The South African Government’s National Development Plan (NDP) is relying on Small Medium and Micro Enterprises (SMMEs) to reduce unemployment to a mere 6% by 2030. Two of the major challenges that stand in the way of achieving this goal are problems relating to cash flow and the inability to manage administrative and business processes, says Jeanne Viljoen, project director: small medium practice at SAICA.

A unusual problem in South Africa is that many entrepreneurs don’t know where to access funding outside of traditional banks, leading to SMMEs closing their doors because of a cash flow crisis which could have been averted.

Richard Mackenzie, sales director at Transaction Capital Business Solutions, advocates that the private sector and government should do more to support SMMEs.

“This would include nurturing SMMEs through the critical first two years and providing access to finance, cash flow management and mentorship. And most importantly, paying your SMME suppliers on time,” says Richard.

One worrying trend that Richard has observed among SMMEs is that they don’t follow proper risk assessment processes when on-boarding new clients, especially when starting out. Most often their first clients are businesses and or individuals that they are familiar with. This often becomes a problem, especially when it comes to collecting outstanding and overdue debts.

Mackenzie proposes that SMMEs have structured business processes in every area of their operation. This should include, among others, marketing, orders, credit applications, risk assessment, collections, on time cash in the bank, on time creditor payments, operating costs and expense control.

“The ultimate benefit when implementing sound financial controls, improved business processes and accurate reporting, is creating a sustainable business that grows in value,” concludes Richard.

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