Reading Time: 3 minutes
Reducing the cost of supplies, inventory, or business operations is common practice amongst many small business owners. Not preserving enough cash could land your business in deep waters, leaving you with a desperate call for a lifeline. Curbing your expenditure is a practical way to improve your cash flow and can be done without incurring risk to your business. Here are a few practical tips to help you achieve this.
Take immediate action
Spending countless hours worrying about your business finances is time wasted and could be best spent strategizing realistic solutions. Create a well-documented plan to engage in a cost-reduction strategy. Map out any areas in your business that could do with an overhaul or cost reduction. Avoid waiting until the last minute to implement your plans. Start immediately. That way you may have a well-thought-out strategy in place for when the leaner months approach.
Related: 5 Growth areas for your business in 2021
Think alternative energy sources
Going green is environmentally friendly, as well as a cost-saving initiative. Efficient energy solutions will help you save. According to the World Green Building Council, a green building on average saves about 25% in electricity usage. An environmentally friendly approach could seem like a less impactful method at first, but down the line, you will start to see a notable change in your finances. Create a clean carbon footprint for your SME by going digital. Print less, go paperless with online invoices or bookkeeping platforms, use energy-saving bulbs and water sparing methods on your taps. Encourage employees to actively conserve water and unplug devices when not in use. For the paper-heavy business, consider recycling. Partner with organisations such as WastePlan will ensure you get a rebate on every kilogram sent for recycling. Your business will be saving the environment, cutting costs, and making an extra buck along the way.
Get paid faster
The sooner your clients pay for your product or service, the sooner you have money in the bank. Historically, businesses have given clients 30 days to pay, however, the current trend is to afford clients two weeks or less to settle the payment. Give your clients clear notice on payment instructions, as well as the payment deadline in your service agreement to avoid any disputes. Lulapay allows you to offer your customers terms. You get paid immediately for any applications we approve. Never spend time collecting unpaid invoices again
Related: 8 Cost-Reduction Strategies to Improve Your SME’s Cashflow
Source the best quotes
You may have a long-term relationship with your supplier, and they may have been with you since day one, however, when it comes down to business, getting the best quote is what matters. If a long-term supplier is no longer offering the best deal, it’s time to look elsewhere. Comparing quotes might require extra time and effort, but in the long run, it may save you a couple of rands. Just be sure that while you’re sourcing the best quote, you’re not compromising on quality.
It is important to foster valuable relationships with your suppliers. Building a solid relationship with suppliers will put you in a better position to negotiate with them – giving you a better likelihood of them offering you discounts and special deals. Trust is an integral part of the business. Long-term trust between business owners and suppliers can open opportunities for flexibility in extending your credit from a two-week payment to a four-week payment plan. Negotiation and the willingness to accommodate one another go a long way.
Short term funding is an option
Consider short-term business funding to help your business if you are experiencing a dip in cash flow. Fast access to additional funding can provide a vital buffer during those leaner times. Look for flexible repayment plans that can help your business sustain a healthy cash flow. At Lulalend, we help SMEs get fast and easy access to business funding of up to R2 million, with no paperwork and no hidden fees. Short-term business funding ensures that you are paying the loan off quickly and not getting yourself into a debt cycle.
Reading Time: 3 minutes
There has been a permanent change in the way that people shop and, in turn, the way that businesses need to operate. In the absence of brick-and-mortar stores being open during the lockdown, as well as a general fear of crowded malls when things were able to re-open, South Africa’s eCommerce sector exploded.
According to Trevor Gosling, Co-founder, and CEO of Lulalend – a financing partner to South Africa’s small- to medium enterprises (SMEs), he has seen phenomenal growth in eCommerce businesses who have connected with them for SME financing. Between the period of October 2020 and February 2021, we saw an 86% increase in loans made to eCommerce businesses and online retailers in comparison to the same period between 2019 and 2020.
“The loans were strongly linked to growth-related requirements, such as the purchasing of inventory or the expansion of marketing,” Gosling explains.
“The reality is that South Africans have now become familiar with and are used to the convenience that shopping online provides. For those who have seized this opportunity and taken the time to invest in developing their digital offering, they will continue to see rewards in the long-term,” he adds.
Related: Move your business online by following these essential steps
One of the fundamental differentiators around eCommerce in 2021 is that, while in the past this has been dominated by retailers, the adoption and familiarity that people now have of purchasing goods and services online has meant that nearly all sectors can capitalise on this trend.
The boom in demand also allowed businesses across a variety of categories to adopt a new way of delivering their products with innovative non-contact formats – whether contactless payments or automated fulfillment systems to help curb the spread of the virus.
“Gone are the days when buying online was simply a purchase of a book, clothing item, or food. Nowadays, having a business presence online that integrates eCommerce functionality will become a lot more common,” Gosling points out.
It takes more than just setting up an online site. Gosling says that new competition emerging out of this pandemic and advancing technologies will require SMEs to incorporate innovative ways of marketing, selling, and fulfilling customer orders if they are wanting to maintain and grow their bottom line.”
Related: Lessons learnt in the pandemic are key to SMEs’ survival
This is where SMEs will need to invest. From the increase in new loan applications from eCommerce businesses that we saw, Gosling says that one of the biggest learnings from them is the need to pressure test any new technology or systems that might be brought online. “It will be important to expand capacity limits as well as invest in systems that will allow for personal, timely and automated customer interactions and sales fulfillment.”
“A secondary, but equally important, the benefit is that it’s not just about an increase in revenue. Doing so means that they are able to reconnect with their existing customer base all while expanding their brand presence to new and potentially untapped markets,” he adds.
Related: How to move your retail business online
Understanding the purchasing paths of these new online customers and ensuring that your platform provides a seamless and simple shopping experience across different devices will be critical. “For those with physical stores, it will also mean ensuring that they are experience-led and digitally connected to any eCommerce platform that could assist in generating sales after the customer has left the store,” Gosling points out.
To do this will require access to capital. “Taking on debt is often essential to business growth. Being able to invest in your business to ensure that it meets the changing needs of its customers is crucial for survival,” he adds.
“Now is the time to act. The world has changed and so have the ways that customers connect with brands. To ensure that they capture market share and emerge after the crisis as market leaders, business owners will need to start making these changes now,” says Gosling.
To help SMEs wanting to move their business online, we’ve created a practical guide that is available as a free download here.
Together with a number of industry leaders within the online retail sector in South Africa, Lulalend will be taking part in the inaugural Ecommerce Day, which will be celebrated on 10 March 2021.
Reading Time: 2 minutes
Many business owners believe the most crucial factor in success is sales. While it is obviously true that without sufficient sales a business will fail, maintaining liquidity, or having access to sufficient cash is equally important. Even the most successful businesses experience fluctuations in revenue, causing disruption to cash flow. Having fast and easy access to funding in these instances is crucial. Without it, not only will daily operations be impacted but the organization will be unable to take advantage of new opportunities.
The latest guide in our Business High Five series, The SME Guide to Business Funding, explains why access to working capital is crucial for all SMEs, as well as where and how to apply for funding.
Some of the important questions our guide answers include:
Where can SMEs access business funding?
If you search for a “business loan” online, you’ll be confronted by a staggering number of results: 1.5 billion, to be exact. And though banks still dominate as finance sources for SMEs, the International Finance Corporation (IFC) finds other loan providers have started to appeal to owners who are searching for fast, easy ways to access finance.
The three main ways one can access funding are:
- Traditional Banks
- Government Funding
- Fintech Lenders
Related: Business High Five: Online tools to improve your business
How to choose a responsible business funding partner?
Ultimately, responsible lending means putting the customer first. Businesses turn to a variety of sources for funding. The problem is there are some lenders out there that don’t act in the customer’s best interests. It is important to select a funder who believes in responsible lending. This means ensuring affordability, transparency of terms and conditions, and supporting the customer when needed.
Do you know what your credit score is? Understanding your own and your business’s creditworthiness is a great practice in general. But it’s especially important if you’re planning to take out a loan as lenders will base their decisions, at least in part, on your credit rating.
Other important factors used by lenders are:
- Trading history (how long has your business been operating)
- Annual revenue
- The collateral you are able to provide
Related: Move your business online by following these essential steps
When considering funding, it’s important to consider the way in which you want to access capital, as well as the repayment terms. There are two broad business funding options available to SMEs.
Fixed-Term loans are the most common type of business funding, a fixed-term loan is a lump sum amount that is repaid over a fixed period of time, typically up to 10 years (depending on the size), and at an agreed interest rate.
A Credit Facility is a fast-growing alternative to fixed-term loan. Simply put, a credit facility offers instant access to a line of credit. A business can withdraw up to a pre-approved amount without needing to reapply.
Download the SME Guide to Business Funding.
Reading Time: 3 minutes
South African small and medium-sized enterprises (SMEs) are the engine-room of our economy and the country cannot afford for this to collapse because millions of livelihoods depend on them. For many small business owners, medium- and long-term planning is not a part of their business strategy, but it is time to realise that the steps taken today will determine whether their survival into 2022 or not.
“There is a rich abundance of knowledge, skills, and expertise in our SME sector – all of which has played an essential role in SMEs survival and ability to adapt during the pandemic. Part of this is that we have had to move away from a ‘business as usual’ approach and realise the need to learn from the lessons that the past year has taught us in order to plan and prepare for the future,” says Trevor Gosling, CEO of small business service provider Lulalend.
Related: 5 Growth areas for your business in 2021
The government’s financial assistance to the SME sector will need to be supplemented with decisive action taken within the SME landscape, he adds.
“The R1.4bn relief package is not enough to save a sector that contributes an estimated R1.5trillion to the economy. Yes, the financial aid is welcomed but it is crucial that SMEs take action to ensure that they are able to recover from the economic hardship that the last year has dealt them,” says Gosling.
To do this, it will require business owners to critically evaluate what did or did not work over the past 12 months. “While there is a renewed optimism, now that the first vaccines have been administered, it is not the time for SMEs to slow down and wait for recovery,” says Gosling.
“Are there better, cheaper, and more efficient ways of delivering your service, and are there unnecessary overheads that you can cut? These are the things that business owners need to think about when mapping out their plans to survive and grow over the next two years,” he explains.
Related: What Challenges Do Female SMEs Face in South Africa?
Equally so, Gosling says that SMEs need to understand how their customer base and needs have changed, which includes the competition. “These shifts are important to consider, especially if you want your marketing efforts to yield the maximum results. If your customer base or their needs have changed, it is important that SMEs focus on building new relationships to deliver repeat business in the future.”
During the year ahead, time will need to be taken to revisit business plans and develop long-term strategies, to not just survive but to thrive. Many of the actions taken in times of crisis can be beneficial to a business in the long run.
Owners should consider how hastily streamlined processes and drastically slashed overheads can be refined to create a new, efficient, and cost-effective business model that can still deliver the best goods and services to their customers. Combining this with the advantages of applying digital technology can set a business owner on the road to recovery and a thriving future.
While most companies have been moving online over the past few years, the pandemic has shifted this into overdrive. He says that there is no turning back. “People have now gotten used to living in a digital world.”
Related: 5 Digital Marketing Strategy Tips: COVID-19 SME Support
But, going digital does not necessarily mean that developing an e-commerce offering is the only way that this can be done. “Digital technology can help to automate and streamline other aspects of the business, including stock control, financial management, and payment facilities,” he adds.
Lastly, and probably the most important for survival, is for businesses to ensure that they have effectively managed their cash flow. As part of the planning, it is essential that time is taken to analyse what can be done to reduce financial constraints in the year ahead. In addition to this, access to capital to invest in growing or pivoting the business will be crucial.
“It is important that SMEs talk to their credit providers about access to funding, including a revolving credit facility to help manage their cash flow,” explains Gosling.
“Survival is dependent on shifting business strategies and plans, as well as leaning on partnerships with service providers, stakeholders, and customers. The year ahead will be a bumpy one, but with the right support it will be possible to come out the other side in a much stronger position,” says Gosling.
Reading Time: 2 minutes
With every business funding application we receive, our Funding Specialists (supported by our AI-driven technology) work tirelessly to thoroughly vet, approve and then disburse the required funds in the quickest time possible. We do this so that businesses can take up new opportunities as soon as they arise.
So, if business owners share their experience with us (good and not so good), we take it seriously. When Andrew Dalrymple, Director at Risk X Data Assurance, shared his story with us, we knew we had to share it. His experience marked a true representation of how Lulalend aims to assist SMEs across SA to continue growing and succeeding at every turn.
Related: Women Powering SA: Sheila Visser; Cheryl Chapman, Wolf Printing
Why did you first come to Lulalend for funding?
Risk X is an SME offering high-end information security audit, advisory, and assurance services to government and private sector clients across a wide range of business verticals. Favourable market conditions presented us with a variety of growth opportunities but as a young business, we did not have the capital reserves to fund this growth internally. After being turned down by the traditional banking sector, we approached Lulalend who provided the funding we needed to take our business to the next level.
How has Lulalend helped your business thus far?
We have accessed two tranches of funding from Lulalend and consequently have been able to grow our business throughout the Covid pandemic, with the certainty that we will be able to meet our short-term cash flow commitments without having to compromise the quality of our long-term strategic decision making and client relationships. Lulalend may not be a long-term capital solution, but they can be an absolute lifesaver as a short-term cash flow supplement, and certainly were in our case.
Related: Business Funding: An overview of how SMEs can access funding in SA
Would you recommend Lulalend to other SME business owners?
I would absolutely recommend Lulalend to any SME who has been let down by the formal banking sector and needs working capital to fund growth in their business. They have a transparent model and a highly ethical approach to lending and take a personal interest in the success of your business. Our experience with them has been exceptional.
“Lulalend saw the potential of our business when other lenders did not and supported us with the cash flow we needed to scale up at a critical stage of our company’s growth. Their lending model and willingness to commit to South African SME’s is a critical enabler for many businesses like ours and the economy as a whole. Lulalend has been ethical and upfront in all of their dealings with us and the level of interest and concern for our progress that Lené has shown throughout goes beyond the purely commercial nature of the relationship. I would recommend Lulalend to any SME that needs short-term cash flow support.” – Andrew Dalrymple.
We hope that when your business requires a cash injection, you’ll always think of your friends in funding first.