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Ask the owner of any of South Africa’s 2,6 million small and medium-sized businesses (SMEs) what their main challenges are, and cash flow management is sure to top the list. Yet the unique challenges that SA’s small enterprises face also makes them some of the most resilient in the world.
Regular disruptions caused by loadshedding or strikes force owners to think on their feet every day, adapting their strategies to survive. Such economic volatility also makes managing cash flow extremely difficult.
“The silver lining in this situation is that there are proven steps you can take to reduce risk that don’t demand huge amounts of time and expense,” says Tom Stuart, chief marketing officer at Lula, SA's first dedicated SME banking and funding platform.
The best way of viewing cash flow risk management is to see it as weaving a financial safety net for your business.
Cash flow is important in managing risk because it’s the financial backbone of any enterprise. When flowing smoothly, it steers the business through choppy economic waters and also allows it to seize growth opportunities as and when they arise.
Successful businesses excel at forecasting what will put cash flow at risk. They can identify these risk factors before they occur and use smart strategies to make sure they land in that safety net.
On top of standard market risks, SA businesses must handle unique threats to their cash flow that other enterprises around the world don’t have to. The global credit gap caused by limited access to business funding is another keenly felt cash flow issue.
Less than 1% of the country’s SMEs had benefited from the country’s Covid-19 relief fund within five months of lockdown, according to McKinsey research. This was a slow roll-out that threatened the livelihoods of 60% of SA businesses. Many of those who did pull through continue to suffer from a lack of credit options, which are vital in keeping business cash flow healthy.
Available stats show that SMEs will still receive just 25% of total business loans in 2023, a situation that’s led to the rise of dangerous “too good to be true” quick loan options, Stuart says.
“Banks provide an impersonal service because they’re less interested in the smaller, not-so-profitable accounts. They build their business models around and channel their resources toward larger corporate accounts.”
In today’s challenging economic climate, fortifying the financial resilience of SA's SMEs requires a multi-faceted approach. Reducing cash flow risk is a vital task for any South African business, but B2B banking services tend to be weighted in favour of large enterprises, leaving SMEs with impersonal and ill-fitted solutions.
Lula is an all-in-one cash flow risk management platform on a mission to level the playing field for small businesses seeking to mitigate these threats.
“Lula isn’t just a banking platform. We’re a financial partner,” Stuart says.
Need to take your business to the next stage? Sign up to Lula today and take advantage of their platform’s cash flow management tools and revolving capital facility.
This post and content is sponsored by Lula, written and produced by Alkemi Collective.
