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Insider advice on financing

South Africa’s small-business sector is feeling the pinch of the technical economic recession but there are simple, yet practical, steps to succeed, according to Nirmala Reddy, Senior Manager of Enterprise Development at Nedbank.

Reddy was among the high-profile speakers at the Riversands Incubation Hub in Fourways, which hosted its second FundEX event on Thursday, 17 August. This year’s one-day conference and expo showcased a wide spectrum of funders, with the aim of exposing entrepreneurs to the many funding opportunities available.

Due to popular demand, the Funders Lounge had been expanded to give entrepreneurs the opportunity to book 10-minute one-on-one appointments with representatives from government funders and commercial banks.

Nirmala Reddy

Nirmala Reddy, Senior Manager of Enterprise Development at Nedbank

Separate personal and business finances

Speaking at the event, Reddy said that small-business operators must separate their personal finance from that of the business, keep up to date with management accounts, and keep their banker updated of their situation at all times, whether good or bad. She highlighted that the key challenges small entrepreneurs have to face include the lack of financial information, poorly compiled financial information, forecasts that bear no resemblance to current financial performance, and a lack of business and/or financial acumen, with business owners often not understanding the financials and not being able to explain variances or other issues.

According to Reddy businesses are in some instances poorly capitalised, as principals are often not in a position to offer any contribution towards financing requirements. A poor credit profile of a business and/or business owners is also a common challenge for small business.

Confidence decreasing

Reddy’s address at FundEX follows the recent release of the Nedbank Small Business Index™, which shows that businesses’ confidence in South Africa has decreased dramatically in the first half of 2017 because of the technical recession, political and economic uncertainty, and the impact of the 18‑month drought.

The Nedbank Small Business Index score is currently at its lowest in four years at 43,2% confidence. Businesses surveyed in the first half of 2017 mentioned several factors that influenced their negative outlook, including the deteriorating economy, slowing revenues, late-payment challenges and high operating costs – particularly the cost of utilities. As it stands, 66% of businesses surveyed indicated that they are operating below full capacity.

Leverage your relationship with your bank

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Photo by Štefan Štefančík on Unsplash

Nedbank believes that the index provides insight into how to assist businesses creatively to “see money differently” and thereby survive their present challenges. Due to the negative financial outlook, the first and most important action that businesses should take is to get in touch with their banker for support to ensure that they do not default on their financial obligations.

Given that lack of financial acumen is listed as a key challenge, we are also able to help businesses to manage their financial information. A solution like Nedbank Accounting consolidates transactions and provides graphic reports and dashboards to show how businesses are doing.

Finally, in these uncertain times businesses are encouraged to leverage the wealth of industry and economic insights that their banks have available to enhance their planning for the future.

 

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