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Entrepreneurs urged to prioritise cash-flow in 2016

Jan 17 2016 19:00

Cape Town - In light of the challenging economic climate, South African entrepreneurs have been cautioned to buckle up for what is predicted to be a challenging year.

In order to be prepared for what may face them in 2016, business owners are advised to dedicate the next few weeks to the planning of budgets and cash-flow, which are both crucial tools required for the survival of any business.

This is according to Gerrie van Biljon, executive director at Business Partners Limited who says that without a realistic and well-managed budget, a business is much like a boat without sails – without direction and headed nowhere.

He describes a cash-flow statement as a vital management tool that should be referred back to constantly, and not only on an annual basis.

“The control of cash flow, adherence to payment deadlines and the management of creditors and debtors are all fundamental aspects that will determine the success of a business,” says Van Biljon.

Van Biljon provides entrepreneurs and business owners with the following tips to stay on top of their finances in 2016:

Keep it accurate

Entrepreneurs are often eternal optimists, even when it comes to budgeting.

Overestimated income can however be as harmful as having no budget at all, and can provide a false sense of security. Van Biljon explains that one of the best ways for business owners to project realistic income is to base figures on historical sales data, and ensure that deviations from such data are based on realistic factors.

Refer back to historical financial statements

Instead of only conducting an annual financial review, entrepreneurs are advised to refer back to their historical financial statements on a regular basis. This will help predict sales dips and rising expenses before it is too late. Regularly updating a budget and a statement of cash flow will enable business owners to keep an eye on where money is spent, and allow them to cut back where applicable.

Simple is better

Van Biljon says that budgeting need not be a complicated exercise for business owners and a simple spreadsheet is more than enough to manage an annual budget. Although employing an accountant to draw up the financial statements is an advantage for some entrepreneurs, they should take care to ensure that they know exactly what the accountant is doing at all times and that they understand the statements.  

Plan wisely

Sensible budgets will help business owners plan for challenging financial times, and provide guidance for when there is extra cash available. Plans on how to cope when the business suffers an unexpected knock in sales or income should also be included.

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