According to IOL, “The Consumer Confidence Index back-pedaled to -13 index points in the second quarter of 2021 after recovering further from -12 to -9 index points during the first quarter of 2021.” And while economists are saying its not as bad as expected, it can paint a very bleak picture for SME’s struggling to keep their doors open or expand.

The positive side is our Startwise experts have compiled a few tips to managing your finances during a recession.

IT’S NOT AS EXPENSIVE AS YOU THINK. CHAT TO AN EXPERT IN OUR FINANCE & ACCOUNTING CATEGORY FOR JUST 15 MINUTES FROM AS LITTLE AS R200.

 

Most SMME’s don’t have the financial backing or cash flow to effectively navigate their way through hard times. there are a few aspects of your finances that you can pay attention to, to ensure your future success.

 

  1. Determine if you really are making a profit

Looking at your income statement, year-on-year, and compare your net income. This amount is the money left over after depreciation, interest expense and taxes. Now look at where you are investing your revenue. If it’s back into the business you could be asset rich but cash poor. Keep sight of your business’ ability to pay off debt with your assets.

 

  1. Manage your cash flow

For every SME to survive you need to ensure you have cash flowing through the business and enough to keep you afloat. Start by looking at your debtors and creditors. Assess your business expenses, stock availability and projected income levels. Shorten your turn around time between invoicing clients and payment deadlines.

 

  1. Reduce your overheads

Cost-cutting is inevitable. Take a critical look at your expenses, identify what you can reduce. This includes opportunities like approaching your landlord for a reduced rent, renting out part of your office or factory, reducing transport expenses, reviewing utility bills and approaching suppliers for a discount or credit facility. Every cent helps.

 

  1. Implement a spend policy

If you are managing a larger workforce, take a dive into your spend policy. Provide stricter guidelines on how and what to spend on as well as your travel and expenses reimbursement policies. Review your purchasing policy and approval processes to ensure you have oversight of money going out your business at all times.

 

  1. Check your credit rating

Your ability to qualify for business loan will depend on your credit rating. Contact your bank to ascertain whether you stand in a good stance for assistance. Boost your credit score by ensuring you pay your monthly debts timeously or contact them to arrange payment breaks. The better your credit history is, the lower the interest rates will be upon further loans. This isn’t a quick fix, but having a healthy credit score means the ability to access affordable credit in the future.

 

After assessing your finances and bracing your business to weather the storms. Remember there’s always the potential for growth :

 

  1. Build multiple revenue streams

Jennifer Allwood reinforced “One key way to recession-proof your business is to have multiple revenue streams. Having a variety of ways you are bringing in revenue at a wide range of price points is necessary to maintain your income, regardless of the economy.”

 

This doesn’t only mean looking for ways to launch a new product to the market. It can be about managing your business more effectively. Explore your opportunities like one-on-one consulting, taking aspects of your business into a digitised world such as marketing, leveraging cloud solutions instead of printing expenses, affiliate marketing, monthly subscription based members to encourage a steady stream of recurring revenue and the like.

 

Speak to one of our Startwise Finance experts to check if your business is profitable and for assistance on how you can enhance your cash flow or reduce your expenses.

 

IT’S NOT AS EXPENSIVE AS YOU THINK. CHAT TO AN EXPERT IN OUR FINANCES & ACCOUNTING CATEGORY FOR JUST 15 MINUTES FROM AS LITTLE AS R200.