Every Small & Medium Business should be aiming to have some savings in the bank as a buffer for difficult months when sales are slow or debtors miss payments.
If your business has some cash in reserve, you’ll be able to fund your growth in the future, avoid taking loans at punitive interest rates and meet your creditors’ payment deadlines.
Striking the right balance
As an entrepreneur you’ll hear a number of opinions about how much cash you should have on hand — for example, many people will advise you to have enough to cover six months of operating expenses. But this will vary between businesses, according to their cash flow, maturity, burn rate and other factors.
Bear in mind that in an ideal world you want to strike a balance between the risk of running out of cash and the danger of having too much dormant cash in your bank account. With today’s relatively low interest rates, it might be better to invest excessive money in productive capacity for your business or to pay it out to shareholders and owners than to leave it lying in your bank account unless of course, you have a financial advisor that handles the business’s money.
Use free and affordable apps
Rather than spending your cash on servers and expensive software licences, rather sign up for online software subscriptions. Companies such as Microsoft and Google offer affordable, cloud-based email and productivity software, allowing you to pay a modest subscription rather than paying upfront.
Embrace the gig economy
One of the biggest costs and risks for small businesses is absorbing too many employees too early. Today, you can source reliable freelancers for many of the tasks you need to do in your business – saving you money because you can tap the skills you need on demand. Another way to ensure your business stays afloat without hiring someone is to outsource your daily tasks such as HR and payroll – this will allow for the smooth running of your business while getting the daily admin done with ease.
Ditch the plush offices
If you’re running a smaller business and have only one or two employees, have a good look at your office costs. Is it really worth having an expensive base in the CBD if you and your team spend most of your time at client sites or if you do most of your work on a computer? The future is mobile and even for us, we believe in giving business owners the power to control businesses from the palm of your hand allowing for easy access and mobile working.
Hire interns
One good way to save on your salary bills is to make tactical use of interns who are fresh from school and university. They are eager to learn and to strengthen their CVs, so hiring them can be a win-win. You will need to give them plenty of support and choose carefully what you delegate to them. An intern programme can be a great way of identifying potential future hires for your business.
Utilities
In the current state of the country, it is imperative that Small & Medium Business owners gear up for the tough times ahead. Matters affecting the nation such as an electricity crises and water restrictions will take massive strain on businesses.
Be prepared with small tasks such as keeping your data backed up, installing the latest software and investing in generators can save time and money during power outages when they happen.
Anton van Heerden
Executive Vice-President, Africa & Middle East, Sage
http://www.sage.com/za
anton.vanheerden@sage.com
