Organisations that are able to survive and prosper during an economic downturn build competitive advantage that lasts long after markets recover.
Cash flow is often the core factor that determines the success or failure of a business. But don’t believe that you need to slash costs right and left. Cutting expenses is an automatic response when times are uncertain, but it may not always be the right one. Rather take a good hard look at what financial tools are on offer to help you make it through.
- Deal with bad debt.
Commercial debt collectors specialise in collecting debt from business debtors. These collections can be more complex as the debtors are trading as companies, close corporation and trusts, all of which have different liabilities. Bentley Credit Control helps companies with bad debt recovery, and also gives advice on credit management. Clients are charged a fixed collection commission, less any commission which may be payable to Bentley in terms of the Debt Collectors Act. Contact: +27 860 102 049, firstname.lastname@example.org, www.creditcontrol.co.za
- Apply for debtor finance.
Get access to cash on the strength of your debtors’ book. Debtor finance is best suited to companies that sell to other companies. To apply, you’ll need to submit your latest financial statements, management accounts, personal balance sheet of guarantors, cash flow projections, and a debtor finance questionnaire.The facility provides funding of up to around 80% of your debtor’s book, improves your cash flow for immediate business growth, allows you to negotiate discounts from suppliers for the early settlement of accounts and improves balance sheet ratios as your debtors become a real asset. In return, you pay a monthly management fee, and interest is charged against borrowings. Contact any of the major banks for more information.
- Apply for an overdraft.
Borrow money on top of your bank balance. Depending on your bank, you’ll pay interest or fees – or both – in return. This is a convenient and flexible way of improving your cash flow. An overdraft limit will be set on application and then you can decide how much of it to use and how often you want to use it. Most banks have a number of overdraft product solutions available for the new, developing or expanding business, incorporating forms of credit that solve temporary finance requirements at negotiable and competitive rates. Contact any of the major banks for more information.
Sell your debtors’ book to a finance institution – the factor – which then assumes the obligation of collecting invoices. You pay the factor percentage of the invoice value of your book, as well as a percentage of the amounts actually paid to you Factoring enables you to quickly receive amounts owed by your customers, so that suppliers can be paid in cash and discounts negotiated. This can improve your balance sheet, and protect you from defaulters, reducing the need for credit risk insurance. Contact any of the major banks for more information.
- Selective invoice finance.
Selective invoice financing is where selected invoices are sold by small businesses to the bank. This enables you to select bigger debtors, in order to release funds and so improve the business’s cash flow. It’s an alternative to traditional overdraft funding, where the balance sheet may not be strong enough to provide sufficient funding for the expanding business’s growth needs. Selective invoice financing is of most benefit to small, medium and start-up businesses. In reviewing debtors’ books, FNB places emphasis on the quality of the debtor and their ability to service their debt. Contact: +27 860 263 362, email@example.com, www.fnb.co.za
- Vet your clients.
KreditOnline, a credit information service from KreditInform, is comprehensive and web-based. There are no costs per report, so you can use the system to obtain as much information as you need to make better decisions. The online system consolidates five separate databases: the KreditInform File displays all information available in KreditInform’s credit reports, including a credit assessment; the Judgement File includes all public record information available, such as judgements and liquidations; the Registrar’s File includes information on all registered companies in South Africa; the Listed Companies File allows subscribers to cross-reference shareholding relationships and directorships; and KreditCheque allows online users to display and input negative information about cheque payments. Contact: + 27 11 777 2700, firstname.lastname@example.org; www.kredit.co.za
- Business term loans.
These are loans for a fixed period of time during which both interest and principal are repaid on a regular basis. Standard Bank offers a relatively simple way of securing funds for any period up to eight years that is repayable in equal monthly instalments. Your term loan may be used to buy fixed assets such as property and equipment, and for refurbishments and alterations. The loan period is not fixed but is determined by your monthly repayments, which include interest and capital. The minimum loan amount is R50 000 and there is no maximum, depending on what you can afford. Contact: +27 860 012 345, email@example.com; www.standardbank.co.za
- Accounting is king.
In bad times, getting good data, preparing accurate reports and checking actuals versus budgets frequently is vital. Strengthen your reporting systems so you know exactly where each penny is going, and where each is coming from. Starting at around R1 800 for a single user licence, QuickBooks Pro 2008 offers fast and easy financial management for small businesses and comes with advanced tools and customisation options to improve efficiency and organisation. For more advanced accounting, try QuickBooks Premier 2008, which meets more specialised needs and gives even greater insight to your business. Contact: +27 861 QBOOKS, www.quickbooks.co.za For the small-to-medium business, Pastel Partner combines power, innovation, flexibility, rapid processing and ease-of-use for about R6 500. For larger businesses, Pastel Evolution brings all aspects of operations together, providing an integrated view of your business. Both packages enable you to add on modules as your business grows. Contact: +27 11 304 3600, www.pastel.co.za
- Business Credit Cards.
Business credit cards provide flexible access to credit, an efficient way of making payments and they can help you to keep track of and manage expenses. To qualify for a card your business must have a satisfactory income, an acceptable credit record as a business entity and an acceptable credit record for individual applicants. Contact any of the major banks for more information.
- Business crisis management assistance.
If all else fails, bring in the financial experts. Absa offers small and medium businesses the service of accredited business crisis managers. The team is able to address and provide solutions to manage crisis situations within your business. The cost of this service is related to the complexity of the situation. Contact: +27 860 008 600, firstname.lastname@example.org; www.absa.co.za