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4 Implementable Ways You Can Manage Your Cashflow For Your Small Business

As an expert on money matters, Mornè Janse van Rensburg, Head: Card Acquiring Sales and Service for Nedbank Retail Banking, gives you tips on how to get on top of cashflow if you have a small business.

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You managed to pay all your staff, except, of course, yourself. There are debit orders looming and you are watching your bank account like a hawk, hoping against hope that even one customer will pay you on time so that the boat stays afloat.

The life of an entrepreneur … so glamorous and with so many perks of working for yourself – except that is, managing your cashflow.

Even the most profitable of small businesses can sink if you don’t proactively start managing your cashflow, and stop chasing profits.

As an expert on money matters, Mornè Janse van Rensburg, Head: Card Acquiring Sales and Service for Nedbank Retail Banking, gives you tips on how to get on top of cashflow if you have a small business.

Related: 8 Ways to Avoid Cash Flow Surprises That Could Kill Your Business

Here are my top four tips:

1Determine the break-even point

Start thinking about what you owe suppliers and what customers owe you, on a monthly basis, and understand at what point you would reach break-even.

You can use that as your benchmark to determine when you will start making a profit and if there is a shortfall. You should always try to have some cash reserves on hand or make an arrangement with your financial institution for a cash advance with reasonable repayment terms.

2Reward customers for paying faster

Consider charging interest on invoices to customers that have a payment cycle of 30 days or longer, and reward customers who pay within 30 days by offering a discount on future services.

Ensure that your customers understand and that it is clearly stated on your contracts and invoices that you will be charging interest for payments over 30 days so that there are no nasty surprises when it comes to invoicing time.

The reverse is also true. Most small companies ironically tend to pay their invoices immediately.

If cashflow is an issue, consider waiting to pay suppliers a little later but within their payment terms.

3Use technology to your advantage

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Ask your financial institution what technology they have on offer to help you with back-office reconciliation, reporting and automation so that the system can work for you, while you are busy doing what you do best – which we guess is not handling administrative issues in the case of most small businesses. Also, make it as easy as possible for your customers to pay you so that you take their pain out of payment – online is the way to go.

Related: The Correlation Between Cash Flow Challenges And Risk

4Stay on top of invoicing

Don’t let your customers have to nag you for an invoice. Staying on top of your invoicing, and invoicing quickly, is absolutely critical to cashflow management. The sooner you invoice, the sooner you will get paid.

Find out the specific person to whom the invoice needs to be sent, so you don’t get lost in the bureaucratic works of your customer. Send your invoice by email to speed the process up.

While managing administrative issues may be the last thing you want to do after a 16-hour day, cashflow administration is the difference between your boat staying afloat or drifting out to sea. Reign it in and reap the rewards.

Results-driven and an outstanding leader is how Morne Janse van Rensburg is described by his peers. He currently heads up Nedbank’s Card Acquiring Sales and Service division, a position he has held since 2012. Morne is a Specialist Strategic Acquisition and Relationship Banker with the ability to focus on the key fundamentals that are important to growing a business, and has extensive experience in helping both small and large franchises achieve their growth aspirations. Morne has gained over 22 years’ experience at large-scale financial institutions covering small-to-medium enterprises as well as large corporate and public sector customer networks and exposure. He is an accomplished communicator, has strong business acumen and extensive knowledge and experience, ranging from strategy to operational or tactical implementation.

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Cash Flow

The Simple Way To Pay Wages When Your Staff Don’t Have Bank Accounts

If you have employed casual workers over the busy season, you can pay wages even if they do not have bank accounts.

Absa

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At Absa Business Banking, the things that are important to you are just as important to us. We understand your business needs, which is why we have developed tailored solutions to help you where it counts. Take CashSend Plus, for example. It is a payment solution that enables you to pay workers even if they do not have bank accounts.

Related: Hiring Your First Employee? 5 Things You Need To Know

It is safe and secure

Your employee will receive a six-digit access code and a ten-digit reference number, so that they can verify the transaction. The money is instantly available at an Absa ATM.

You can even pay yourself

We have all lost bank cards or wallets at some point in our lives. What an inconvenience. Well, it is good to know then that you can access cash by sending it to yourself. Now, that is what we call better. 

Related: How Salary Transparency Empowers Employees – And When Not To Use It

Interested?

Please speak to one of our consultants or call 0860 111 123 or visit your nearest branch.

Absa Business Banking 

Do better business. Prosper.

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Cash Flow

Entrepreneurial Balancing Acts with Debt

Young South African entrepreneurs face many challenges when it comes to debt-related financing. Small and medium enterprise (SME) owners typically require extensive debt financing from bank and non-bank lenders.

Harald Merckel

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Young South African entrepreneurs face many challenges when it comes to debt-related financing. Small and medium enterprise (SME) owners typically require extensive debt financing from bank and non-bank lenders. Unfortunately, many South African entrepreneurs are limited in their ability to access capital markets. Among others, the major challenges facing entrepreneurs include lack of credit history, no collateral, shaky credentials, and unformulated business plans.

Regardless, SA entrepreneurs are forging ahead and using multiple resources at their disposal such as payday loan providers, non-bank lenders, family and friends, crowdfunding and other economic empowerment initiatives to raise the necessary seed capital for investment purposes. Given the staggering unemployment rate in the country (+25%), the only way out for many people appears to be entrepreneurship. The 2008 global financial crisis threw the economy for a loop, and now the hopes and dreams of many South Africans hang in the balance.

Related: Every Tough Choice Has Management Debt – Are You Accounting For Yours?

ISM Study Sheds Light on SA Entrepreneurial Pros and Cons

An intensive study conducted by the University of Cape Town’s Unilever Institute of Strategic Marketing (ISM) found that the country is experiencing ‘a crisis of aspiration’. Simply put, many South Africans are struggling to attain their career objectives in an economy that has been ravaged by corruption, mismanagement, and scandal. Despite tough economic times, South African entrepreneurs are determined to try their luck. Pressing challenges in the form of rising unemployment, and an economy mired in failure are challenging entrepreneurs to be more inventive than ever before. The most volatile component of the economic spectrum in South Africa is the middle class.

Many South African families have lived the high life, or ascended the rungs and then been knocked down a peg. This instability is creating added volatility in a country where high crime, mismanagement and political rancour pepper the scene. For many entrepreneurs, any access to credit is a godsend. Banks and non-bank providers offering personal loans, business loans, or credit card funds invariably expose themselves to debt default. For entrepreneurs, it’s important to know where to draw the line. Access to lines of credit in a crippled economy is significantly more valuable than the equivalent access in a developed economy.

How to Know when you are Overstretched as an Entrepreneur

Debt is considered a prerequisite for investment purposes. Most South Africans simply don’t have the necessary capital to start up a high-tech venture, fund a new business, or conduct marketing and advertising activity. As such, lines of credit are increasingly being used to propel business activity among SMEs – both in the formal and the informal sector. However, once debt reaches untenable levels, the tough questions need to be asked. For example, if multiple loans and multiple payments are required monthly, revenue streams need to be evaluated against expenses to gauge whether this is a feasible status quo.

Related: How To Handle Your Post-Holiday Debt

Many entrepreneurs find it difficult to manage multiple loans simultaneously, although it is necessary to acquire the capital from multiple sources. One of the ways to deal with these types of exigencies is a single loan from a low-cost lender in the form of debt consolidation loans. Simply put, these loans are provided by bank or non-bank lenders at lower interest rates than the prevailing interest rate on other lines of credit. By taking out a debt consolidation loan, the entrepreneur has more disposable income over time by not paying the higher interest on credit card debt.

Escape Debt Before Debt Consumes You

There are several other ways to know when your personal financial situation has reached critical mass. For starters, the nature of your business may require you to continue dipping into lines of credit to maintain business operations. If you don’t have the requisite discipline to stop indebting yourself, you may not be able to get out of debt. Debt consolidation is only effective insofar as you have the necessary discipline to put an end to debt financing of all business-related activity.

Credit should be used sparingly, and profits should be generated to allow your business to prosper. In a tight economic climate, costs are the bugbear that need to be attacked. Lavish trappings are unnecessary for business functionality – modest budgets, and high-quality goods and services are far more effective than window dressing at a premium.

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Cash Flow

How South Africa’s Small Businesses Plan To Invest Their Money In 2018

Here are their five areas they should focus their attention on in the next year and beyond.

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Despite economic uncertainty, South Africa’s small businesses are positive about the future. In fact, our State of South African Small Business report reveals that 40% of small businesses are expecting to grow. However, to achieve growth without overextending their limited resources, small businesses need to invest wisely.

Here are their five areas they should focus their attention on in the next year and beyond.

Marketing

When times are tight, companies typically reduce their marketing spend. This isn’t the case for 36% of South Africa’s small businesses. These respondents recognise marketing as a critical investment area.

They’d rather make a concerted effort to grow their customer base, than sit still and do nothing as consumer demand declines.

Related: What To Consider When Investing Your (Hard-Earned) Money

Technology

Without access to the latest technology, business growth can quickly stagnate. This is why 23% of South Africa’s small businesses plan to invest in up to date equipment, whether that be new machinery, mobile devices or computers.

The right investment in this area can give a business a real competitive advantage.

It can help boost profits and improve operational efficiency – both of which can help a small business withstand difficult economic conditions with greater success.

Product development

Consumers are spoiled for choice. Their needs are constantly changing and companies can’t afford to become complacent. To keep up with market demands, 22% of small businesses plan to invest in product development. Barring a few timeless classics, most products need a regular review and tweak to stay relevant and popular.

Technology

technology-south-africa

Digitisation is transforming business functions across the board. Technologies, like cloud software can take care of laborious administrative work.

Related: How To Make Money Investing, According To Ashton Kutcher

This liberates employees from time-consuming tasks, enabling them to focus on more strategic work like customer retention and acquisition.

Technology has the power to improve productivity and efficiency. Which is why 18% of small businesses are going to focus their investment plans on this area of their businesses.

Customer service

The customer should always be the priority. It doesn’t matter how good a product is, if there are no customers, then there’s no business. As competition increases, the user experience becomes more and more important to win over customers.

Business growth depends on happy customers and to achieve that, 18% of small businesses plan to invest in delivering better service.

All five of the above business areas are worthy investment focuses. The question is, how does a small business work out what to invest where? The only way it can invest effectively is with a full view of its company finances. A small business needs to be able to see which functions have provided the best return on investment to date.

Related: 12 Millionaire Habits To Start Making Serious Money Soon And Build Wealth In A Hurry

It also needs to consider how much investment capital it has to spend. What’s more, before it makes an investment in say, marketing or product development, it must know exactly how and where the money needs to go.

The right software can help a small business access the real-time insights it needs to make better, faster financial decisions. To combat increased competition and market uncertainty, South Africa’s small business owners need access to up-to-the minute information from any device no matter where they are. An informed investment has the greatest chance of success.

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