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Cash Flow Tips For Small Businesses To Survive Rocky Times

Staying afloat when cash is tight in your business.

Darlene Menzies

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The bad news in the SME market in 2016 was that 67% of small businesses that closed in South Africa did so for financial reasons. This is a far more pressing problem for local entrepreneurs compared to their regional counterparts, with 50% more South African entrepreneurs discontinuing their businesses due to a lack of access to finance compared to the average for Africa. With this and the reality of SA having entered an economic downturn in June, it’s not hard to feel a bit bleak.

Darlene Menzies, CEO of Finfind, South Africa’s leading online access to finance solution, shares a few finance tips on optimizing your cash flow management to help ensure that your business survives and thrives during rocky times.

Ask for a deposit from your customers

One of the easiest ways of ensuring that you can cover the cost of doing the work for a customer is to ask them for a deposit before you start the work.

This is common business practice so don’t be afraid to try it. It’s acceptable to ask for up to 50% of the total cost as a deposit with the balance being paid at agreed delivered milestones or on final completion of the work.

Related: 10 Expert Tips On Managing Cash Flow As A New Business

Offer discounts for early payments by customers

Offering your customers a discount for paying earlier than the standard 30 day terms can help bridge your cash flow gaps as well as reduce the risk of late payments.

When cash is tight it makes sense to get slightly less money in immediately than to wait to get the full amount later. As a gauge, you can offer between 2.5% to 5% discount on payments received within 7 days from date of invoice.

Ask suppliers for better payment terms

Having extra time to pay suppliers can make a big difference to your cash flow – imagine paying 45, 60 or even 90 days from date of invoice instead of 30 days. If you have established a good payment history with your suppliers in months past and they see you as a valued customer then you should be able to negotiate better terms. It never hurts to ask!

Apply for accounts instead of paying cash

Many entrepreneurs pay cash for services they may be able to get on account – for example stationery, courier services, IT services or maybe car rental costs, if you do business travel. Paying for things monthly instead of using immediate cash helps with your liquidity and with cash flow planning.

Some entrepreneurs use pay-as-you go for their airtime and data purchases for their business – it’s worth investigating whether paying monthly for a contract works out cheaper.

If you’re a new business or don’t have a good trading history it may be better to apply for your contract in your personal capacity.

Barter services

One way to get the services you need in your business without having to outlay hard cash is to swap services with other businesses. For example, if you provide accounting services you could offer to do the books for a small IT business in exchange for them helping you with your IT needs.

This kind of arrangement not only helps with cash flow but can also be a mutually beneficial way of gaining new customers if you both agree to refer each other’s services.

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

Credit cards

When you’re in a cash jam an easy way to fund urgent business purchases is using a credit card, either your personal or business card. The upside of using a credit card is that you only have to make small monthly repayments but the downside is the additional interest rates charged if you don’t pay it off quickly.

Apply for an overdraft facility

Banks offer overdraft facilities on your personal and business accounts. Getting an overdraft approved means that the bank allows you to continue withdrawing money from your account when you balance is zero. Apply for an overdraft even if you don’t currently need it as it could be a lifeline if you suddenly find yourself in a tight position cash flow wise.

Some banks now charge a small monthly fee for these facilities even if you don’t use them, but this is a small price to pay for the convenience of being able to meet unexpected financial challenges.

Get a loan for outstanding invoices

There are lenders who will give you money while waiting for customers to pay your invoices. This is a good option if your cash crunch is caused by customers who take a long time to pay.

These lenders typically only consider lending if your customer is a corporate or Blue Chip company and of course the work has to be completed and invoiced. In this type of finance the lender looks at your customer’s credit history and ability to pay in deciding whether to approve the finance.

On average you can raise between 75% and 80% of the value of the invoice within a day or two of sending the invoice to your customer. There is usually an administrative fee to be paid plus interest on the loan – it can be an expensive way of getting finance but it is better than waiting 90 or 120 days for your customer to pay you if you have cash flow constraints.

As a small business owner you will know how true the old adage is that says ‘revenue is vanity, profit is sanity but cash flow is reality’. Month end comes around fast and they can be scary times – managing your cash flow well is not only critical to your business’s survival and growth but can also help to give you better peace of mind.

Darlene is a tech innovator and serial entrepreneur. She is the founder of the award winning online accounting software SMEasy as well as Finfind, an online access to finance solution for entrepreneurs recently launched by the Minister of Small Business Development. Darlene won SA Innovation Entrepreneur of the Year Award in 2010 and has also been recognised by Swiss-based Stars Group as a future Global Leader. Darlene believes that technology should play a leading role in the fight against poverty in Africa. She has been invited to speak in Zurich and London on harnessing technology for Social Change. Darlene works alongside Government, Business and Civil Society to address youth unemployment and to develop small businesses in South Africa. Her life motto is “to live an extraordinary life you must resist an ordinary approach”.

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Cash Flow

18 Ways I’ve Earned Rent Money When I Was Broke

Nothing motivates your hustle more than the prospect of an eviction notice.

John Rampton

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It’s an interesting world out there. In the past five years I’ve gone from being worth millions to being broke to being worth a millions again. There’s been more than one month where I didn’t have enough money to pay rent. There are times you need money, and need it quick.

With a more connected world, there are more opportunities to make money doing micro jobs and taking advantage of constantly evolving opportunities. Plus, globalisation has opened the door to add value for people well outside of your immediate proximity.

Here are 18 quick ways I’ve made money to pay rent when money is tight:

1. Teach a skill that you’ve mastered to others

If you are a talented musician, athlete or you have other desired skills, you could get paid to teach others. You could either become a freelance teacher or look for a service that helps match you with clients. This is an opportunity to make some serious money, improve your teaching ability and help others. Do not underestimate all of the time you spent as a kid playing the piano or learning to do backflips.

I’ve been able to scrounge up $100 teaching math to neighbourhood kids. This could turn into a longer gig as well.

Related: Which Side Hustle Should You Try? (Infographic)

2. Drive for Uber and/or Lyft

driving-uberThere are a few prerequisites you have to meet to become a driver. Assuming you are 21+, have been driving for three years, have a clean record and a nice enough car, though, you can make serious money driving for Uber or Lyft. You can be a driver for both at the same time, and can drive at whatever hours you want.

It took me about a week to be all setup to drive. So it’s not an overnight money situation, but it’s a quick way to make some money for bills. Most of the time money is deposited very quickly, often the same day.

3. Put a room in your house on Airbnb

There are inconveniences that come with being an Airbnb host, but it is quite easy to do so. As long as you have a room to spare in your house, you can rent it out for extra money. Plus, it could give you an opportunity to meet and connect with interesting people.

It took about three weeks for me to get set-up, actually host guests and see money in my bank account. It can happen faster but that’s about the timeframe it took me.

4. Build a social media brand

Social media is quickly becoming the world’s most powerful platform for generating revenue and reaching an audience. While the ecosystem is becoming more and more competitive, there are a number of tools you can leverage to stand out.

I’ve personally used this Instagram automation service to help me accelerate my growth quickly and gain new followers. It is important to invest in generating high quality content such that you develop loyalty among your fans before you begin to monetise.

I now can earn a few hundred bucks quickly by pushing brands out online.

Pro tip: Make sure to always disclose with #ad in the message.

Related: Are You Ready For A Side Hustle? Here’s How To Know

5. Go through your old things and sell them

You likely have books, clothes and other novelty items lying around that you no longer use. Spending a few days to go through those things and list them on Amazon, eBay or other sites to make some extra cash.

6. Pickup jobs on Fiverr

fiverr-logoThere are countless tasks on Fiverr that you can pick up. None by itself is a large amount of money but doing many tasks, though, can add up to a nice chunk of cash.

Money comes a few days after the task is completed. Most are cheaper tasks with demanding customers but can really start to add up. One month I paid all my bills from just working on Fiverr at $5 per gig that I did.

7. Dog walker/sitter

You can do this on a neighbourhood level or use a service to find clients. Walking or sitting for dogs tends is minimal effort for extra cash. Plus, if you like animals, what is better than getting paid to spend time with them?

I recommend starting small, say $1-2 per hour and working your way up once you have stable clients. It’s not much, but it can start to add up over time plus give you enough money to make bills.

8. Take advantage of credit card deals

There are countless credit card deals that are always popping up. Managing multiple cards is not the most fun, but it can yield you significant benefits. Be on the lookout for these deals. Some require that you spend a certain amount on the card within the first few months, and others have yearly fees. If the money that you are getting is greater than your costs, though, they can be a great use of time. Plus, if you are spending a certain amount of money anyway, you might as well do so on a card that will give you the maximum benefits in return.

Related: 3 Ways To Set Your Side Hustle Up For Success

9. Go thrift shopping and resell the best items

People turn in some awesome items to thrift stores. Going through the stores to find good deals is both fun and rewarding. You will likely find some items you can resell for a nice profit, and you might even find some cheap things to keep.

10. Proofread

proofreadingYou can get paid to proofread articles, books, and journals today. You have to be meticulous and able to stare at a screen for a while, but it is nice and relaxing money in return. Sites like Freelancer can help you find clients to do the proofreading for.

11. Do surveys and studies

Services like Mechanical Turk will pay you to take surveys, and there are always listings to get paid for participating in studies. The work can be a bit monotonous, but it is typically a mindless way to make money.

12. Keep your email receipts

You can make money today simply by not deleting receipts that come via email. Earny automatically scans your email for old receipts and matches what you paid to current prices. When there is something being sold for less money, now, they will help you get the difference back.

13. Take advantage of your data

There are services that will give you money just for offering access to your data. For example, Nielsen gives money away just by letting them install a software on your computer that tracks your habits. It might feel scary to give others access to this data, but in many cases, it will have zero impact on you.

Related: 50 Jobs, Gigs And Side Hustles You Can Do From Home

14. Make a bet to do something that will improve your life

If you have a goal you are trying to accomplish, make a bet with someone that you can do it.

This could be a great way to lose weight or pick up a new talent. It will incentivise you to actually do so, and you will be able to make some money for your efforts. Keep track of this in your calendar app.

15. Be a mystery shopper

You can get paid to pose as a regular customer for services like pizza delivery. Mystery shoppers are how companies test their customer service, and, in return, you can will get paid. You have to find the right deals, but doing so offers another effortless way to make money.

16. Become a search engine evaluator

You can make $12/hour evaluating search engine accuracy. Despite how good we think Google is, they still make mistakes and are willing to pay people to find them.

17. Sell your trash or recycling

empty-cans-recyclingThere are countless companies that will pay for your empty cans and sometimes even your trash. You are going to be creating the waste anyways, so why not take advantage of it?

18. Approach companies for consulting services

If you have a skill that you think you can help businesses with, then approach them about it. Many companies, even successful ones, struggle in a variety of different areas. If you know what you are doing and can demonstrate that, you could make some serious money helping a company out. This could especially be the case for companies that do not have enough money to hire more people full time but have enough to pay a one-time fee for a project or service. Hot topics today include SEO, digital marketing, and design.

Ready to take your making money to the next level? Here is a quick self employed guide to help you get started.

This article was originally posted here on Entrepreneur.com.

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Cash Flow

4 Scenarios When It Makes Good Sense To Take On Business Debt

Debt is often necessary to grow.

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You need to invest money into your business to make it grow. You need money to expand your workspace, buy more materials or equipment and to market your business.

Without an infusion of money, your business will remain stagnate. You might be able to grow a little bit, but you’ll never get big results.

If your business doesn’t bring in a large revenue that can be funneled back into the business, you’ll likely need some type of loan. The loan will give you a financial boost, and you can pay off the loan with increased revenue from business growth.

You shouldn’t automatically think of debt as a bad thing. Debt is often necessary to grow. But, there are good times and bad times to take on debt.

Here are four times taking on debt is beneficial to business growth.

1. You want to provide more products

If you want to offer new products or carry more inventory of current products, you need money to buy them. Getting a small business loan can give you enough money to provide more products.

When you carry more inventory, you need space to store and display it. You might use a storage unit, buy a second location, move to a larger location or maybe even add on. Small business debt can help you purchase more space.

Related: Entrepreneurial Balancing Acts with Debt

2. You want to increase your marketing efforts

radio-adsYou will only get more customers by getting the word out about your business. That’s why you need small business marketing.

Marketing doesn’t have to be expensive. You might create something as simple as flyers or do basic social media marketing. But, to reach more people, you might need more elaborate marketing tactics. You can invest in magazine ads, radio ads, billboards, pay-per-click ads and more. To achieve marketing success, you might need to consider taking out a small business loan. The extra cash will let you market your business well. You can pay off the loan with the increased revenue from the influx of new customers.

3. You want to build your credit score

You need good credit to get a loan. Plus, good credit can get you better payment terms with your vendors. But to get good credit, you need experience with taking on and paying off debt.

Taking out small loans can improve your business credit score. Small loans show that you are responsible and capable of handling debt. And when you make payments on time, your credit score increases.

Once you build up your credit and prove to lenders that you can handle debt, they will be more willing to give you larger loans. And, your score and timeliness might result in better loan terms, such as lower interest rates.

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

4. You want to hire employees

At some point, you might spend so much time on your business that it consumes your life. You might miss out on time with your family and friends. Or, you might have so much business stuff to do that you can’t get everything done.

Hiring an employee can help you grow your business. You can get more done and produce better quality work. You can hire employees who have special skills that will benefit your business.

Spending money on an employee is worth it if having that employee can help you earn more money. If this is the case, you might take out a loan to help prepare for the employee, cover recruiting fees, and pay for wages until your business begins earning more. When figuring out how big of a loan to take out, make sure you consider the true cost of hiring an employee.

This article was originally posted here on Entrepreneur.com.

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Cash Flow

How Stokvels Allow You To Make Smart Purchases Through Group Buying Power

The traditional model of stokvels are evolving. A major draw card that comes with starting or joining a stokvel club is the group buying power that comes from the cooperative model.

Tshepo Moloi

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The traditional model of stokvels are evolving. A major draw card that comes with starting or joining a stokvel club is the group buying power that comes from the cooperative model. Yes, this can be used to secure significant discounts from wholesalers in many instances when making bulk purchases and sharing these savings across members. However, as stokvels have evolved over time, we are seeing more and more stokvels looking to use their group buying power to make “smart purchases” that can turn a profit in the long run.

Arguably becoming business club orientated instead of consumer club orientated. This article explores smart tactics stokvels can employ to get the most bang for their buck in 2018 instead of purely being consumption based.  

Related: Stokvels 101: Is Group Saving For You?

How do you generate income with your group buying power?

Getting a great deal on perishable goods is never a bad thing. However, your stokvel can do a lot more with its buying power to earn revenue for its members. Our foreign brothers and sisters from the rest of Africa who are running spaza shops have unlocked one of the secrets to this. Using their collective buying power to amass perishable items at notably discounted rates to sell at a highly competitive rate, they are able to earn revenue from the cooperative model approach. This principle can apply in any business where bulk buying opportunities exist for “cooperatives”.

For example, minibus taxi owners/associations looking to get better deals can galvanise and approach car manufacturers and those who sell parts for better bulk discounted prices on vehicles or parts. The trick here is to look at purchasing “perishable goods” that as their value or usage gets discounted, you are able to generate revenue out of them higher than the purchasing amount.

How to identify perishable goods that can generate revenue for you or your stokvel?

Based on the taxi and spaza shop examples above, arguably it is easier to identify such goods when you are in a common business with your stokvel members. However, this is an economics  exercise i.e. identifying goods which are high in demand that you’re stokvel can supply at a profitable rate. As a stokvel, you should be asking yourselves what are essential perishable goods that are in high demand, that your family, close friends and immediate neighbours need. For example, toilet paper is a perishable good that is and always will be in demand. Would it not make sense to source this perishable item at a bulk for sale to friends and family of the stokvel?

Better yet, if one of the stokvel club members has enough storage space, would it not make sense to purchase the toilet paper making machine as an asset? Your stokvel must get entrepreneurial about the immediate opportunities that exist around them and see how best to take advantage of these gaps. However, if your stokvel does not have a slight of entrepreneurial bone in it not to worry. There are innovative ways for your stokvel to purchase such assets that yield great returns for your stokvel club. One such way to do this is through asset crowdfunding platform, The People’s Fund.

Related: Picking Your Lane: Maximising Your Chances Of Success And Happiness

The truth is that your bulk buying power strength depends on how well your cooperative model approach is organised and well run. The stronger your cooperative model approach, the stronger you will likely leverage off other forms of revenue generators better than perishable goods such as asset rental discounting products.

At the end it comes down to not only how much you have managed to save but also how well you can generate additional revenue from your savings. After all, isn’t money suppose to work for you?

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