Article provided by Lulalend
July is the South African Savings Institute’s (SASI) national Savings Month. The campaign aims to draw awareness to the financial struggles experienced by South African entrepreneurs and the importance of saving.
Why is Savings Month important? According to MoneyWeb, over 25 million South Africans are in debt, and while entrepreneurs have long been earmarked as the builders of our economy, most struggle under their balance of payments. Many look to small business finance providers and traditional lenders to stay on top of debt.
Spending money is a necessary part of growing a business, but it shouldn’t exceed your budget or even profitability. The Savings Month campaign emphasises saving money to achieve future growth and personal development, rather than freeing up enough cash flow to pay off debt and expenses.
So, what is the best way to approach saving?
1. Set your savings goals
Take a look at your balance sheet and your budget and establish exactly how much you pay and how much you would like to save a month. Incremental changes are better than one or two exponential ones – and have a minimal impact on your small business finances. Starting off with the goal of saving 5-10% can make all the difference.
2. Prioritise expenses
Establish which of your direct overheads are unavoidable – such as accounting, transport costs, rent and salaries. Once you’ve established which costs cannot budge, you get a clearer idea of those that can. Lenders can always be negotiated with, employee salaries can’t.
3. Identify areas to cut
Some monthly expenses, such as insurance, rent and suppliers, can be re-negotiated with or even replaced, for much more favourable rates. Advice from your financial advisor or tax consultant can be helpful here. The goal is to cut smartly. If you’re paying too much to a large supplier, look at smaller businesses offering the same service. Not only will you be cutting your expenditure, but you’ll also be helping another entrepreneur like yourself grow.
There are many more savings strategies you could implement in your business to lower the overheads and get your savings plan in place. Sit down with the relevant business stakeholders and brainstorm some cost reduction and investment options. You can implement these over time so that you can increase profits and put some savings aside for future needs. Even placing it back into the business in areas that will significantly increase your revenue can be a savings strategy implemented well.
Entrepreneurs are under enormous pressure to create their own wealth. Small businesses that were bootstrapped from the ground up are at the most risk of falling into debt. Initiatives like Savings Month are a great way of improving financial literacy around the struggles all entrepreneurs face, but at the end of the day, the responsibility lies with the entrepreneur to put their business first.
Getting on top of your small business finance is as simple as knowing your business inside and out. Budget smartly, invest well and save where you can.
Lulalend is a proud Partner of the NSBC.