Business owners who are faced with a cash crunch often freeze, not knowing how to respond when they have a drop in sales, had one large customer not paying on time, had their suppliers cancelling their credit line, or any of a number of unexpected interruptions. Who would, for instance, have anticipated the devastation of the Covid-19 pandemic on small business sales?
There are many ways to respond to such a situation, says Monde Zuma, founder of MamelodiBiz. He emphasises that many businesses do not have access to bank loans or other mainstream financial products, but they have feasible businesses that need to overcome a short-term cash problem.
“For these businesses, alternative funding, such as peer-lending, or re-negotiating credit terms with suppliers may offer quicker solutions than trying to apply for a bank loan,” he says.
He lists several more plans he’s been able to help his small business clients with, such as cutting costs, even if not so comfortable for the business. Other steps business can take include making it easier for taking payment, such as with a debit or credit card facility, offering small discounts for early payment by clients who have accounts and making lifestyle sacrifices. In some instances, it may even entail revisiting the business model itself.
Zuma will share such practical tips on the next episode of the IBASA & EPI Webinar Series, along with co-panelist Peter Magner of Iridium Business Solutions.
“Practical tips to support small businesses to bridge cash flow gaps due to the pandemic and the holiday period”
Join Monde Zuma, founder of MamelodiBiz and leader in various other business ventures, and Peter Magner, Chartered Accountant of Iridium Business Solutions for this practical webinar on advising your small business clients on overcoming cash flow challenges. If you are an independent business advisor, you may learn how you may solve such problems for your own firm too.
Thursday 10 December 2020 from 11h30 to 12h45
<< CLICK HERE >> to book your place
Solving a cash flow shortage is not an uncommon issue for small businesses, according to Magner. He says: “Before jumping to banks and exploring other funding options, you need to know if you need additional cash and if so, how much. You have to do a forecast to know what your shortfall maybe for different scenarios. You have to plan for the worst so that you know how bad the situation maybe.”
While businesses may have very different needs, it has to start with knowing what the cash flow needs are and the options that are available for addressing the shortfall. If you take out a loan, you also need to show how the future sales will cover the additional costs associated with the loan.
“One of the important questions to ask if the client is tax compliant,” says Magner. “Options for financing and grants linked to Covid-19 relief are all dependent on being compliant and other support, such as ordinary grants and selling to the government also requires tax compliance, so this is an important consideration — to sort out any outstanding tax issues,” he says.
Magner adds a very important consideration for business support practitioners: “As an advisor, you must have a trust relationship with your clients and they must understand that your advice is based on looking at all the options and is for the good of their businesses.”
- To join the CPD webinar, you can << REGISTER HERE >>
- Christoff Oosthuysen is the webinar host and Founding CEO of the Entrepreneurial Planning Institute (EPI)