Starting a business is an emotional and financial investment. You must be aware of the potential pitfalls in small business financial management so that you can prepare adequately for unforeseen cash flow issues.
The underlying cause of financial problems almost always comes down to poor cash flow management and not getting paid on time.
It’s with this in mind that we’ve curated a list of the five top money tips from some of South Africa’s most exciting entrepreneurs to help you get on top of your money matters and hit the ground running.
1. Keeping it in-house
Bio-scientists Andile Gcaza and Phetole Raseropo founded Evergrow in 2018 after deciding that everyone should have access to healthy food, no matter their income. Their start-up sells high-yield, fast turnover vegetable seedlings to small-scale and subsistence farmers in rural and peri-urban communities.
Top tip
They initially outsourced a 50-tray order, but after realising the expense of this, they brought everything in-house and upskilled themselves to get the work done.
This way, they were able to save more money, which is vital for any business. We recommend always having access to at least three months’ worth of expenses in case of an emergency.
2. Hard work meets integrity
Brian Malatji started his business, Dinoko Automation Service and Repair, in 2014.
He grew up in Tembisa and had always been worried about the high crime levels in his neighbourhood. He wanted to create a solution that would service those around him and provide job opportunities to the community.
Brian completed a diploma in electrical engineering, joined an access automation company to get experience, and started his business. He’s won numerous awards, and in 2019/20, his business turned over R2.7 million.
Top tip
Brian is a believer in two things: hard work and respect. His business wasn’t afforded the things that many small companies have access to, such as liability insurance, funding and investors, work experience, confidence from privately-owned companies. Despite this, he worked harder, and his commitment to learning and excellent service delivery have skyrocketed his business. Add this to a clear and solid budget, and the path to profitability is set.
3. Invest
Powerhouse entrepreneur MashuduModau is an advocate for youth entrepreneurship and is on a mission to empower start-ups to build what they believe in.
He is committed to empowering entrepreneurs for the future of Africa. Instead of Africa merely adopting tech and innovation, he says the continent needs to produce more originators and creators.
Top tip
Invest in things that feed your growth. When a business invests in the future, it attracts the best employees, and customers appreciate the level of service.
When investing, we’d recommend that you avoid using your credit card as much as possible. Invest with money that you already have so that you avoid the risk of debt.
4. Cash reserves, systems, and management
Octavius Phukubye founded Brillianaire in response to the concerning economic challenges facing Africa today.
His business is designed to empower entrepreneurs to launch their own companies that can compete with other companies in the supply chain and are ready for venture capital investment. This way, they can live and work as independent business owners.
Top tip
Octavius is a firm believer in building up your cash reserves. He suggests saving 10% of every invoice as a cash flow optimisation strategy. Couple this with a strict client policy of getting paid on time and your business will always have a healthy cash reserve.
He’s also an advocate for embedding systems early on. When proper processes aren’t in place, there is a real risk of reducing growth potential.
Finally, he recommends using advanced cloud accounting software. It makes it so much easier to monitor performance.
It’s vital that you remember all your tax obligations. Now that you’re a small business owner, you are responsible for paying VAT and other taxes, so you must factor this into your planning. Our accounting software helps you stay on top of all the latest legislation, giving you the peace of mind you need when dealing with SARS.
5. Impact
Vuyolwethu Dubese believes in making an impact. That’s why she launched InnovTel, a design impact and consulting studio that aims to produce a new era of impact-driven businesses.
It’s a learning platform that offers free or affordable courses, e-books, and knowledge-sharing experiences for entrepreneurs to learn how to build their own sustainable, innovative, and impactful business.
Top tip
Make sure you nurture your network. Your clients will often come from referrals, so look after all the relationships you have. At the same time, though, remember to honour the current season in your life. She says, “Relationships and networks are important, but they evolve as people evolve. It’s not personal; it’s called growth. Honour it and move on.”
Own it
With Sage Business Cloud Accounting, you can take control of invoicing, cash flow, payments and tax. Our effortless accounting software lets you do the start-up stuff, like exploring and growing, while keeping on top of all your money matters so your business can thrive.
Brian Malatji reflects on the value of working with a consultant like Sage. “Consultants assist you in planning, managing, and running the business. They also provide an objective eye to help guide the business and expertise in specialised areas, like strategy and management, operations, human resources, finances, funding opportunities, and sales and marketing.”
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