Running a business involves a great deal of work. You may need to open your store, greet customers, stock shelves, keep your website up to date, fulfil customer orders, and manage various other tasks related to your business. One crucial aspect of being a business owner is making financial decisions.
It’s up to you to decide how to accept payments from customers, know where and how to access funding, manage the timing of your revenue (incoming money) and expenses, and ensure your business remains profitable.
While you may prefer some tasks over others, everything from customer service to financial management plays a vital role in starting, running, and growing a successful company.
Managing Cash Flow and Expenses
If you’re running a small business, when you get paid can be just as important as how much you get paid. Predicting and managing your cash flow—the timing of when money comes in versus when you need to pay bills—is an essential skill for success.
Profit and Loss
At the end of the day, your business needs to generate more income than it spends to be sustainable. Creating a profit and loss statement, and understanding how to interpret it, can help you identify ways to increase revenue, reduce expenses, and improve profitability.
Payment Options
As a small business owner in South Africa, you’ll need to decide what types of payments to accept, such as cash, EFT (electronic funds transfer), debit and credit cards, and mobile payment solutions like SnapScan and Zapper. Offering multiple payment options can help attract a broader customer base and encourage larger purchases. However, each payment method comes with its own costs and considerations.
Banking Services
One of the first steps after establishing your business should be to open a dedicated business bank account. This helps separate personal and business finances, making it easier to manage cash flow, protect personal assets in case of business financial difficulties, and streamline tax preparation. Many South African banks offer business banking services tailored to SMEs, including merchant services and business loans.
Access to Business Credit
Businesses can build credit histories separate from their owners, which can help when applying for business loans or lines of credit. Establishing good business credit can improve your chances of securing funding from banks or alternative lenders. South African business owners can explore funding options from institutions such as the Small Enterprise Finance Agency (SEFA), banks, and fintech lenders.
Recordkeeping for Small Businesses
For small business owners in South Africa, recordkeeping is an essential yet sometimes complex task in ensuring smooth operations. Keeping clear records of income, expenses, employees, tax documents, and accounts isn’t just good business practice—it can also provide peace of mind, help track progress towards goals, and save both time and money.
Inventory Management
Keeping track of your inventory can help prevent errors and inefficiencies. By carefully managing stock levels, you can increase profits and operate more efficiently. Record products manufactured or purchased, shipped, delivered, and returned to ensure you can meet orders without delays or becoming overwhelmed. Implementing an inventory management strategy can help you stay organised, maintain accuracy, save time and money, improve efficiency and productivity, and keep customers satisfied.
Count Inventory Regularly
Tracking stock levels is crucial for managing costs, ensuring smooth business operations, and detecting theft. Even with a POS system and digital records, regular inventory counts are necessary to ensure records align with actual stock levels.
Set Goal Inventory Levels
Experts recommend setting a “par level” for products—the minimum amount of a product required at any given time. This helps determine when to reorder and prevents stockouts, which is key to maintaining customer satisfaction.
Use the FIFO Approach (First In, First Out)
To keep inventory fresh, stock should be sold in the order it was purchased or created. The FIFO approach helps avoid selling old or expired products, ensuring better product quality and reducing waste.
Identify Low-Turn Stock
If certain items haven’t sold in several months, it may be time to discontinue them. Consider offering discounts or promotions to clear out slow-moving stock and replace it with products that customers are more likely to purchase.
Invest in an Inventory Management Tool
Depending on the complexity of your inventory, management tools can streamline tracking and save time. This could range from a simple spreadsheet to sophisticated software that monitors orders, sales, average order values, and daily shipments.
By staying on top of your business finances and inventory, you can make informed decisions that contribute to the growth and sustainability of your venture.