Your guide to better understanding, managing and improving your business Cash Flow.
Successful South African women entrepreneurs share their strategies for managing cash flow in their businesses to fuel growth.
Lioness Playbook Series provides practical business advice and insights delivered directly by leading African women entrepreneurs selected from the Lionesses of Africa community. These experienced women entrepreneurs share their proven hacks, tactics and strategies for getting things done in business. Hard won, tried and tested business knowledge is presented in an easy-to-read format for you to learn from and apply in your own business. Relevant, agenda-free, pragmatic, advice and strategies that are sure to help drive successful change in your business and guide your personal growth journey as a woman entrepreneur.
Every entrepreneur knows that maintaining a strong cash flow is key to business successit’s the oxygen that keeps it alive. However, it can be harder to achieve good cash flow management in practice. There are times when the business will have good cash flows, for example after a positive sales period, or after closing a big deal or project. However, there are other times when cash flow is under pressure, after an unexpected essential large-scale purchase, or during a weak sales period when the local or global economy is challenging. Let’s face it, even profitable, fast-growing companies can experience cash flow challenges at times while waiting for big deals to convert into cash in the bank.
So, it’s time to start getting your cash flow management strategy on track. Use this Playbook as your guide. It will help you to focus on how to manage your cash flow better, no matter what stage of your business-building journey you are on. Our featured Lionesses bring their own experiences to the table, sharing their proven hacks, tactics, and strategies to help you better understand, manage, and improve your business cash flow.
Enjoy our Lioness Playbook.
Melanie Hawken Founder & CEO Lionesses of Africa
Efficiently managing cash flow plays a significant role in the sustainability of SMEs
In today’s difficult economic environment and ever-changing business landscape, managing cash flow effectively is more critical than ever. In fact, research underscores the significant role that cash flow plays in the success and sustainability of small and medium enterprises (SMEs).
At Absa, we recognise the contribution these businesses make in driving economic growth, creating jobs and fostering innovation. We also understand the unique challenges that SMEs face, particularly those owned by women. Our ongoing engagements with business owners reveal that managing cash flow can be particularly difficult, especially during the critical first two years of operation.
It is against this background that we collaborated with the Lionesses of Africa to develop this playbook. The learnings from the last few years have underscored that access to appropriate resources, training, mentorship and funding opportunities can enable positive outcomes for women entrepreneurs. This playbook is an effort to supplement the collection of resources already available.
We remain committed to walking the journey with you and we continue to be inspired by your resilience, the strength of your vision, and the potential of your enterprises. We look forward to seeing your businesses flourish.
Ronnie Mbatsane Managing Executive for SME Business, Absa Relationship Banking
Empowering women entrepreneurs to navigate the complexities of cash flow management
As part of our strategy to be the primary partner for our clients, and broader efforts to transform South Africa’s economic competitiveness, Absa is fully committed to support women entrepreneurs along their journey by building strong relationships with them and creating innovative solutions that meet their unique needs.
Our focused approach to the various client segments we serve, coupled with our strategy of keeping close to our clients, allows us to respond to the specific challenges faced by today’s women-owned businesses.
As the Bank of the Entrepreneur, we are proud to sponsor this Cash Flow Playbook, designed to provide practical insights, tools and strategies to navigate the complexities of cash flow management. This collaboration is a testament to our commitment to supporting small businesses, particularly those owned by women, which contribute to the growth and prosperity of our economy.
The resource is designed to provide actionable insights, practical strategies, and real-world examples to help you navigate the complexities of cash flow management and guide you in making informed financial decisions.
It is our hope that this guide serves as a valuable companion on your entrepreneurial journey and that it helps you achieve your business goals.
Sanah Gumede Managing Executive for Strategy and Customer Value Management, Absa Relationship Banking
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South African women entrepreneurs share their top cash flow management advice
“Keeping a cash reserve is my number one cash flow management recommendation. Creating and keeping that buffer makes sure you can pay your debts even when your business isn't making as much money as projected.”
— Mauricia Cox
“...by getting to know your finances, especially your cash flow projections, women entrepreneurs can make smarter decisions that drive the growth and sustainability of their businesses.”
— Lauren Anderson
“Always make sure that you keep making a profit and that you keep ploughing that profit back.”
— Margaret Hirsch
“I rely heavily on an annual budget as well as monthly budgets to help forecast upcoming expenses and potential shortfalls. This gives me the opportunity and time to 'make a plan'
— Michele Carelse
“Avoid neglecting cash flow projections. Many entrepreneurs focus solely on profit and loss, overlooking cash flow forecasts. This can lead to liquidity issues, even if the business is profitable on paper.”
— Mamela Luthuli
“Keep the project pipeline full. A constant flow of new projects secures consistent income. Avoid project gaps that create cash flow disruptions, making it harder to meet ongoing expenses.”
— Andiswa Silinga
Once you have a clear insight into the cash situation you can find a balance between what needs your focus income or expenses.”
— Sasha Knott
“Be careful of the big, juicy deal. While large orders or clients may be great for revenue, the resulting cash flow strain may put your business at risk.”
— Annie Muronda
“At any given time in your company, always ensure your cash on hand can provide at least a 6 months runway. If not, then make some cuts in your company so that you have cash on hand for 6 months.”
— Nneile Nkholise
“I've learned to sidestep common traps. First, don't neglect budgeting; always track income and expenses. Build cash reserves to weather uncertainties and avoid the hand to mouth cycle.
So, where do you start when it comes to cash flow management? Whether you’re a young, first-time entrepreneur or a seasoned professional, our step-bystep guide for mastering your cash flow is designed to help you pay your expenses, grow your business, and minimise the stress associated with it.
"Cash flow" is known to be the lifeblood of any business. For any entrepreneur starting up or scaling a business, it's not just crucial; it's a game-changer. Your business's survival hinges on your grasp of the concept and its impact.
Cash flow in business refers to the total amount of money coming into and going out of the business. A positive cash flow fuels business growth, enabling you to hire more staff, open new locations, and acquire better equipment or assets. Conversely, a negative cash flow indicates that more money flows out of the business than in.
Think of your cash flow like a water tank. You want to keep it full to enable business operations and growth. To achieve this, the amount of money coming in should exceed the amount going out. Positive cash flow means you earn enough money to pay your bills and have extra to reinvest in your business. Additionally, you are able to deposit money into your bank account and withdraw it without the concern of your account becoming overdrawn.
While it may seem simple, there is always more to learn, and this Playbook is designed to guide you through it and provide you with great advice from leading women entrepreneurs.
Think of your cash flow like a water tank. You want to keep it full to enable business operations and growth.
Why is cash flow so important for your business?
Cash flow is crucial for the success and sustainability of any business. It represents the movement of money in and out of a company, and having a positive cash flow is essential for meeting financial obligations such as paying employees, suppliers, and bills on time. Without a healthy cash flow, the business may struggle to operate smoothly and may even face the risk of insolvency.
Additionally, a positive cash flow provides the flexibility and resources needed for future growth and investment. It allows the business to seize opportunities, expand operations, invest in new equipment, or hire additional staff. A strong cash flow also indicates the financial health of a business and its ability to weather unexpected expenses or economic downturns.
Furthermore, understanding and managing cash flow effectively can help women entrepreneurs make informed decisions about pricing, inventory, and expenses. It provides valuable insights into the financial performance of the business, helping to identify and predict potential cash flow gaps or areas for improvement.
In short, cash flow is the lifeblood of a business. It enables day-to-day operations, supports growth and investment, and serves as a key indicator of financial health. Therefore, maintaining a positive and stable cash flow is imperative for the long-term success of a small business.
Is profit the same as good cash flow? In short, no.
Business owners often make the mistake of thinking that as long as they are making a profit according to their accounts, there will be enough cash to support ongoing operations.
It's important to remember that even profitable small businesses can experience cash shortages. This may come as a surprise, but a business could be making a significant profit and still experience negative cash flow due to the business owner withdrawing cash to cover personal expenses.
In essence, profit reflects a business's financial performance. It's the amount of money a company earns after deducting all expenses. A business can either have a positive profit, which means it earns more money than it spends, or a negative profit, which means it spends more money than it earns. Cash flow, on the other hand, pertains to the amount of cash entering and exiting a business. It's vital for day-to-day operations – even if a business makes a profit, it will struggle to pay expenses if that cash isn't flowing consistently. Consequently, cash flow is directly linked to the business's success.
“Revenue is vanity, profit is sanity, cash flow is reality.”
Cash flow is the lifeblood of a business. It enables day-to-day operations, supports growth and investment, and serves as a key indicator of financial health.
The management and reporting of cash flow involves categorizing cash flows into three types: operations, investments, and financing. Cash flows from operating activities stem from the day-to-day business operations, such as paying wages, buying inventory or paying for utilities. Investment cash flows are associated with long-term assets, such as equipment purchases or property sales. Financing cash flows result from debt and equity activities, including debt and interest payments to creditors and dividends to shareholders. Below, you'll find examples of different types of cash flows for small businesses.
How can you track how much cash you have in your business at a given time? What about the cash needed to operate and grow your business? What about future cash needs to buy new equipment or assets?
Cash flow management involves monitoring the money coming in and going out of a business over time. Tools and techniques for cash flow management enable business owners to predict and control the amount of available money for the business in the future. Effective cash flow management is crucial for the success of small businesses.
Three techniques help small business owners understand, manage, and enhance business cash flows:
1. Cash flow statement
2. Cash budget
3. Cash flow analysis
We will explain how to prepare a cash flow statement, create a cash budget, and conduct a cash flow analysis.
Before using any of the three cash flow management techniques, you need to know how cash flow is calculated. The most common method of calculating a SME’s cash flow breaks cash flow balances into the three categories (described in the previous section) and adds them to the cash balance at the beginning of the period. That formula for any time period is:
The statement of cash flows is one of three financial statements that a small business must prepare at the end of each accounting period. The other two financial statements are the income (P&L) statement and the balance sheet. The cash flow statement is the single most valuable tool a small business owner has for managing liquidity and solvency over time. It breaks down cash flows into operating, investing, and financing activities, helping business owners manage liquidity and solvency. It identifies cash flow challenges, gaps between income and expenses, and areas for potential growth and investment.
Effective cash flow management is crucial for the success of a SME business.
Here are 5 steps for preparing a cash flow statement for a small business using the irect metho transactions from the company's operating activities. This inclu es cash receive from customers an cash pai to suppliers, employees, an for operating expenses to the company's investing activities. This involves cash receive from the sale of assets an cash pai for the purchase of assets, such as equipment or investments with the business's financing activities. This inclu es cash receive from borrowing or issuing shares, as well as cash pai for ebt repayment an ivi en s investing, an financing activities. This involves summing up the cash flows from each category to arrive at the net increase or ecrease in cash for the perio cash flow statement (a basic Excel sprea sheet works well, or fin a free template online), presenting the net cash flow from each activity category an reconciling the beginning an en ing cash balances
Start wit cas from operating acti ities
Detail cas flows from in esting acti ities
Identify cas flows from financing acti ities
Summarize t e net cas flow
Present t e cas flow statement
These steps will help in preparing a comprehensive cash flow statement using the irect metho for a SME business.
The cash flow statement is the single most valuable tool a small business owner has for managing liquidity over time
One way to improve an manage your business's cash buffer is to create a monthly cash bu get that relates to your cash flow projections an anticipates cash nee s. By un erstan ing projecte cash flows, business owners can set asi e the cash they will nee for expenses an can manage business activities accor ingly. A cash bu get shoul be create 6-1 months in a vance an a justments ma e as nee e base on actuals. Follow these 3 steps
Begin by estimating the cash that your business expects to receive in a given perio . This inclu es sales revenue, accounts receivable collections, an any other sources of incoming cash such as investments or loans. Be realistic in your estimates, taking into account factors like seasonality an economic con itions
Next, i entify an estimate all the cash payments your business is likely to make uring the same perio . This shoul inclu e expenses such as payroll, rent, utilities, loan repayments, inventory purchases, an any other operating costs. Consi er the timing of these payments to accurately project when the outflows will occur
With the estimate cash inflows an outflows in han , create a cash bu get that outlines the projecte cash position for specific time perio s, such as weekly or monthly. This bu get will help you un erstan when your business is likely to experience surpluses or shortages of cash, allowing you to plan an manage accor ingly. Regularly review an up ate the bu get as circumstances change to ensure its accuracy an usefulness.
Be realistic in your estimates, taking into account factors like seasonality and economic conditions.
Cash flow analysis is an important tool for managing the cash flow of a SME business
This technique involves examining various aspects of a business that can affect its cash flow, inclu ing accounts receivable, inventory, accounts payable, an cre it facilities The goal of cash flow analysis is to i entify any cash flow issues that may affect the liqui ity of the business, to n ways to improve the cash flow an to i entify cash flow problems ahea of time
By analyzing cash flow, a SME can i entify recurring patterns an tren s in its cash inflows an outflows This can help in pinpointing perio s of surplus or shortage, allowing the business to plan an strategize effectivel
can highlight inef ciencies in accounts receivable an accounts payable processes
By optimizing these processes, a business can expe ite incoming cash an manage outgoing cash more effectively, thereby improving overall cash flow
Utilizing cash flow analysis, a small business can create accurate cash flow forecasts, allowing for proactive planning an resource allocation By forecasting cash inflows an outflows, the business can anticipate potential shortfalls an surpluses, enabling better nancial ecision-making business can i entify areas where costs can be minimize By scrutinizing cash outflows, the business can n opportunities to re uce expenses an improve overall cash flow
By analyzing cash flow, a SME can identify recurring patterns and trends in its cash inflows and outflows
Running a small business presents numerous financial challenges, with cash flow management being a primary concern. SMEs can employ various strategies to enhance cash flow and bolster business expansion.
In this section, we will explore 12 ways for you to enhance your business cash flow. It is important to commit time and energy to this task. Women entrepreneurs can effectively track the money coming in and going out, which enables better decision-making and proactive planning. Tracking cash flow helps in understanding when to expect peaks and troughs in cash, identifying potential shortages, and ensuring there's enough liquidity to cover operational expenses, investments, and growth initiatives. Moreover, analyzing cash flow data reveals valuable insights into areas for cost savings, optimizing revenue generation, and identifying potential financial risks. Ultimately, a solid grasp of cash flow allows small business owners to navigate challenges, seize opportunities, and sustain long-term success.
Before discussing ow to improve your cas flow, it makes sense to understand w at causes cas flow issues in t e first place. Some of t e most common causes include
Bein too optimistic:
Entrepreneurs by nature are optimists. But w en
it comes to cas flow, t at attribute can be a downfall. For instance, don’t spend too muc oping t at you’ll make it up tomorrow
Hi h fixed costs:
Hig fixed costs suc as rent or salaries can put a strain on cas flow during periods of slow sales
Late customer payments:
W en customers fail to pay t eir invoices on time, it can lead to a cas flow crunc for t e business
High stock levels:
Having excessive stock can tie up funds t at could be used for paying bills or investing in growt
Seasonal fluctuations:
Many businesses experience fluctuations in sales t roug out t e year, w ic can create cas flow problems during slow or off-peak demand periods
Not preparin a cash flow forecast:
Not understanding t e business’s anticipated future cas flow can lead to being unaware of impending cas s ortages.
Overspendin too soon:
One way to avoid spending too muc is by creating a business plan w ere you map out w ic milestones you s ould meet before you make certain investments
Not havin enou h of a cash buffer on hand:
Many small business owners start up wit little to no reserve for rainy day funds.
To avoid t is dilemma, a good best practice is to ave at least two mont s of operating expenses in your business savings account
Don't assume that you can solve a cash crunch by raisin funds:
Even if your business meets t e criteria for receiving credit or is attractive to investors, t e loan application and investment-seeking process can be time-consuming, especially during a crisis. It is better to concentrate on managing t e funds your business currently possesses, w et er t ey were internally generated or borrowed, rat er t an continually searc ing for additional funding.
To maintain a positive cas flow, business owners need to take steps to manage and mitigate t ese problems. In t e section t at follows we outline several strategies you can begin utilizing today to begin to improve your cas flow.
Make strategic decisions on how to improve cash flow to ensure your business remains vibrant and competitive in the long term.
Improving cash flow is crucial for the health and sustainability of your small business By adopting a comprehensive approach that includes leveraging technology, enhancing customer relationships, optimizing inventory management, and strengthening supplier relationships, you can create a more resilient and flexible financial foundation Remember, effective cash flow management is not just about monitoring the money that flows in and out of your business; it’s about making strategic decisions to ensure your business remains competitive in the long term
Many small businesses have stock sitting on shelves A healthy cash flow relies on the swift turnover of stock for which the cash outlay has already been made To improve cash flow, it's important to know the average industry norms for stock turnover You can offer discounts or bundle slow-moving stock with other products and services to help sell them and improve your balance sheet
Speed up your accounts receivable
There are several ways to speed up the collection of payments from customers These include leveraging technology to accelerate payment receipt, promoting credit card payments, offering discounts and incentives for early payment, and ensuring that invoices are sent out early, are accurate, and have clear payment due dates
onduct credit checks on customers
Conduct credit checks on customers seeking credit to minimize the risk of late payments and cash flow disruptions When a small business is considering extending credit to customers, it's crucial to conduct thorough credit checks to mitigate the risk of late payments and cash flow disruptions This process typically involves obtaining and reviewing the customer's credit report, assessing their credit history, evaluating their current financial status, and setting clear credit terms to minimize potential risks By implementing these measures, small businesses can make more informed decisions and minimize the impact of late payments on their cash flow
Optimize accounts payable
It's crucial to maintain good relationships with vendors and suppliers when managing accounts payables Paying invoices on time and capitalizing on early payment discounts can help build trust with vendors and lower expenses It's also worth exploring opportunities to negotiate more favorable payment terms, such as by entering into long term contracts in return for discounted prices.
Cu spending
It may seem obvious, but one of the quickest ways to improve cash flow is to reduce spending. Focus on enhancing cash flow by eliminating unnecessary expenses and paying for essential costs at more strategic times. This can aid in curbing overspending and boosting cash flow.
6 Use accoun ing and budge ing sof ware
If hiring a bookkeeper is too expensive, or if you already have one, using software to track receivables and payables, generate invoices, pay bills, and create cash flow statements and other related reports can improve your small business's cash flow management. Technology not only saves time but also saves money by providing the tools to better understand and manage cash flow.
7 Be aware of he shor - erm financing op ions available o you
When facing a cash crunch, it's crucial to already know what options are available to you for addressing the cash flow gap. Educate yourself about temporary funding options in advance. Talk to your bank about potential solutions like a revolving line of credit, or a short-term business loan and keep an eye on your credit score so that you'll have access to funding when you need it.
Co sider leasi g vs. purchasi g fixed assets
Consider flexible ways to finance long-term and capital-intensive assets, such as equipment and facilities. Additionally, depending on the market and the stability of your business, you might find it more advantageous to buy real estate and make mortgage payments instead of being tied into a long-term lease. Choosing leasing over purchasing equipment or real estate could help to lower initial costs and improve cash flow.
9. Bootstrap your busi ess as lo g as possible
Maintain a mindset that your business should consistently produce enough operating cash flow to meet its obligations without relying on debt, and base financial decisions on this premise. It can help to imagine that debt is not an option and make cash decisions accordingly.
In the first year of operating a small business, owners may struggle to determine the appropriate pricing for their products or services. Consequently, they often opt to set low prices in order to attract early customers. It is crucial to accurately assess the value of the offerings to customers. It is important to benchmark with competitors and industry standards. It is also essential to test the market and make price adjustments as needed. For instance, a coffee shop could consider increasing the price of one or two high-demand products to gauge the impact on sales.
10. Look for ways to automate processes
Identifying the routines and processes that hinder cash flow in the daily management of a small business can be challenging. Technology often holds the key to boosting productivity. It's important to pinpoint redundant and manual tasks that could be automated or removed, freeing up employees to concentrate on tasks that generate cash flow. or instance, empowering salespeople with data and technology can help them close deals more efficiently and swiftly.
12. U e online payment olutions
Encourage customers to use online payment solutions. Offering multiple payment options can speed up the receipt of funds. Digital payments can be processed and deposited into your account more quickly than traditional methods, improving your cash ow.
SMEs can employ various strategies to enhance cash flow and bolster business expansion.
Managing your Business Cash Flow: Women entrepreneur playbooks
Founder of Gemini GIS and Environmental Services
www.gges.co.za
Andiswa Silinga is the co-founder of Gemini GIS and Environmental Services in South Africa, established in 2018. She is a leader in the field of geospatial and drone technology. By leveraging these tools, she empowers businesses in mining, construction, and energy sectors to minimize their environmental impact. Her expertise unlocks valuable insights that guide sustainable practices across these industries. A passionate mentor, she actively invests in shaping the next generation of experts in her field.
Andiswa Silinga’s CASH FLOW MANAGEMENT playbook
Insights into how to control cash flow to build a sustainable consulting business. my approach
Consistently attract and retain paying clients to drive cash flow
The high failure rate of startups, particularly due to cash flow issues, was a concern for us as we launched our consulting practice. Recognizing our lack of business experience, we enrolled in an Enterprise Development (ED) program that equipped us with critical aspects of finance, such as budgeting, cash flow management, financial statements, and data analysis.
While we explore various pricing models as our business grows, hourly billing currently provides a strong foundation for our cash flow projections. Since income is directly tied to the time spent working on a project, we have a clear picture of the revenue generated throughout the project lifecycle. By factoring in the anticipated costs associated with delivering these projects and business operations, we gain a comprehensive understanding of our projected cash flow. This approach serves as a roadmap for our cash flow, allowing us to anticipate our financial needs and make informed decisions.
Understand how your sales conversion cycle impacts cash flow We've faced periods of slow client acquisition, which have left a significant dent in our financial health. Initially, we relied heavily on one-off projects. This over-reliance proved detrimental for two reasons. First, the sales conversion cycle can be lengthy, creating long gaps between securing a client and receiving payment. Second, the pressure of completing a large project often diverted our attention from sales and marketing activities.
“The sales conversion cycle can be lengthy, creating long gaps between securing a client and receiving payment.”
Interaction between cash flow, sales, and marketing
Our success depends on the active interaction between cash flow, sales, and marketing. Here's how it works: Consistent sales and marketing efforts attract paying clients, generating a steady stream of cash flow. This cash flow then fuels further investment in marketing, leading to even more client acquisition and, ultimately, even better cash flow. It's a virtuous cycle that ensures the longterm success of our consulting business.
Strategies for taking control of your cash flow
To improve our cash flow, we've adopted a two-pronged approach:
Ideal client profiling using the 70/20/10 model. This framework helps us identify clients who are a good fit for our services, contribute most to our bottom line, and avoid projects unlikely to yield long-term benefits.
As our business grows, we're exploring the potential of value-based pricing. This approach moves us away from hourly billing and allows us to charge based on the specific results and outcomes we achieve for clients.
By combining these strategies, we are taking control of our cash flow and building a sustainable consulting business that thrives on delivering exceptional value to our clients.
“Our success depends on the active interaction between cash flow, sales, and marketing.”
tip one
Prioritize client retention! Loyal clients bring recurring revenue and cash flow stability.
tip two
Invest in accounting software to simplify tracking income and expenses and boost cash flow.
“Keep the project pipeline full. A constant flow of new projects secures consistent income. Avoid project gaps that create cash flow disruptions, making it harder to meet ongoing expenses. Be proactive in finding new opportunities and manage project timelines to keep the momentum going. If you cannot do this yourself, consider hiring a salesperson or marketer to ensure your pipeline stays full.”
Annie Muronda’s Playbook
Key cash flow management hacks for a direct-to-consumer business
Founder of Rufaro Garments
www.rufarogarments.com
Annie Sibindi Muronda is the founder and managing director of Rufaro Garments and has overall executive management responsibility for the company. Under Annie’s leadership, Rufaro Garments has built a vertically integrated end-to-end manufacturing capability supported by the bespoke distribution of uniforms through brick-and-mortar and online outlets. Rufaro Garments has found particular resonance in the burgeoning affordable independent schools market and now provides stylish yet affordable school uniforms to over 40,000 students across South Africa.
my approach
Keep an eye on the future and predict your cash flow needs ahead of time
Beware the hidden risk Cash flow is a hidden risk for businesses that deliver their products or services before customers can buy them. This risk applies to most direct-to-consumer (D2C) or customerfacing businesses that need to have products on the shelves before customers can buy them. In a perfect world, businesses would receive payment for their products and then use that cash to make and deliver them. However, for most businesses, the pattern is reversed; they have to spend their own money to make the product, pay for distribution of the product, and then hope that a customer will buy and pay for the product.
Compounding this is the uncertainty of when a sale will be made and when payment for that sale will be received. This uncertainty is why cash flow is an essential concept for small businesses. Without available cash, businesses can not afford to deliver their products or services (including paying the staff needed). As a result, they will not have products on the shelf, therefore not generating sales to earn revenue. It can be a vicious cycle.
The first and most important cash flow hack for any business is to choose clients and business models that pay sooner rather than later. Examples include requiring customers to pre-pay for orders or pay a deposit and working with clients who pay as soon as the product is delivered.
“...choose clients and business models that
pay sooner rather than later.”
Unfortunately, when small businesses service large clients such as corporates or government departments, they often have to accept payment on delayed terms of up to 90 days or more in some cases. These arrangements can be catastrophic to a small business. One way to mitigate this impact is to price appropriately for delayed payments, which includes adding a margin for the cost of working capital needed when payment is delayed.
“...add a margin for the cost of working capital needed when payment is delayed.”
For entrepreneurs dealing with late-paying clients, securing working capital from funders becomes a necessity to bridge the cash flow gap. However, the key to managing this effectively is to be proactive. It's crucial to establish relationships with financiers before the need for working capital arises. By doing so, you can ensure that you're prepared for any cash crunch that may come your way, rather than scrambling for solutions when it's already too late.
“It's crucial to establish relationships with financiers before the need for working capital arises.”
tip one
Negotiate working capital facilities with funders before you need the cash. It will likely be too late when you actually need the money.
tip two
Look forward. Project your cash flow needs into the future and manage them proactively.
“Be careful of the big, juicy deal. While large orders or clients may be great for revenue, the resulting cash flow strain may put your business at risk.”
Founder of Asmara Coffee
Buhle Magwentshu is the owner of Asmara Coffee in South Africa, which was established in 2018. It is an artisanal micro-roastery with the vision of making quality, artisanal coffee appealing to the palates of coffee connoisseurs and newcomers alike. Buhle completed her Diploma in Food & Nutrition, BTech in Quality Management, and a certificate in Management Development. Before establishing her business, she worked in various entities in both retail and manufacturing (FMCG). In 2023, she opened her first cafe, offering a complete food and beverage experience.
Buhle Magwentshu’S Playbook
Insights on managing cash flow in a business facing currency fluctuations
approach
ake proactive measures by using
forecasting
Developing a clear strategy We understand how important it is to take proactive measures to minimize the impact of volatile market conditions on our operations. Since we import raw materials, we are susceptible to currency fluctuations. To manage the risks associated with currency fluctuation, we have implemented several key strategies:
1. Negotiating favourable supplier terms
2. Diligent accounts receivable management
3. Strong financial reporting and analysis
4. Strategic production forecasting and lean inventory management
Accurate forecasting is essential for effective cash flow management.
Negotiating favourable supplier terms
We have focused on building mutually beneficial relationships with our suppliers and negotiating favourable repayment terms and fixed pricing agreements to reduce the financial impact of fluctuating exchange rates.
Build mutually beneficial relationships with your suppliers and negotiate favourable repayment terms
Diligent accounts receivable management
Our bookkeeper ensures timely invoicing and actively follows up on outstanding payments. We use digital invoicing systems and automated reminders to streamline cash collection processes and optimize cash flow efficiency.
Strong financial reporting and analysis
Our accounting reporting system provides valuable insights into our financial performance, enabling data-informed decision-making and proactive risk management.
Strategic production forecasting and Lean Inventory Management
We use predictive analytics to forecast production needs and maintain minimal stock levels accurately. We follow a "just-in-time" inventory approach to lower carrying costs and minimize inventory obsolescence risks.
Just-in-time inventory management can lower carrying costs and minimize your inventory obsolescence risks.
tip one
Maintain a robust system for monitoring and optimizing accounts receivable. This involves promptly invoicing customers for goods rendered and diligently following up on overdue payments.
tip two
Use digital invoicing systems and automated reminders to streamline cash collection processes and optimize cash flow efficiency.
“One significant cash flow management pitfall to avoid is underestimating the importance of accurate forecasting. Failure to forecast cash flow effectively can lead to unexpected shortfalls or surpluses, resulting in financial instability and missed opportunities.”
Founder of INO-Biodiesel
www.inobiodiesel.co.za
Mahlatse Mamaila is the founder of INO-Biodiesel and Girl Water and Environmental Science Research, started in South Africa in 2020. As a climate negotiator and International Young Leader, she is passionate about creating change, especially for young girls and boys in rural communities. She works with 20,000 women and youth to promote regenerative agricultural development for food security and a sustainable environment. Mahlatse has received multiple international awards and was nominated for the 2024 EarthShot Prize.
Mahlatse Mamaila’s Playbook
Insights on cash flow management from a green business leader
my approach
Manage and track cash flow continually to stay on track
In January each year, I develop my annual business action plan, which sets our activities, goals for the year, and the budget for implementing the plan, detailing the estimated expenditure on each product or initiative. Goals to be achieved are set and tracked weekly, monthly, and annually. This action plan helps me to manage and track my cash flow continually. I regularly go back to it to see if we are still on track, or if we may have made a loss, or spent much more than we estimated on a project. If unexpected expenses and losses occur because sometimes things don't go as planned, we need to regularly revisit and update the action plan and cash flow forecast.
“Keep your finances predictable by organising them, using financial tools and reports to monitor your cash flow”
I have an accountant, and it's easy for me to manage my cash flow as I have an accounting background. I use Yoco to manage my payroll, invoices, and cash flow. I continually track the business cash flow using my action plan. I have monthly management account meetings with the accountant to see where we are spending more, and if necessary, we try to cut our costs. This tracking against my action plan helps me to see if I'm running a sustainable business. I need to know if we are making a profit, expanding, or making a loss, or to identify if there's something wrong with what we're doing - we need to figure out what it is and fix it. This approach enables me to ensure that my business is expanding and will continue to be sustainable in the next five to ten years.
“...tracking
against my action plan helps me to see if I'm running a sustainable business.”
We establish good relationships with our customers to ensure good cash flow and on-time payments. Our business model requires a 70% deposit before we proceed with production. This means our customers pay reliably and on time.
We also have a steady customer base and have developed good relationships with them over time, which also ensures reliable payments.
Diversifying our product and service offerings to improve cash flow
We are diversifying our business model to introduce new revenue streams to better manage our cash flow. Previously, we were focused on producing our end-product offerings to customers, but we are now also moving to offer training services, including those for unemployed youth. For example, we will be training 40 unemployed youth in greenfield biofuel manufacturing later this year. We will also be applying the power of digital technology for climate action, and we get carbon credits for every litre of used cooking oil we collect. I check every two weeks to ensure we submit the correct and accurate carbon credits for our cash flow.
A steady customer base with well developed client relationships helps to ensure reliable payments and a predictable cash flow.
tip one
Keep your finances predictable by organizing them, using financial tools and reports to monitor your cash flow, and helping you to make better financial decisions.
tip two
Always check your accounts to ensure you're on the right track.
“The most critical cash flow management pitfall to avoid is not paying attention to incoming and outgoing money. Failing to create a cash flow forecast, and mismanaging credit are the major causes of cash flow issues.”
Founder of KOA Academy
www.koaacademy.com
Lauren Anderson is the CEO and co-founder of Koa Academy in South Africa, established in 2021. With a diverse background in healthcare and a passion for leadership and effective systems, she has honed her skills in strategic planning, team building, and problem-solving. Her commitment to positively impacting her community has led her to the education sector, where she is leveraging technology and innovative teaching methods to create a dynamic and engaging online school.
Lauren Anderson’s Playbook
Insights
on managing cash flow from an innovator in edu-tech
my approach
Learn to love your business numbers, budgets and cash flow projections
Prior to starting Koa, my background was not in finance, and I had yet to familiarize myself with management reports and the workings of a profit and loss statement. However, my passion for budgets and numbers led me to swiftly assemble a team of individuals with extensive expertise in these areas.
It is crucial for women entrepreneurs to have a proper understanding of their business's financial numbers and to embrace budgeting for several reasons. Importantly, by getting to know your finances, especially your cash flow projections, women entrepreneurs can make smarter decisions that drive the growth and sustainability of their businesses. Understanding the company's financial health empowers them to allocate resources effectively and identify areas for improvement.
“...my background was not in finance, and I had yet to familiarize myself with management reports and the workings of a profit and loss statement.”
Learning 1: Sometimes you need to spend in order to make. One of my most nerve-wracking cash flow moments was in year one of Koa when our cash runway was very short. We needed to grow our number of students to survive. My natural instinct was to hold tight to our purse, but we had to spend more money on marketing to ensure we got enough enrolments to cover our costs. Knowing when to spend and what to spend it on is crucial. By spending the money early on marketing, I was giving up the cushion that ensured we could cover operational costs for longer. As we took the plunge, I had many sleepless nights, but it paid off! We secured enough enrolments to gain further funding and ultimately reach profitability.
“...by getting to know your finances, especially your cash flow projections, women entrepreneurs can make smarter decisions that drive the growth and sustainability of their businesses.”
Learning 2: Build lean. We learned how to build our product in a really smart way, never compromising on the things that were important to us, such as high teacher/learner ratio and quality education. However, we designed our initial platform by leveraging existing solutions rather than spending big on custom IT builds. If we had spent exorbitant amounts of money on the tech we use, we would have had a good product but no customers.
“Knowing when to spend and what to spend on is crucial.”
Learning 3: You're only as good as your team. Having a team of people whose experience I could draw on has been invaluable. Even though I am ultimately responsible, having smart people around me makes me more courageous in my financial decisions.
tip one
Be disciplined: Set time aside in your calendar to review your management report every month, compare your monthly spending to your budget, and ensure you know what is happening with your finances.
tip two
Have excellent accountants: Knowing that your numbers are correct and reliable is essential for making the right decisions.
Entrepreneur Advice
Don't let poor cash flow sneak up on you. Decisions made under financial pressure are often made out of fear. Instead, be proactive and make changes to the company or look for funding before you get to the point where you are desperate.
Cash in the bank puts you in a more powerful position to negotiate.
Mamela Luthuli’s Playbook
Insights on managing cash flow from an innovative IT solutions provider my approach
Make cash flow management a cornerstone of your business success
Founder of Take Note IT
www.takenoteit.com
Mamela Luthuli is the founder and CEO of Take Note IT in South Africa, providing cyber security and innovative IT solutions since 2007. She has made significant contributions to South Africa’s cyber security and IoT industries, including establishing the Cyber Excellence Academy to train young, highly-skilled cyber security employees. Through her work, she aims to create opportunities for marginalized and disadvantaged women and young leaders of tomorrow.
Managing cash flow effectively has been a cornerstone of Take Note IT's success. As a female CEO and entrepreneur, I have navigated various challenges to ensure that our small business operates efficiently and sustainably. Here are some key strategies and experiences that have shaped our approach to cash flow management.
During the early stages of Take Note IT, one of our main focuses was establishing strong financial controls. We achieved this by putting in place a thorough accounting system to track every transaction meticulously. Regular financial audits and detailed record-keeping became standard practices. These controls gave us a clear understanding of our financial position, enabling us to make well-informed decisions and promptly rectify any discrepancies.
“I have been intentional about communicating my vision and mission through consistency in how we serve our employees, communities, and clients.”
To maximize our resources, we adopted a three-quote system for significant purchases. This approach involved soliciting quotes from at least three suppliers before purchasing. It allowed us to negotiate better deals and ensured we were not overpaying for goods and services. This practice not only helped in reducing costs but also fostered a culture of fiscal responsibility within the business.
Implementing a detailed costing process helps to set realistic budgets and avoid unexpected financial shortfalls
3. Leveraging Consultants
Hiring full-time staff for every need was not feasible for a small business like ours. Instead, we strategically utilized external consultants for specialized tasks. This approach proved to be cost-effective and efficient. Consultants brought in the necessary expertise without the long-term financial commitment of permanent hires, allowing us to manage our budget more effectively.
4. Accurate Project Costing
One of our early challenges was accurately estimating project costs. Underestimating expenses led to budget overruns and cash flow issues. To address this, we developed a meticulous project costing system. Each project underwent thorough analysis to identify all potential expenses, from labour to materials. This detailed costing process helped us set realistic budgets and avoid unexpected financial shortfalls.
5. Negotiating Supplier Payment Terms
Maintaining a healthy cash flow requires strategic management of our payables. We negotiated favourable payment terms with our suppliers, extending payment periods where possible. This strategy allowed us to hold onto our cash longer, providing more flexibility in managing our finances. In some cases, we also secured early payment discounts, further enhancing our cash flow.
6. Forming Strategic Partnerships
Collaboration has been critical to our growth strategy. We formed strategic partnerships with other small businesses to share resources and reduce costs. These partnerships provided mutual benefits, such as bulk purchasing discounts and shared marketing expenses, which helped us manage our cash flow more effectively.
7. Focused Financial Planning
Detailed financial planning and budgeting have been integral to our success. We regularly review our financial performance and adjust our budgets as needed. This proactive approach ensures that we are prepared for any financial challenges that may arise. Additionally, we maintain a cash reserve to cover unexpected expenses, which has proven invaluable during times of uncertainty.
”Maintaining a healthy cash flow requires strategic management of our payables. We negotiated favourable payment terms with our suppliers, extending payment periods where possible”
tip one
Regularly review cash flow statements to identify and address potential issues early.
tip two
Maintain a cash reserve to manage unexpected expenses without disrupting operations.
Advice
Avoid neglecting cash flow projections. Many entrepreneurs focus solely on profit and loss, overlooking cash flow forecasts. This can lead to liquidity issues, even if the business is profitable on paper. Always forecast your cash flow to anticipate shortages and plan accordingly.
Founder of Ledikana Creations (Pty) Ltd
www.ledikana.com
Mapholo Magapatona-Ratau is the founder, managing director and designer of Ledikana, a lifestyle brand established in Johannesburg, South Africa, in 2014. It specialises in the manufacturing and retailing of contemporary readyto-wear African clothing and corporate gifting, including Golf wear and accessories targeted at tourists, locals, business travellers, tenants and corporations in and around OR Tambo International Airport and Melrose Arch, where its retail businesses operate. Before her career as an entrepreneur in the fashion industry, Mapholo worked in the financial sector.
Mapholo Ratau’s Playbook
Insights on managing cash flow from a prominent lifestyle brand builder
my approach
Entrepreneurship and money management have been part of my life for as long as I can remember. From early childhood, I helped my parents with their businesses, and my various side hustles have prepared me to become the owner of a formal, established business.
I took control of my company's cash flow from inception. By checking my bank statements every week, I can create realistic budgets, make projections and identify challenges. This money management approach allowed me to identify opportunities and threats as early as possible, enabling the business to operate proactively rather than being reactive. With the onset and continuation of the challenges presented by COVID-19, my business, like many other businesses, suffered, and I developed a phobia of money and cash flow. .
Develop a money management approach that allows you to identify opportunities and threats as early as possible
This resulted in me avoiding scrutinising the health of my cash flow and bank balances. I had to call myself out, transform my thinking and overcome my financial fears. With the help of my coaches and mentors, I started rechecking the bank statements, tracking my income and expenses, and evaluating these against business practices, sales, and stock. Whether the cash flow was trending positively or negatively, I captured and recorded all the data accurately in Excel.
“...a small
business owner must fully understand all aspects of their business, including statutory accountability, invoicing, declarations, and payroll.”
Doing this consistently allowed me to forecast current, future and expected cash flow against income and expenditure. By disciplining and educating myself in this manner, I managed to overcome my financial fears and learned to understand the monthly operating expenses, and the gross and net income of my business. Small business owners generally and commonly believe that, as entrepreneurs, they should lean on financial professionals to manage their finances. While this is always helpful, a small business owner must fully understand all aspects of their business, including statutory accountability, invoicing, declarations, and payroll.
As such, I invested in training to get myself proficient in our accounting system. This skill set helped me to be better at tracking my cash flow. It was incredibly helpful in making me aware of unnecessary expenses, reviewing insurance policies and cellphone contracts and closing unnecessary bank accounts that attracted unwanted and excessive fees. It also assisted us in invoicing clients quickly and exporting all expenses and income directly onto the balance sheet and general ledger. We implemented a set of debt collection policies regulating how we follow up and collect on overdue payments, and changed our payment terms to benefit clients.
Finally, I realised that, to keep my business financially sound, the business practices needed to be continuously monitored and managed and, if need be, changed.
“I took control of my company's cash flow from inception. By checking my bank statements every week, I can create realistic budgets, make projections and identify challenges.”
tip one
Be in control and stay on top of your finances.
Schedule a regular time weekly to check your bank statements. Evaluate your cash flow and become money-savvy.
tip two
Learn everything you can and develop yourself to become an effective businesswoman.
“Schedule time for forecasting and planning. Neglecting to forecast and plan for irregular fluctuations in revenue and cash flow can lead to high financial strain in the business.”
Executive Director of Hirsch’s Group
www.hirschs.co.za
Margaret Hirsch is the Executive Director of Hirsch’s Group, the largest independently owned appliance and electronics retail outlet in Southern Africa, now in its 45th year. Margaret oversees the day-to-day operations of all Hirsch’s stores and their concept stores. The Hirsch’s story is one of constant expansion and success. Margaret has been recognised with many international and local awards for her business, social, and charitable work, uplifting communities nationwide.
Margaret Hirsch’s Playbook
Insights on managing cash flow from an award-winning woman entrepreneur
Keep ploughing profits back into the business
It's important to reinvest any profits back into the business immediately. This practice helps in developing budgeting skills and an appreciation for the value of money. After getting your business started and reinvesting profits for at least five years without spending on unnecessary items, such as new vehicles, for instance, you should continue reinvesting the money until you have built a strong financial foundation and a solid cash flow.
Reinvest profits until you have built a strong financial foundation and a solid cash flow for the business.
Think ahead
At Hirsch's, we looked at our expenses and saw that our most significant expense was our rent. What could we do to avoid this? The obvious answer was to buy our own properties, pay them off, and then we wouldn't have the burden of rent. This is precisely what we did. How did we start? We saved R100 a month to buy a small property, which we then improved upon, sold, and bought a better property, and so it went on. Today, we have millions of Rands worth of properties in our portfolio. It's important to start small and only borrow money when you absolutely need it and pay it back as quickly as you possibly can. If there is a need to borrow money for something essential that will improve the business and make it work quicker, smarter, and faster, make sure that you don't over-extend and also make sure that you pay the money back as quickly as you can.
“...make sure that you don't over-extend and also
make sure that you pay the money back as quickly as you can.”
Make sure your product is marketable
Work on solving a customer's problem, and if you have an amazing product or service, be sure that the customers want that product or that problem solved. Many businesses close down so quickly because they have wonderful products, but nobody really wants them. Your product or service has to be something that the consumer is definitely looking for and one that solves a problem in their lives. Product and service sales mean cash flow.
“Start small, and reinvest your profit. This is the way to grow sustainably.”
Develop an online presence
A strong online presence is needed as everyone does their research online. Always remember the best and cheapest way of marketing is word of mouth. Nothing is more powerful than a testimonial from a happy customer. Constantly think of ways to ensure that your customers are happy. At Hirsch's, our mission is to have happy customers who return often. Turn your happy customers into sales, which in turn, means cash flow.
Learn from Margaret Hirsch’s Playbook
tip one
Start where you are today with what you have.
tip two
Keep ploughing that profit back.
Entrepreneur Advice
“Start by yourself and when the workload becomes too much, get one employee, and then as the business builds and you can afford more, take people in one at a time. Teach each one yourself and ensure their values are the same as yours - let them learn your culture. Always make sure that you keep making a profit and that you keep ploughing that profit back.”
Founder of Wellchemco
www.wellchemco.co.za
Mauricia Cox is the founder of WELLCHEMCO in South Africa, established in 2023. She is an engineer who has dedicated her career to water and wastewater treatment. She founded WELLCHEMCO to develop cosmetics that have minimal impact on our water sources, helping to protect the environment for future generations, and as a platform dedicated to championing holistic wellness by integrating wellness and beauty. WELLCHEMCO empowers women to radiate from the inside out.
Mauricia Cox’s Playbook Insights on managing cash flow from an eco-friendly beauty brand builder
Build a cash reserve to help manage irregular cash flow needs
Managing cash flow effectively is crucial for the stability and growth of any business.
I have implemented the practices below, and I hope businesses can maintain healthy cash flow by undertaking some of the following:
I regularly create cash flow forecasts to anticipate future cash inflows and outflows. This allows me to plan for upcoming expenses and understand when to expect revenue. I consistently document and prioritise all my fixed expenses in my budgeting process. I continuously revisit my budgets and adjust them as needed to reflect any change in my business conditions.
I monitor cash flow by frequently reviewing financial statements, cash flow statements, and bank balances. This helps me identify missed payments early, allowing for timely corrective actions and ensuring an accurate depiction of cash flow at the end of each month.
Ensure your cash flow tracking process is efficient. I initially set up Excel spreadsheet templates to uniformly track and monitor sales, revenue, and fixed expenses. This approach enhanced efficiency and minimised errors.
I manage my expenses by distinguishing between essential and non-essential spending, including fixed monthly expenses and occasional advertising and marketing costs. I regularly review my expenses and cut costs when business conditions require it, ensuring no compromise in product quality.
I learned this the very hard way! Build and maintain a cash reserve! This is important to cover unexpected expenses or downturns in business. All businesses undergo periods of low sales or downturns, and this will act as a buffer to provide financial stability that will allow you to pay fixed expenses incurred during periods of low sales.
Businesses thrive on relationships. By paying your expenses on time, you can negotiate favourable payment terms with suppliers and service providers. Leverage business-to-business rates and maintain open, honest communication with your suppliers and service providers.
I began my journey by self-funding, as my business couldn't handle repayment obligations initially. I encourage new business owners to explore various financing options, such as lines of credit, loans, or investments, to manage cash flow gaps. However, use financing wisely to support growth without over-leveraging, ensuring your business can meet repayment terms. This requires a solid financial plan.
My business relies on inventory for product sales, so I optimise inventory levels by minimising waste, streamlining processes, and maintaining low stock levels without risking stockouts. Additionally, I built strong supplier relationships to negotiate better terms, such as shorter lead times and bulk purchase discounts.
Regularly, I prepare and review cash flow statements using Excel to track the movement of cash in and out of the business. This practice offers insights into operational efficiency, revenue, expenses, and sales, highlighting areas or products needing attention. Additionally, it aids in determining the necessary marketing strategies.
Many accounting software tools are available to automate cash flow management, increasing accuracy, saving time, and providing real-time financial insights. By linking to your bank account and sales channels, these tools automatically track cash flow, minimising human error.
tip one
Keeping a cash reserve is my number one cash flow management recommendation. Creating and keeping that buffer makes sure you can pay your debts even when your business isn't making as much money as projected. It also helps you deal with unforeseen expenses and downturns.
tip two
Monitoring cash flow allows you to be proactive, to plan for fixed and variable expenses, and identifying potential shortfalls early.
“The worst mistake in cash flow management is not taking all costs into account, especially those that happen occasionally. Ignoring these expenses can cause unforeseen deficits and jeopardise your financial security. To guarantee thorough and precise budgeting, always include both fixed and variable expenses in your cash flow planning.”
Michele
Carelse’s Playbook Insights
on managing cash flow from a natural health brand builder
my approach
Maintain a culture of financial discipline in the company
Founder of Feelgood Health
www.feelgoodhealth.co.za
Michele Carelse is the founder of Feelgood Health, a South African plantbased, natural health company founded in 2000. We focus on 100% natural medicines, essential oils and 'food as medicine' products for the whole family, including the family pet. Our mission is to make natural health alternatives readily available to everyone and do so sustainably. Our products may be bought online, in health shops, pharmacies, retail stores and vet shops.
Cash flow is at the heart of every business, especially a growing business. In fact, the faster a business grows, the more challenging cash flow becomes! While it may feel great to have orders rolling in, it can become very stressful when the time comes to pay expenses when you have not yet been paid for these orders! As a multi-channel natural health business, cash flow management is a finely tuned balancing act! For a company with both wholesale and retail channels, as well as a presence on 3rd Party platforms like Amazon and Takealot, managing cash flow can be a constant tightrope walk! Here are some insights and strategies that have helped me maintain a healthy financial pulse!
“I rely heavily on an annual budget as well as monthly budgets to help forecast upcoming expenses and potential shortfalls. This gives me the opportunity and time to 'make a plan'”
1. Understand your business’s cash flow cycle
There is an inherent difference in cash flow between wholesale and retail.
While wholesale transactions often involve longer payment terms, retail sales can provide ready cash to bridge the gaps. I have learnt to use this to my advantage by adopting the following strategies:
Negotiate the most favourable payment terms with wholesale customers, as well as suppliers.
Make sure wholesale customers pay within the agreed-upon terms and follow up closely when they don't.
In certain cases, we offer payment incentives for early payment, which can really benefit us and our customers.
2. Stock management
Inventory and order fulfilment management is very important
With more than 500 products, Feelgood Health needs an accurate inventory management system to avoid overstocking or stock outages.
Overstocking ties up cash and means more resources are used (e.g., warehouse space), while stock outages affect sales. We keep a close eye on historical sales and seasonal fluctuations and try to make sure that our inventory is streamlined to accommodate this.
3. The importance of planning and budgeting
I rely heavily on an annual budget as well as monthly budgets to help forecast upcoming expenses and potential shortfalls. This gives me the opportunity and time to 'make a plan', rather than being caught short with unexpected expenses!
4. Investigate your cash flow financing options
Consider establishing a line of credit with a reputable financial institution and use this wisely (credit is expensive!). This can provide a safety net for unexpected cash flow fluctuations and can be a real lifesaver when there is a sudden spike of orders that need to be financed. You should consider approaching your bank for an overdraft or using one of the reputable business financing companies
5. Stay on top of your numbers
Most important is to stay on top of your numbers and to maintain a culture of financial discipline in the company, always minimising unnecessary expenses and exploring cost saving measures. Although it is not always possible, try to keep a cash flow buffer when sales are up and expenses are down – this will serve you well in months when things are the other way around!
“A financial advisor can save you time - instead of the long and tedious research exercise on how to handle certain matters, you can delegate while focusing on other aspects of the business.”
Give
yourself the opportunity and time to be proactive
tip one
Know your numbers! Look at historical sales and expenses and try to be prepared for them.
tip two
Negotiate the most favourable payment terms possible with your suppliers.
Entrepreneur Advice
“'Flying blind' when it comes to cash flow can result in disaster. Always keep on top of cash flow and give yourself the opportunity and time to be proactive when there are problems, rather than exposing yourself to nasty surprises!”
Founder of Thola
www.getthola.com
Nneile Nkholise is the co-founder of Thola Inc. in South Africa and the U.S., established in 2021. She studied BSc Physics at the University of Witwatersrand and Mechanical Engineering at the Central University of Technology. Before founding Thola, she founded a FemTech company called iMed Tech and worked as a project engineer in the construction sector. She is passionate about climate change and helping communities become climate resilient. She is equally passionate about football and has devoted her life to supporting amateur football development in rural communities.
Nneile Nkholise’s
playbook
Insights on managing cash flow from
an agri-tech business leader
my approach
Ensure your cash on hand can provide at least a 6 months runway
My primary role as CEO is to ensure our company's financial health. I have achieved financial health by building automated CRM tools that enable me to track every cent that comes in and leaves. Having financial data analytics systems in place that provide snapshots of cash flow and tie our cash flow to projects/activities happening in our company also helps me.
“ ...it's important to fully understand every activity happening in the company and be able to forecast the impact of each activity on the company's bottom line.”
As a CEO working in a tech company, it's important to fully understand every activity happening in the company and be able to forecast the impact of each activity on the company's bottom line. When our team decides to build and launch a product feature, I need to develop a financial forecast framework which accounts for the development cost, the customer acquisition costs (to get customers to use that specific feature), the marketing costs of that feature, and the customer support costs.
“We constantly revisit the budget we have committed to...”
I created a monthly cashflow projection and budget for the business. The budget is incorporated into our financial management system and helps us to check if we are on track or overspending. We constantly revisit the budget we have committed to, ensuring that all key fixed and operating expenses are taken care of before spending on unplanned activities, and I track our cash flow.
Equally, the financial returns we will make from customers using and paying for that feature. The goal is always keeping the profit margins at 50% and above. In our work environment, the reality is that it may take time before a company has a healthy cash flow because software product adoption takes time before a company hits hockey-stick growth. Hence, having a good understanding of the internal functions of my company would be helpful. Also, I have a solid understanding of our market dynamics, such as knowing or forecasting risks in the market that could affect cash flow such as interest rate increases, inflation, political instabilities, etc.
“...I have a solid understanding of our market dynamics, such as knowing or forecasting risks in the market that could affect cash flow such as interest rate increases, inflation, political instabilities, etc.”
tip one
Build good CRM tools that easily help you track your cash flow frequently.
tip two
Keep in touch with local and global macroeconomic dynamics (e.g. recession) that could affect your cash flow.
“At any given time in your company, always ensure your cash on hand can provide at least a 6 months runway. If not, then make some cuts in your company so that you have cash on hand for 6 months.”
Phumzile Khoza’s Playbook
Insights on managing cash flow from the founder of a township-based business
my approach
We stay focused, adaptable, and resilient, positioning us for success in our sustainable, township-based business
Founder of Lathitha-Biodiesel
www.lathitharecycled.co.za
Phumzile Khoza is the founder of Lathitha Biodiesel in South Africa. The company was established in 2020 during the lockdown but only got formally registered in 2021. Phumzile has a passion for entrepreneurship and, as a result, has no formal employment background. With beauty and lifestyle experience dating back to her early teens, Lathitha Biodiesel proves that you can achieve your dreams despite feeling scared.
Managing cash flow presents unique challenges as a female entrepreneur in the maledominated biodiesel industry. Here's how we've effectively navigated these challenges, particularly given my lack of previous employment background.
We start by understanding the cash flow cycle of our biodiesel business. This involves identifying when money comes in from sales, investments, etc. and when it goes out for raw materials, salaries, utilities, etc. Understanding this cycle helps us anticipate periods of surplus and shortage.
“...we can effectively manage cash flow as female entrepreneurs in the biodiesel industry, even without previous employment background. We stay focused, adaptable, and resilient”
We develop a comprehensive budget outlining all our expenses and revenues, including fixed costs (like rent, salaries, and utilities) and variable costs (like raw materials and transportation). Our budget is realistic and accounts for market fluctuations and seasonal changes in demand.
We monitor expenses closely, seeking ways to cut costs without sacrificing quality. We negotiate with suppliers for better rates, explore alternative energy sources to reduce utility bills, and optimize production processes to minimize waste.
To reduce dependency on a single source of income, we consider diversifying our revenue streams. This could involve offering additional products or services related to biodiesel production, such as waste oil collection or consulting services on sustainable energy solutions.
Build Strong Relationships with Suppliers and Customers
We cultivate strong relationships with our suppliers and customers. Negotiating favourable payment terms with suppliers improves cash flow, and offering incentives for early payment from customers encourages prompt payment. Long-term relationships based on trust and mutual benefit help navigate challenging times.
Invest in Technology and Automation
We look forward to investing in technology and automation to improve efficiency and reduce costs. This could mean upgrading equipment to increase production capacity or implementing software systems to streamline administrative tasks like invoicing and inventory management.
Maintain a Cash Reserve
Building up a cash reserve cushions our business during lean periods. Setting aside a portion of monthly profits creates an emergency fund to cover expenses during low revenue or unexpected expenses.
We stay informed about financial resources available to female entrepreneurs, such as grants and loans.
We surround ourselves with mentors, advisors, and peers who offer guidance and support. Joining industry associations and networking connects us with other female entrepreneurs, providing valuable insights to navigate challenges in a male-dominated industry.
Focus
Highlighting our commitment to sustainability and social impact resonates with customers and investors. Emphasizing the environmental benefits of biodiesel production and our role in creating positive change in our community attracts customers willing to pay a premium for sustainable products and investors who share our values.
By following these strategies, we can effectively manage cash flow as female entrepreneurs in the biodiesel industry, even without previous employment background. We stay focused, adaptable, and resilient, positioning us for success in our sustainable, township-based business.
tip one
Prioritize your cash reserves. Every entrepreneur aims to ensure financial stability. Having reserves helps manage cash flow during unpredictable times.
tip two
Maintain a cash cushionmy personal goal during the pandemic was a financial stretch. Reserves help navigate uncertain times and manage cash flow.
“I've learned to sidestep common traps. First, don't neglect budgeting; always track income and expenses. Build cash reserves to weather uncertainties and avoid the hand-to-mouth cycle. These steps help ensure stability and success, reducing stress and boosting the running of a thriving business.”
Co-founder of Fynbos Fine Foods
www.fynbosfoods.com
Rozelle Abramson is co-founder of Fynbos Fine Foods, an agriprocessing business in the Western Cape, South Africa, established in 1996. We continue to uplift our community by buying locally, providing job opportunities, and developing skills while following Fair Trade principles, respecting the environment, being sustainable, and producing delicious, natural, vegan, non-perishable products rooted in Africa and enjoyed worldwide.
Rozelle Abramson’s Playbook Insights on managing cash flow from an agri-business leader
my approach
Understanding your sales forecasting
In my experience, bridging finance and an overdraft have been critical to our healthy cash flow. Bridging finance for new large orders or new manufacturing contracts has helped me not shy away from increased volume orders to fulfil growth opportunities. The bank is happy to assist if they are given the value of the potential order. Custom-made payment terms, 30-, 60- or even 90-day terms, can result in a payment delay. To avoid delays, give customers clear beneficial payment options to improve cash flow.
“‘Cut your garment according to your cloth’ Be realistic and know your budget.”
Offering a discount on early settlement and interest on late payments can help maintain a healthy cash flow. Constant monitoring of payments using age analysis helps me keep track of all incoming payments. Accurate costings of all raw ingredients, packaging, labour, water, electricity, etc., are integral to ensuring a healthy profit margin and cash flow to cover the production of the order.
“...outstanding invoices and continuing to supply late-paying customers are significant dangers to cash flow health”
Sales Forecasting is important, using existing trends from orders, plus a percentage for growth, maintenance costs, running costs, wages, etc. Breakdowns and forecasting based on tracking monthly expenditures are also key. It’s essential to set realistic goals and be flexible to new opportunities. This ensures good financial management.
Building strong and healthy relationships with good customers is vital, as is ensuring continuing communication with your bank consultant, accountant, customers, and suppliers.
Exchange
Keep abreast of the exchange rate as it factors into profit margins. We always do costing realistically in rands to ensure that, no matter what, we cover our costs plus our profit margins.
“Bridging finance for new large orders or new manufacturing contracts has helped me not shy away from increased volume orders to fulfil growth opportunities.”
tip one
Having a good relationship with your bank. Bridging finance, and an overdraft have been key to my cash flow and business growth.
tip two
An old saying that rings true for me in my business cash flow is, ‘Cut your garment according to your cloth.’ Be realistic and know your budget.
Entrepreneur Advice
“I would say that insufficient planning for possible lean periods, dips in sales, a crisis situation, and taxes is imperative. Also, not following up on unpaid, outstanding invoices and continuing to supply late-paying customers are significant dangers to cash flow health. And finally, make sure you continuously monitor your financial statements.”
Co-founder of Job Crystal
www.jobcrystal.com
Sasha Knott is the co-founder and CEO of Job Crystal, a company operating in South Africa and the United Kingdom since 2009. She began her career in IT and soon discovered her passion for entrepreneurship, often incorporating technology to disrupt industries. Sasha's current goal is to help small and medium-sized enterprises (SMEs) by providing them with the ability to hire personnel within seconds using AI, thus saving them money. Her vision is to make a significant impact on unemployment in Africa.
my approach
Knowing what your runway looks like for the next week, month, 3 months, helps you sleep better
Understanding cash is king, and forecasts are the queen Cash is king, so they say, but I believe in the queen, and that is having a quick cash flow forecast. When cash is tight, I recommend doing this on a daily basis so you can keep a firm hand on what is coming in, what needs to be paid, who needs to be informed about delays and where the team needs to focus. Without the forecast, you have no insight into where you are going and what campaigns and projects you can say yes to!
“Cash flow can take 10 minutes max per day, not doing it will add months to your goal achievement – take the 10 minutes!”
In my experience a simple and Quick excel sheet showing at the top your cash balance daily (or weekly depending on your timings), with a list for all different income streams you can be absolutely sure of, then listing all expenses and when they are due. This gives you the ability to move expenses around based on when income is due.
“Once
you have a clear insight into the cash situation you can find a balance between what needs your focus – income or expenses.”
Also keep a tight rein on your debtors' control and creditors, knowing when to put pressure on those clients who pay late and who you can talk to about payments. The biggest indicator is the top line number which shows very clearly where you have some tight moments!
what you work on
Once you have a clear insight into the cash situation you can find a balance between what needs your focus – income or expenses. Prioritizing what you work on is critical, working on both will just limit both sides. If you need more income immediately, possibly an overdraft or using a business credit card will help, else is there a way you can get the sales team to bring in more small deals to help with the initial shortfall (and if so, how long will it take). If it is expenses, you can put a note out to the teams that spend to advise that spending is on hold for a specific amount of time.
But communicating the right information is critical. Telling your team you are in the red is not always a good idea for retention of staff, but giving them a clear direction on what should be the focus will help reach the goal together.
The Queen (aka Quick cash flow forecast) of the show will give you a clear idea on what your goals MUST be in the short term, and how to fix the long term. Focusing on the Profit and Loss doesn't always work for goal setting as it does not consider if you have the actual cash to negotiate better deals, payment terms, or what you can offer to clients. Knowing what your runway looks like for the next week, month, 3 months, helps you sleep better (added bonus). And yes, it's you! I have had our financial manager create the cash flow forecast, but always felt having my own version was a good idea. It was where I could play with the numbers, move payments and income around and know clearly in my head where we were going. You as the founder, CEO, executive – it is up to you and what you know that makes the journey clear for the team. Make sure YOU know clearly how you can get there with the queen!
“Use your Quick cash flow forecast to help you prioritize your short term and long term goals, and communicate priorities to your team.
The cash flow forecast is the one area you can control
tip one
The cash flow forecast is the one area you can control, when everything else feels a bit out of control this is your guardrail.
tip two
When times are tight watch your cash flow daily, when things are easy keep at it weekly – but never take your eye off it!
Entrepreneur Advice
“The biggest cash flow management pitfall is to not view the cash flow when setting goals for the company. Not having a view of the runway and setting goals will ensure they do not work together, which will result in failure on one or both sides. Cash flow can take 10 minutes max per day, not doing it will add months to your goal achievement – take the 10 minutes!”
Founder of Lefata Engineering
www.lefataengineering.co.za
Sewela Setshogoe is the founder of Lefata Engineering in South Africa, which was established in 2016. She is a passionate and driven entrepreneur in male-dominated industries, namely mining and engineering. Sewela established her entity to provide infrastructure solutions for mining and industry and the business currently employs 22 full-time employees. With a background in electrical engineering, her business focuses on mechanical, civil, and electrical engineering services. Her goal is to become an industry leader in the engineering field.
Sewela Setshogoe’s Playbook Insights on managing cash flow from an engineering entrepreneur
my approach
Stay in the know and take control of your business’s finances and cash flow
Starting and running a business without financial backing is one of the most significant challenges that exist for many entrepreneurs. However, finding solutions to fund and manage your business's cash flow is crucial to remain in business in the long run. In my own experience, I have learnt that effective budgeting on a monthly basis is required to ensure that you can meet the business's operational needs and to ensure that you have a buffer or financial support when new business opportunities present themselves.
“Learning how to interpret your management accounts and financial statements also empowers you as a business owner to forecast your business needs over a certain period.”
Prioritize your spending
The most effective tool I have used is to carefully prioritise spending on earning activities that assist you in generating more cash for the business over the less productive expenses that can be minimised or spread out over a certain period.
“...prioritise
spending on earning activities that assist you in generating more cash for the business”
I have also sought external funding to finance new projects when I identify possible future shortages.
Study your financial statements
Learning how to interpret your management accounts and financial statements also empowers you as a business owner to forecast your business needs over a certain period. This information gives you valuable insights into the financial health of your business. It also aids your ability to take necessary action where there are any foreseeable financial shortfalls in the company.
“manage
your personal finances well,
so you can easily
access financial help when needed.”
Always stay in the know when it comes to the finances of your business
tip one
My top cashflow management tip is to always stay in the know when it comes to the finances of your business and take control of them.
tip two
My second cash flow management tip is to ensure that you manage your personal finances well, so you can easily access financial help when needed.
Entrepreneur Advice
“The most important cash flow management pitfall to avoid is underestimating your business's financial needs.”
Founder of Nilotiqa Haircare
www.nilotiqa.com
Thokozile Mangwiro is the founder of Nilotiqa (PTY) LTD in South Africa, which was established in 2016. With Krugersdorp roots and a family drive for education, Thokozile duly completed a Master's Degree in ICT (Business Intelligence). Frustrated by the hair care products on the retail shelves being marketed to black women, Thokozile felt compelled to create natural and organic hair care products for her dry, brittle hair. Nilotiqa was formulated in 2014 and launched in 2016.
Ensure that your financial year always begins with a cash flow forecast
A solid financial plan forms the basis of our growing business. Yearly, we take full advantage of technology that assists us in mapping out reporting to monitor forecasts, budgets, cash flow, and business expenses. To track the business's liquidity and solvency, we monitor financing, investment, and, most importantly, operating activities. This analysis is the basis for how the business operates daily.
receivables and invoices, enforce payment terms, and follow up on payments.”
Monthly cash flow analysis is fundamentally important to ensure that:
1. Income is meeting the projected targets
2. Expenses are managed within the budget
3. Forecasts are, in fact, meeting the set targets
4. Revenue is not stuck in spaces that negatively impact the business, e.g. inventory
“we monitor financing, investment, and, most importantly, operating activities. This analysis is the basis for how the business operates on a daily basis.”
“Managing the budget relatively tightly will determine whether the business can afford to spend the money.”
Comparative reporting, which analyzes our monthly cash flows from previous years, tells a story of how the business performs. Comparative reporting enables us to determine which partner does not fit the business model for our brand or which product is or is not performing. Based on our cash flow, we can allocate resources effectively.
tip one
If you operate a funded small to medium-sized business, ensure that your financial year always begins with a cash flow forecast.
tip two
Create automated systems for invoices in a growing business. Balance receivables and invoices, enforce payment terms, and follow up on payments.
“Growing a business requires a tight budget to manage your revenue and expenses. One of the biggest pitfalls is overspending operational revenues for "the sake of growing the business." Managing the budget relatively tightly will determine whether the business can afford to spend the money.”
In conclusion, it's crucial for the success of any small or medium-sized enterprise to master the art of cash flow management. By comprehending the principles of cash flow, conscientiously handling income and expenses, and employing some of the tactics shared in this Playbook to enhance cash flow, small business owners can effectively manage financial challenges and promote sustainable growth. It's essential to regularly monitor cash flow, use cash flow projections, and take proactive steps to address any cash flow shortages. Additionally, maintaining strong relationships with your bank and vendors, optimizing inventory management, and exploring financing options can help alleviate cash flow constraints. With a strong grasp of cash flow management, womenled SMEs can attain financial stability and thrive in competitive markets.
Get ready for funding conversations with your bank or financial institution.
To find out more go to: https://www.absa.co.za/ business/funding-my-business/ short-medium-solutions/ explore/, or contact your banker, or contact an Absa Virtual Banker via: smevirtualbanker@absa.co.za
When a startup or SME seeks a loan from a bank, there are several key things that the bank will consider before making a lending decision. Understanding these factors are important next steps to enhancing the chances of obtaining business funding.
Creditworthiness: The bank wants to assess the creditworthiness of your business and its owners.
Business Plan: A comprehensive and well-structured business plan is vital.
Collateral: For larger loan amounts, banks often require collateral as security that can be sold if the loan isn't repaid.
Cash Flow and Financial Statements: Banks want to evaluate a business's cash flow, profitability, and financial health.
Loan Purpose: The bank wants to ascertain the purpose of the loan and how it will benefit the business.
Business Experience and Management: The bank considers the experience and expertise of the founder and management team.
Paying Capacity: Alongside cash flow projections, banks assess the business's ability to make the monthly loan payments.
Essential Documents: Banks will want to see your business plan, financial statements, tax returns, and collateral information.
The Lioness Playbook Series represents a collaboration between Lionesses of Africa Public Benefit Corporation’s Lioness Data Division and Absa Group. We are grateful to them for their funding support in making the production of the Playbook possible and for our teams to advance our respective missions to empower women entrepreneurs across the African continent.
We would like to express our gratitude to each of the women entrepreneurs from the Lionesses of Africa community who so graciously participated in the production of this Playbook. They contributed their valuable time, shared their considerable insights, and gave us the benefit of their years of experience, all of which was gratefully received and so important to the success of this project.
Thank you to our Lionesses, Andiwsa Silinga, Annie Muronda, Buhle Magwentshu, Mahlatse Mamaila, Lauren Anderson, Mamela Luthuli, Mapholo Ratau, Margaret Hirsch, Mauricia Cox, Michele Carelse, Nneile Nkholise, Phumzile Khoza, Rozelle Abramson, Sasha Knott, Sewela Setshogoe, and Thokozile Mangwiro for sharing their Playbooks.
Lioness Data is the research and insights unit of Lionesses of Africa Public Benefit Corporation, a social enterprise advancing Africa’s women entrepreneurs. Lioness Data taps into a growing network of over 1.8 million women entrepreneurs across Africa to extract actionable insights that help investors, policy makers, and development agencies make faster and better data-driven decisions. Lionesses of Africa builds and delivers development programmes, business tools, community platforms, digital media, networking events and information resources that women entrepreneurs need—connecting them with key global markets for growth. Lionesses of Africa’s community stretches across 54 African countries and thousands of users in the Diaspora in Europe and North America. lioness data
For further information about Lionesses of Africa, visit www.lionessesofafrica.com
Absa Group Limited (‘Absa Group’) is listed on the Johannesburg Stock Exchange and is one of Africa’s largest diversified financial services groups. Absa Group offers an integrated set of products and services across personal and business banking, corporate and investment banking, wealth and investment management and insurance. Absa operates in 15 countries. The Group owns banks in Botswana, Ghana, Kenya, Mauritius, Mozambique, Seychelles, South Africa, Tanzania (Absa Bank Tanzania and National Bank of Commerce), Uganda and Zambia. The Group also has representative offices in Namibia, Nigeria and securities entities in the United Kingdom and the United States, as well as an IT specialist office in the Czech Republic. absa GROUP LIMITED
For further information about Absa Group Limited, visit www.absa.africa
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