2024 is in full swing, and for the millions of small businesses across the country, now is the ideal time to take stock while planning for the year ahead. This doesn’t only apply to physical inventory.
Rather, “taking stock” should involve a thorough process of due diligence and performing a few important health checks that can provide a clear overview of which processes and methods should stay and which should be given the boot.
Three checks that will get your business off the starting block and set it up for a successful 2024:
Basic budgeting: the ins and the outs
The quarterly Business Partners Limited SME Confidence Index has revealed that over the past 10 years, “cashflow management” has been among the top three challenges small businesses face consistently. This highlights that budgeting should always be given priority, especially during the first three years of operation.
Before diving headfirst into what 2024 has to offer, it’s best to get back to basics. In terms of good cashflow management, that means taking a closer look at your business’s outflows and inflows, and how cashflow can be optimised.
First, it’s important to review all expenses, including variable costs such as raw materials, delivery costs, packaging supplies and transaction fees. Some of the most effective ways of keeping variable expenses to a minimum is to review how production can be made more efficient, to negotiate better prices or payment terms with suppliers and to invest in tools and technology that can save the business money in the long-term.
Next, it’s time to look at fixed expenses and how these can be optimised. Now is the best time to cancel subscriptions that are no longer valuable to your business, switch to free plans on digital tools where possible, negotiate a lower insurance premium using the help of an adviser, and use energy- and water-saving devices to reduce your utilities bill.
Once the cost-cutting measures have been implemented, it’s time to look at how you can maximise the inflow of cash to your business. This can be done by diversifying revenue streams through product and service diversification, implementing creative ways to secure new sales, using incentives to encourage early payments, ensuring that invoices are always sent promptly and checking whether renting certain equipment may be more cost-effective than buying it.
Check in on compliance
One of the most common challenges that small businesses face relates to compliance. Not complying with the regulations that govern your industry could result in hefty fines and legal costs in the long run, so ensuring compliance across the board is essential.
The first step is to conduct research on any legislative changes that may relate to your industry and have been made during the previous year. Some of the most important aspects to consider are tax, and whether your business has a robust tax strategy in place.
Next, it’s advisable to check in with the relevant industry body that governs compliance for your sector. For example, small businesses in the construction field will need to check in with the Construction Industry Development Board, interior design firms could check in with The African Institute of the Interior Design Professions and advertising agencies could check in with the Marketing Association of South Africa.
In general, becoming a member of these kinds of associations can prove to be beneficial, as their resources and advice can go a long way in helping business owners keep abreast of important developments in their industry.
Another important factor to consider, particularly for small businesses that have physical premises or office locations, is health and safety. Depending on the industry, certain precautions may need to be taken to prevent workplace accidents and create safe working environments.
Do you have the right tools of the trade?
Investing in the right digital tools can help small businesses save a significant amount of money. Fortunately, the proliferation of digital technology and the wide availability of tools specifically aimed at small businesses means that this kind of technology is readily available to business owners with any level of technological proficiency.
The tools that can benefit a small business will vary from case to case but in general, these kinds of tools are highly recommended: accounting software to automate manual reporting processes (such as Xero), social media management and post scheduling tools (such as Sprout Social and Buffer), workflow management tools (such as Asana and Slack), instant messaging tools (such as WhatsApp and Skype) and video conferencing tools (such as Google Meet and Zoom).
When choosing a tool, carefully review which package would work best and stick with the free version (or trial) to begin with. This will ensure that you don’t add unnecessary costs to your balance sheet and that if you need to opt for a paid subscription, the cost is well worth the investment.
From there, it’s important to ensure that the relevant team members get the training they need to use all the available features of the tool and that the tool offers the right mix of functions to sustain your operations.
Ben Bierman is the managing director of Business Partners.