Tag Archives: Tips

Ten tips for small business owners during tough financial times

When the economy is slow, small business owners struggle to survive, many for the first time. Financial problems consume valuable time and business resources, yet must be dealt with proactively. Also make use of your financial advisor or your banker; they have the expertise and knowledge regarding your business and its financial well-being.

  1. In tough times cash is king.
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    Have a close look at every purchase you need to make, and decide if it is worth the money. Will the product generate enough cash to pay for itself? If not, don’t buy it.
  1. Let your budget show the way.
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    Without a budget, you will find it difficult to cope with hard financial times. Adapt it regularly and do the same with your personal expenses. If you don’t keep track of expenses, they will become a bottomless pit into which all your cash will disappear.
  1. Look at your business’s financial position and performance objectively.
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    Do you get maximum returns from your investments? Could you sell those that are not making you money? When times are tough, survival is the only goal.
  1. Examine how your debt is structured.
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    If you have an imbalance between short-term and long-term debt you should restructure your long-term debt so that you can pay back the short-term debt over a longer period. Be careful not to take a loan against long-term assets, except if you are in critical need of money.
  1. Prepare for your meeting with your banker.
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    Make sure you have all cash flow and balance sheets and inventories at hand for your banker. This will make your review time more productive. Write down any ideas regarding your financial position and discuss them with your banker.
  1. Ask your banker about guaranteed loan programs.
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    Your banker could be able to restructure your business debt over a longer period if you are able to secure a credit guarantee on your loan to the bank. If your business is situated in a qualifying rural area, you may qualify for a guaranteed loan. Ask your banker about any additional resources which may be of use to your business.
  1. Review your insurance coverage.
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    Increase your deductibles and your premium will decrease. Items that are low-risk or obsolete should be removed from your inventory list.
  1. Examine your life insurance policies.
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    Some whole life policies have provisions that enable you to borrow against the cash surrender value at very low rates, or you could deduct the cost of the premiums from the cash surrender value. Determine whether your life insurance is worth the money or whether you couldn’t get by at a lower cost. Make sure all key personnel in your company have life insurance so that business can continue in any of the key players’ absence.
  1. Deal with financial problems immediately.
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    As soon as a financial problem arises, deal with it immediately. Keep your banker informed of any problems and make him part of your inner circle of confidants. Use your team as a soundboard to discuss financial difficulties and brainstorm solutions.
  1. Get some perspective.
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    Sometimes you need to get some distance from your work to solve the problems. Take a weekend off or go and watch a movie – whatever you do, leave your worries behind for a short while and focus on something else – it will make you and your business a lot stronger.

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice.  Errors and omissions excepted (E&OE)

12 Tips to be Financially Fit

Enough talk of financial doom and gloom. Try these 12 practical ideas to take your money status from out of shape to financially fit.

1. Prioritise your financial needs

Without a sense of priorities, you’ll have limited success in planning your budget. Decide what you most critically need to spend your money on, and develop a realistic spending and savings plan. If your children’s education is a key concern, then list it as a priority area and move that flatscreen TV down the list.

2. Call in the experts

A meeting with a financial planner is the first step on the road to financial independence; what follows is entirely up to you. A good qualified planner will take a holistic view of your financial situation and will suggest a plan to help you reach your goals by considering your risk profile, life stage, financial position and time available to reach those goals.

3. Clear and avoid unnecessary debt

Financially stretched or not, the last thing you need is excessive debt. This can be defined as debt that you have incurred to buy things that you don’t really need. Through careful planning with your financial planner, try to pay of all your expensive debt such as your credit card or personal loans. Anything bought on credit ends up costing you a lot more than the original price, so save up to buy something rather than paying it of – and save on interest!

4. No credit cards

With no monthly credit card payments, you will be able to purchase more things in cash, and you can avoid credit purchases and the interest payable that comes with credit. To remove the temptation of clocking up credit card debt again, leave your card at home or commit to only using it for emergencies.

5. Plan for your old age

You are not able to generate an income forever, so make sure your financial plan makes full provision for your retirement. Your planner can suggest retirement savings options that can accommodate your budget and financial goals. Ask your financial planner about the tax benefits of taking out a retirement annuity (RA).

6. Protect your income

Just as you should insure your prized possessions, such as your car or house, it is important to protect your greatest asset, your ability to earn income. This asset can disappear in a flash, for instance if you are disabled in an accident or if you lose the ability to work due to serious illness. Most people think it won’t happen to them, but it really isn’t worth taking that chance. A range of income protector plans or disability cover options are available from financial services providers to safeguard yourself if you are no longer able to work.

7. Quit pricy bad habits

Smoking doesn’t just spell bad news for your health. It’s also bad news for your pocket. Depending on how much you smoke, quitting the habit can save you about R600 per month (or R7 200 a year). Also, a non-smoker generally pays lower life insurance premiums and is healthier, which means fewer visits to the doctor and saving on medication costs.

8. The s-word…

If you want to achieve your financial goals and live your dreams, you simply have to start saving. If your employer offers you an annual increase, allocate a portion of it to savings before you get used to having the extra money in your pocket. Better yet, set up a monthly savings account debit order on the day you get paid! That way you won’t miss the extra money, as it will feel like you never really had it to begin with. You might think you can’t afford to save, but you will be surprised how you can make it work if saving is your priority.

9. Work on your spending habits

It’s easy to spend our hard-earned salary on less important expenses – money that could be used to achieve a particular goal, or for emergency savings. Because it’s so easy to “swipe the plastic”, leave your credit cards at home and try to only bring them out in emergencies. Watch out for cash leakage. If cash in your purse disappears – leaving you with nothing to show for it – take note of what you spent it on.

10. Plan your spending

Plan purchases. Only buy what you planned to buy. Make a shopping list and stick to it so you don’t overspend. When buying big, expensive items, do an online search for price comparisons. Always ask yourself: Do I really need this? If the answer is no, then put the item back and walk away.

11. Make sure you have a Will

Everyone should have a Will. Not only does will it indicate the beneficiaries of your estate when you die, it also helps to ensure that your last wishes are known and understood. For example, you may have very specific instructions on who should take care of your minor children should you die unexpectedly. Having a Will means that your family and friends will be comforted during a very difficult time in the knowledge that your last wishes were clearly communicated.

12. Plan for the longer term

Once you’ve put everything into place, set your vision on the longer term. It’s well and fine to plan one year in advance, but to really achieve your goals, you need to think further ahead.

By Karin Muller, Head of Growth Market Solutions at Sanlam

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)