share and levies from your mining proceeds and operations respectively.

You may be one of the people who have never maintained financial records for their mine, here is how you can get started:-

It is essential to start by getting a book where you record your daily earnings and expenses.

At the end of the week and month, you will notice whether you are making a profit or not. Analyse your spending history and note where you need to improve.

Always separate your business finances from your personal finances.

Whether you own the mine, you are the worker in the business. Get your salary like anyone else at the end of the month, and leave the rest of the proceeds to further develop and improve your mine. Allow your salary cater for your personal needs. Let the business cater for its operational needs and pays its workers.

Put on record all your expenses and track how you are spending.

Each week carefully analyse how you are spending. Always keep all receipts for reference. Where purchases are made, strive to get at least three quotations for price comparison before making any purchases. You will make great savings through price comparisons.

Follow-up your debtors more often.

Where possible, sending monthly statements to your debtors is advisable as a reminder for payment.

Maintain a good relationship with your suppliers.

It is advisable to have scheduled dates when you make payments to your suppliers. You can opt to make supplier payments once a week, once a fortnight or once a month. Once you set this as a norm, you will avoid unnecessary follow-up from suppliers as they know your operational trend and when to check for their payments.

Pay your suppliers on time and avoid getting into debt situations.


Like any business, mining is a specialised discipline. Educational qualifications are related to the success, failure and profitability of any business enterprise.

As a miner, you must strive to enrol in various short mining courses to equip yourself with basic principles of mining; foundation courses on financial management; disaster management; mine accidents and investigation techniques; mining and environment among other mining courses offered by various tertiary institutions. Education thus plays a key role in the success of any small-scale mining enterprise. ENDS//

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