If 2020 and the COVID-19 pandemic is anything to go by, we know that in order to survive in business, one must adapt. If you’re a retailer, right now this means going digital. In this guide, we’ve unpacked the basics of what you need to know if you are looking to move your retail business online and develop eCommerce capabilities. We’ve also provided an indication of how much you’ll need to invest.
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Know your target customer
At this point, you should be very well versed in who your customer is and what their buying behaviour is. You need to research whether your customer base does in fact shop online and whether they will be willing to do so for your business and the products or services you sell.
Optimize your products, services, and offerings
What you sell or offer online must make sense, be easy to find, attractively presented, and be readily available.
Related: Business High Five: Online tools to improve your business
Choose the right eCommerce platform for your business
Having the right website and eCommerce platform for your business goes hand in hand. If you do not have a website already, there’s always the option to build your own website (integrating with an eCommerce platform) if you have the budget and resources available.
Choose a payment gateway
The final basic step to setting up your online selling channel is choosing the right payment gateway. If you want to maximise your online sales, choosing a gateway that has a variety of payment options is important. To match the payment preferences of online shoppers in South Africa, you will need to offer most of the following payment methods; Credit and debit cards, Instant EFT, Masterpass, Mobicred, and Zapper.
Related: Move your business online by following these essential steps
Make sure your business has a digital presence
Marketing your business online may seem like a daunting task but as a small business owner, you can start small. No matter what industry you’re in, chances are your customers are online. It’s estimated that South Africans spend more than 9 hours a day online, according to a wearesocial.com report.
For the complete expert guide on how to move your retail business online, click here.
Having an effective cash flow system is the heartbeat of any successful business. This is especially true in a construction business where managing cash flow between different projects can mean the difference between success and failure of your business.
We’ve put together a few tips and tricks that can help you manage your cash flow to ensure your construction business remains profitable across all projects.
Understand your customer
As a business owner, it is always ideal to work with contractors and customers who know how to process your paperwork, provide approval on work completed, and pay for services soon after completion. Knowing your customer’s creditworthiness by reviewing their financial statements or annual fiscal reports can help you understand how they have worked in the past and guide you on how to manage your relationship with them. It is important to know that they will be able to pay for the work you complete for them, even before you begin.
Do a Cash Flow Forecast
Create a reasonable cash flow forecast for each of your projects. Depending on the length of the project, plan out how much work will be completed each week or month and how much you can invoice for. Remember to consider how much you are set to pay vendors so you have an estimated idea of how much cash you will have at every stage during your project. At the end of each project, compare your forecast against your receipts so you can improve future forecasts and in turn better manage your cash flow.
The Best Bridging Finance for SMEs
Be realistic about your profitable estimate
You should never consider taking on a construction project that will not be profitable for your business. Managing your cash flow on profitable projects is difficult enough. You always have to avoid moving funds from one project to pay for another just to keep an unprofitable project going.
Negotiate contract terms in your favour
It is important to ensure that the payment terms you agree on are in your company’s best interest. The invoicing schedule you should prefer is one that reflects upfront costs that set the project in motion, such as being paid for materials when they are delivered rather than when they have been installed. Come up with a schedule that works for you and your vendors so both parties have an understanding and you can avoid having disputes about money and payment terms throughout the project.
Always check Change Orders
Change orders can have a big impact on your cash flow so it’s important to know what you can and can’t charge for. Change orders should be clearly established in the contract. Keeping on top of and documenting the extra work completed is essential.
Be strict about collecting payments
It is always good to have your accounts receivable down to 40 days or less, however, this may not always be the case. When invoicing customers, ensure you have all the correct and necessary documentation and that you are submitting to the relevant people so you can avoid delayed payments. Do not be shy when requesting payment against an agreed contract.
3 Ways Bridging Finance Instantly Improves Cash Flow for Your Business
Close the Project
Closing a project and collecting payment can be tricky at times. Effectively managing the final punch list can improve the timeliness of the final payment. With the help of Lulapay, you can collect payments upfront and we can offer your debtors payment terms with us. Read more about how this works here.
According to entrepreneur.com, growing a business is not an easy task, and especially under the current economic climate. When you’re expanding your business, it’s important to remember that whatever your plan, you should consider the ever-changing marketplace. We’ve put together a few noteworthy tips on how you can best prepare your business for growth.
Setting out achievable short term and long term goals are important. Goals act as a guide to what you need to do and when you need to do it. Having a clear plan of the direction you want your business to take will help in reducing the risks associated with expansion.
When you have plans, you are also able to make difficult decisions that help you stay on track.
Recruit the right people
Having a strong team is the foundation of any successful business. When hiring new people to join your business, it is important to have a diverse group of people who are clear on what your business vision is.
Each member of your team should have an understanding of what is expected from them and how their contribution adds value to the goal. In this way, you are also able to evaluate performance and reward good work.
Budget permitting, building a human resources team can streamline the recruitment process and ensure you find the best people the first time. This will also assist in providing your teams with ongoing feedback and development.
Related: Move your business online by following these essential steps
Improve your processes
Having clear processes makes it easier to understand what is needed to scale your business. You have to document how you do things within your business. When you have your processes down on paper, your employees can visualise the work they do from start to finish. If your processes are undefined, there is no way for you and your employees to measure that you are meeting requirements.
Having an open workplace culture has been proven to boost staff morale and balance out some of the uncertainty surrounding business processes that may seem overwhelming
Keep your customer in mind
When you are planning to grow your business, you must think about how what you are offering is different from others and why it should be the consumer’s first choice. It is important to always keep in mind what made your business succeed from the start.
Adding a personal touch to your product or service helps the customer feel connected to you and builds brand loyalty. This gives you the edge over larger companies who may not find this to be an essential part of their business model.
Related: Business Funding: An overview of how SMEs can access funding in SA
Review, review, review
It’s important to always go back and review your performance against your plans so you can improve them at every turn.
While your business goals will largely remain the same, your operating environment will always be changing. In order to truly evolve and gear your business for growth, adapting to change is always necessary.
What is Business bridging finance in South Africa?
Business bridging finance, or a bridge loan, is a short-term loan that is typically taken out for a period of 2 weeks up to 12 months. This type of funding enables sudden or unexpected cash flow gaps to be plugged, and can also allow businesses to invest in growth opportunities when business is slow.
Business bridging finance is ideal for when day to day operational costs such as materials or inventory purchases, salaries or rent need to be met in order to continue producing a product or a service.
How does business bridging finance work in South Africa?
Each different financial institution will offer its own version of bridging finance. The amount of funding you receive, and how long you will take to pay it back, will determine the exact nature of your funding offer and the costs associated with it.
Before you receive funding, the financial institution will often need proof that your business will be receiving sufficient income over the period of the loan. You can provide proof in the form of contracts, invoices sent out, or purchase orders.
Where most traditional financial institutions have restrictions on what you can spend your bridging finance on, alternative lenders, such as Lulalend, offer unrestricted bridging finance. This allows you to spend the funds on any expense associated with your business.
The Benefits of Business Bridging Finance
For many businesses, customers failing to pay on time are a common problem. This puts a business under severe financial strain and affects the ability to buy new inventory, or pay employees’ salaries, amongst a number of other challenges. Bridging finance allows your business to continue operating effectively without worrying about delayed cash inflows.
Here are some practical benefits of business bridging finance:
- Being short term in nature, funds can often be approved faster – especially via alternative lenders such as Lulalend
- Allows your business to continue production of goods or services even when cash flow is tight
- Aids business growth by allowing expansion plans that require significant investment to continue, as other day-to-day costs can still be met
Related: 3 Ways Bridging Finance Instantly Improves Cash Flow for Your Business
Who offers bridge loans?
Traditional banks, alternative financial institutions, and government funders all offer bridging loans.
Lulalend’s funding specialists advise customers to be wary of unscrupulous lenders in this space. It is important take out loans from reputable companies that only offer you loan amounts you are able to repay. As much as being approved for larger amounts, or being offered a loan even if you are blacklisted, may be tempting, often the repayment costs will harm your business in the long term.
Do banks offer bridging finance?
In South Africa, most banks provide bridging finance to business owners so they can cover cash flow shortfalls. However, it’s important to remember that traditional banks require collateral or restrict the use of the finance you’ve taken out. For example they may state it must only be used to pay a specific supplier.
How much interest do you pay on bridging finance?
The interest associated with bridging finance will depend on the funder you choose, the total amount of your loan, and the period you take the loan for.
Lulalend will charge fixed monthly costs of 2% – 6% of the capital amount for bridging loans. The exact costs will vary from customer to customer. Unlike most lenders, Lulalend does not charge penalty fees on early repayments. This is something one should take close note of when going through a lender’s policy on repayments.
How long does it take to get a bridge loan?
Each lender has its own disbursement terms and how long it will take will depend on the amount of the loan and the type of loan you need.
At Lulalend, we disburse funds to successful applicants within 24 hours.
Related: Business Funding: An overview of how SMEs can access funding in SA
Are bridge loans a good idea?
Many SMEs admit that having inadequate cash flow is a problem that arises often. Bridging finance is a way to help ease the ups and downs of managing a business and its access to funds.
A bridge loan is a great solution for businesses that need access to funds quickly in order to take advantage of new business opportunities or to pay one-off or unexpected costs.
Why choose Lulalend?
Lulalend offers bridging finance that is unsecured, more affordable than traditional banks, and easily accessible within 24 hours. Plus, there are no penalty fees for early settlement.
Related: What is a business credit facility?
Lulalend and Business Bridging Finance
We understand that different businesses have different needs, which means their financing requirements will differ too.
Our business bridging finance offer is unsecured (no collateral required), affordable, and easily accessible. We also allow you to settle early without having to worry about penalty fees. With Lulalend’s quick and easy online application, you can access business funding of up to R1,5 million within 24 hours. Our application is completely paperless, requires no collateral, and you’ll have an answer in hours.
If you’re looking for funding for your business, read more about Lulalend’s business funding options here.
On Thursday, 17 September 2020, Governor Lesetja Kganyago read the latest Monetary Policy Committee (MPC) statement. We are happy to see that the South African Reserve Bank (SARB) held it’s key lending, or repo, rate at 3,5%. A low repo rate is good news for both consumer spending levels and for businesses looking to borrow money to invest in growth opportunities.
However, on a more cautionary note the SARB also revised its 2020 GDP forecast downwards, indicating a contraction of 8.2% for the year compared to its early prediction of a 7.3% decrease. This revised forecast is now more in line with other external organisations such the OECD. According to the Dailymaverick.co.za, “The Organisation for Economic Cooperation and Development (OECD) forecasts an 11.5% contraction for the South African economy in 2020, the biggest among 19 countries surveyed in Africa. A GDP contraction indicates a potential decline in industrial production and retail sales, and could lead a drop in real personal income.
Related: Tips for the 2020/2021 tax season
The SARB also indicated that inflation is set to remain within it’s target range off 3% to 6%. The Monetary Policy Committee statement said, “The central bank’s headline consumer price inflation forecast averages 3.3% in 2020 and is lower than previously forecast at 4% in 2021 and at 4.4% in 2022.”
During the MPC meeting, it was also brought to light that the inflation rate “is expected to be well contained over the medium-term,” due to the slow recovery and economic contraction.
This suggests that the SARB has the ability to reduce rates even further but the statement was clear in the fact that the bank’s “Quarterly Projection Model (QPM) indicates no further repo rate cuts in the near term and two rate increases in the third and fourth quarters of 2021.”
Related: What We Learned At The Business Show South Africa
With the country moving to Level 1 in a few days, the hope is that the further increase in commercial activity will help grow the overall economy and put money back in consumers pockets.
With the record low repo rate set to remain at this level for the foreseeable future, and inflation also expected to remain steady, now is a good time for business owners to look at accessing additional capital to invest in the future of their business.
Lulalend’s funding options are flexible and personalized for your business needs. Find out more about our bridging finances and credit facility offers today.