Month: August 2013

The beauty of business budgeting

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Business budgeting, just like personal budgeting, is imperative for financial peace of mind. In the case of business owners, says René Roux (Head: Sanlam Liquid), proper budgeting can also help ensure the long-term success and sustainability of your business. “Most businesses, regardless of size, will experience an ebb and flow in their revenue, and external factors like fuel and electricity hikes can occur at the most inopportune times. Planning around these eventualities, and budgeting for them, can make all the difference in how your business deals with these kinds of upsets.”

Estimating and balancing income and expenditures, whether real or anticipated, is important because it helps a business avoid spending more than it’s taking in. “Having a good overview of the cost of operations, profits and cash in hand not only ensures healthy finances, but it can also give you an idea of whether you are in a position to grow your enterprise”, says Roux. “Good budgeting can assist in creating a financial roadmap for your business, and inform choices on if and when you can expand your operations.”

The all-important emergency fund

Ideally, says Roux, you shouldn’t even think of expanding or taking on financial liabilities if you don’t have some emergency savings available to help you through an everyday crisis that may require you to spend money immediately. This includes unexpected expenses like fixing equipment, suddenly replacing an employee or hiring temporary help. “Having an emergency fund in place will help ensure that you can cover unexpected costs without having to compromise your profits or take on additional debt”, says Roux.

Limit liabilities

A great benefit of business budgeting is the ability to review and limit how much money is spent on certain operations. “Knowing exactly how much you are paying for what puts you in a position to shop around for better – and cheaper – alternatives, which will bring down your overheads.” It can also help you identify where you have a little extra cash to sink into loans and long-term debt. “Paying off debts faster not only improves your eventual cash flow, but it also means a saving on the interest you would have paid over the full term of the liability”, says Roux.

An early warning system

According to Roux, a budget can be incredibly useful when it comes to identifying wastage and areas of concern. “Tracking your business budget on a regular basis can help you spot areas you should investigate and allow you to implement corrective action timeously. If sales are progressively declining you may want to consider increasing your advertising to target a broader market or take a closer look at your pricing”, says Roux. “Monitoring your performance over the next few months will give an indication of whether your initiatives are bearing fruit.”

Forecasting future growth

Business owners don’t always realise that budgeting can assist in the planning of future growth and expansion. By reviewing your budget regularly and limiting expenses as mentioned above, you can free up spare cash in your budget. Putting the money you save in reserve, will allow you the flexibility to grab business opportunities as they arise. “By designating certain funds to an expansion strategy, you can limit the risk to your business’s day to day operations and put yourself in a position to make quick decisions. An emergency fund also affords you a buffer if your business takes an unexpected downturn due to slow consumer spend and economic downturns” Roux adds.

The bottom line, says Roux, is that budgeting is an essential tool for business owners to forecast and plan current and future income and expenses. “If you as a business owner use budgeting effectively, you can ensure that you have enough money available to keep your business up and running, capitalise on opportunities for growth, increase your competitiveness and have a safety net in the form of an emergency fund.

Sanlam Liquid offers savings solutions to help you manage your business finances. For more information on our offering, call 0860 547 843.

Women who are doing it all – the mompreneur

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It is no secret that women business owners are more affected by the addition of a child in comparison to their male counterparts. However, female entrepreneurs are increasingly proving that they are able to successfully run a company and care for a family at the same time, and this has led to the rise of the ‘mompreneur’, a term given to female business owners who are actively balancing the role of being a mother and an entrepreneur.

According to Nimo Naidoo, project manager of the Sanlam / Business Partners Entrepreneur of the Year® competition, the number of female-owned South African businesses is growing, and ‘mompreneurs’ are contributing towards this growth.

“The concept of working from home has gained popularity over the last few years and due to the advances in communication and information technologies allowing for a more mobile workforce, many individuals are choosing to run their businesses from home instead of renting office space.

“This development has also led to many mothers now having the option to run a business whilst also having the freedom and flexibility to spend time with their children.”

She points to a report by the United States Census Bureau, which revealed that about 30% of individuals working from home are self-employed women, compared to about 20% of men. “These figures highlight the growth of female run home-based businesses.”

Naidoo says that women are choosing to start businesses for many reasons, mostly for the flexibility it offers, but also because they have noticed a gap in the market, often inspired by motherhood.

“The rise of the ‘mompreneur’, and the awareness created around the possibility of running a business from home while still caring for the home and children, is extremely positive as it encourages women who may not have previously considered a career path of an entrepreneur as an option.”

While being a ‘mompreneur’ has its many benefits, juggling a start-up or small business, as well as the role of a mother, can sometimes be challenging.

Naidoo says that in order to successfully balance work and family, it is crucial to establish a suitable work environment at home. “This can be done by planning your workspace at home and by setting aside a dedicated office area. This will allow you to separate work and family effectively.”

She adds that managing time effectively can sometimes be a challenge. “Being a mother is a full time job, and the additional responsibilities that come with running a business can seem daunting. In order to manage your time as effectively as possible, draft a rough schedule that includes all daily activities. This will allow structured work periods at a time that best suits your schedule. It may be working in the morning when the children have gone to school, or in the afternoon when they are having an afternoon nap or doing homework. While this schedule is likely to change given the nature of home life, it will assist in balancing your time between work and family time.”

One of the other possible challenges ‘mompreneurs’ might encounter along their entrepreneurial journey is finding the balance of how and when to expand the business. “’Mompreneurs’ often start a business to afford the opportunity to watch their children grow up and may be hesitant, or decide against, expanding their business for the fear of taking away time from the family.

“Instead, ‘mompreneurs’ should take the opportunity to expand their business as their children grow up and start spending more time at school and with friends,” concludes Naidoo.