Money Lessons to Start the Year

Start the year on the right note with these money lessons
Share

Start the year on the right note with these money lessonsFinancial management and strategy is often rated as one of the biggest challenges entrepreneurs face in their businesses on a daily basis. The start of the new year is the perfect time to look back at your business’ performance in the past year and recalibrate with a plan and strategy for bigger success in the new year.

SME South Africa takes a look at some of the insightful pieces of advice from leading thought leaders, industry experts and entrepreneurs in the trenches.

Here are some money lessons that will ensure your business begins 2016 on the right note.

What to do with the festive season profits

Many businesses come out of the festive season with big profits, particularly retail businesses. Business owners should, however, be careful about how they spend that cash and ensure they maximise those profits.

“Profits earned during the festive season can go a long way to help SMEs prepare for the tough times and even quieter periods at the beginning of the year,” says Elize Giese, head of business investments at FNB.

She says that business owners can do this by saving and investing their festive season profits.

“A business with unpredictable cash flow projections could be better suited for short-term investments that provide for more liquidity and flexibility – should the business owner need to access the funds immediately. Businesses with a more stable cash flow should look at investing in longer term assets that provide for higher returns,” she says.

“Furthermore, long-term savings are essential to ensure the sustainability of businesses, especially in times of economic uncertainty.”

Where your money should be going

Eliminating unnecessary spending and keeping a tight budget is an important element of a successful business, but just as important is knowing what to spend money on.

Don’t be afraid to pay for legal advice, says Johan Cilliers, CEO and founder of Task Monkey.

“Entrepreneurs know how to make money, but where most stumble is when it comes to the legal aspects of a business such as registering your company’s name, employee laws, permits, licenses and trademark issues,” he says.

The biggest spend in most small businesses is the staff and you need to lay a strong foundation with good people, says Kirsty Rowett, founder of Cape Town-based experiential food agency, Source Food.

“Employ the best staff you can afford and pay them fairly. Try not to work with friends, unless they bring specialist skills to the business. Spend money on employee welfare and keep morale high by creating a positive environment with a few fun office perks,” she advises.

Money wasters all small businesses should avoid

Entrepreneurs should avoid wasting money by paying for things they can do themselves, says Ncamisile Maphumulo, founder of the Coastal Nephrology Centre. She says despite your good intentions, everytime you spend money it must make economic sense. “When your business cannot afford it, you pull up your sleeves and do it yourself,” she says.

Maphumulo also advices business owners to go easy on the cash withdrawals, particularly if it comes from the business account. “I used to do a lot of withdrawals, then come month end I couldn’t pinpoint exactly what that money was for. Every cent should be accounted for,” she says.

Get your bootstrapping budget right

Finding the best ways save money is every bootstrapping startup’s goal. Author of The Anxious Entrepreneur and the founder of Startup PicnicTiisetso Maloma offers entrepreneurs 3 pieces of bootstrapping advice that could save you time and money.

He says, “Firstly, look at what, ideally, it would cost to start. Secondly, break the activities down to simple tasks and requirements. Thirdly, select which areas you think are crucial to the success of the business and those you can do without but still be able to, for example, produce the product, market it and distribute it.”

Maloma says bootstrapping is essentially done with sales cash when your customers pay, so it is important to get the cash ASAP. As much as getting new clients is important, bootstrapping businesses should not neglect the old ones, repeat business is key and easier, he says and adds that monitoring costs closely and figure out ways to reduce them is the surest ways to ensuring you get the bootstrap budget right.

Keep personal finances in check through financial planning

Maintaining the balance between managing their business and personal finances is often a tricky tightrope walk for many entrepreneurs. Financial planning is the best way to get the balance right, says associate consultant at Alexander Forbes, Bantu Bam and financial advisor with financial services company, Discovery, Reshma Ansary.

“Financial planning means that you have the correct financial disciplines in place and understand the value of money,” says Bam.

His advice to entrepreneurs is to treat themselves as an employee, “Particularly when it comes to a cash business as this increases the temptation to spend any cash in hand. I believe this is often the downfall of smaller businesses,” he says.

Ansary advises entrepreneurs to get help, “Ask a professional financial planner to help you manage your finances. Doing it yourself would be like asking a beautician to do the job of a dentist.”

Facebook Comments
Share