By Charles Teversham, Managing Director of Sage Intelligence
Starting a small business is almost like leaping out of a plane without a back-up parachute. It’s exciting, but at the same time, quite risky. There are several reasons why 80% of small businesses in South Africa fail within the first three years, the greatest reason being cash flow.
For many Small & Medium Business owners, their monthly conundrum is looking at their bank balances and then calculating whether or not they can make payments to their employees and suppliers, or if they’re going to be counting the company’s tea bags for the next month.
According to JTB Consulting, South Africa’s Small & Medium Business owners lack financial literacy, which leads to poor money management. This argument has been taken a step further to say that the line between profit and cash in the bank is unclear.
I disagree that most Small & Medium Business owners lack financial literacy to run their businesses’ finances. It’s often just a case of time. Entrepreneurs who are juggling many different responsibilities sometimes aren’t able to spend as much time sifting through accounting records as they’d like to.
The good news is that accounting, payroll and Business Management Solutions now offer visual reporting tools. They aggregate the information that has been inserted into the accounting and payroll system and give the business owner a visual representation of the current state of their business. These tools are also cloud-based, which gives business owners the flexibility to access their reporting information from anywhere and at any time.
With ease of use, decision-makers can gain greater visibility across the business. They can analyse revenue, check if expenses are spiraling out of control, track which stock is moving and what is dormant.
Business owners can monitor their companies’ performances against industry trends, see how much customers are purchasing and which customers require additional attention if their spend is dropping.
The trick is to crawl before you walk. There is a tendency for entrepreneurs to jump straight into the very detailed tools, while it is often more beneficial for them to keep the initial analysis tools simple. There are three indicators that decision-makers need to be on top of – Revenue growth, money in and money out. Debt collection is also crucial, understanding who owes money, when they pay and if they pay on time.
Small business owners often operate on the skin of their teeth, and visual reporting that can be accessed anywhere and anytime can alleviate the stress and provide information to make the business profitable, efficient and sustainable.
It is these entrepreneurs who are the drivers of prosperity, and it takes hard work and sacrifice to help power the economy. At Sage, we focus on giving them the ability to control their businesses with real time and intuitive information.