Keep the cash flowing during uncertain times

Managing cashflow during uncertain times is essential for business survival. A healthy cashflow helps businesses pay their employees, suppliers, rent, taxes and other operating costs timeously.

In this week's episode of The Bold Leap business podcast sponsored by Sage Accounting, host Graeme Richards chats to Tlou Ledwaba, a chartered accountant and CEO of Bright Path business consultants who shares his expert tips to manage cashflow during such times of uncertainty.

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The unprecedented uncertainty caused by the Covid-19 pandemic has forced many small businesses to look at cutting down costs in order to manage tentative sales projections and earning potential.

As such, the difficulty remains in managing the money coming in, or accounts receivable, and the money going out, accounts payable.

Ledwaba boasts an impressive CV, which includes serving on the board of Groote Schuur Hospital, and being appointed an Accounting Member of the Tax Court by President Ramaphosa in 2018.

In Ledwaba's experience as a consultant, one of the first mistakes small business owners make in managing their cashflow is failing to plan adequately.

"Most entrepreneurs who come to us for help respond very late. Their problems have developed from one stage to another, and there is a lot of damage control happening instead of a proactive approach to ensure they avoid business failure."

Forward thinking, planning and making use of sage advice can help businesses avoid these mistakes, says Ledwaba, which include:

Knowing your strengths and weaknesses

Every business owner has core strengths that drive their success, as well as other areas where they are not as strong. Outsourcing critical functions to experts delivers better results for your small business.

"If you're not an IT person, don't force yourself to design a website. You need to get someone who is trained. Likewise, most companies forget there are people who studied how to manage finances, and that's where experts come in to assist with accounting."

Invest in a cashflow platform

According to recent Sage research, most small businesses and accounting practices in the survey admit they were not well prepared for a pandemic. In the research, 77% of small businesses believe adopting new technology or digital capabilities will be vital in restarting their businesses.

Ledwaba believes that proper implementation of an accounting system is one way of investing in technology. A digital accounting system requires a full integration of all your information on one platform, and means investing in software that talks to all areas of your business and avoids duplication.

"For instance, we use Sage Accounting and Sage Payroll, where the processes are automated. Some businesses don't require an inventory system, others require recurring invoicing. It's all about getting the right system in place."

Investing in a platform that does the hard work for you gives you more time to focus on long-term growth and strategy.

Avoid expenses you don't need

Sage's research indicated that at least 22% of respondents were concerned about cash flow and liquidity problems. Among the steps that could be taken to increase resilience, 82% said they would reduce operational costs.

Avoiding unnecessary expenses can be crucial for start-ups in keeping the business operational during the first, challenging few years.

"Most of us develop a passion for wanting to have everything at the same time. At the end of the day, you're putting too much pressure on your cashflow. In my company, in seven years I have yet to rent out office space because I can work from anywhere and still deliver. Focus on getting the money in and lessening your expenses."

Join Graeme and Tlou as they discuss more tips to improve cashflow, including reinvesting in your company, building capacity, and handy tips on loan repayment terms, when to take deposits and buying on credit.

LISTEN to the full podcast below:

To find out more about Sage Accounting’s industry-leading cloud-based solutions, including e-filing solutions for accounting professionals, go to Sage Accounting.

The Bold Leap Business podcast sponsored by Sage chats to a range of dynamic small business leaders to provide the best insights into how to effectively manage your small business.