Jump ship or keep rowing?
With the country’s slow economic growth, many SMEs find themselves struggling to keep afloat. Should you jump ship or keep rowing?
While President Jacob Zuma has announced short-term interventions to boost economic growth and confidence, the question is whether or not these interventions will actually be to the benefit of small business owners remains to be seen. Are there any warning signs one should look out for in terms of whether or not to continue with the business?
Octagon Chartered Accountants says: “There are simple things you can do to spot warning signs early.” The auditing firm further points out four significant signs one should be on the lookout for:
- Negative cash flows – don’t ignore them. Roll up your sleeves and find out what is going wrong
- Customers replying on you for excessive credit terms or limits – your clients have just made you’re their banker. Don’t let them ride you
- Credit guarantee refusing insurance to your client base – in most cases your book cannot be insured because insurers feel there is too much risk – don’t ignore this – reduce your exposure to these clients and monitor limits
- Suppliers reducing limits – now it may show you that either they are short on cash flows. Maybe it’s time to find a new supplier or at least secure alternative supply in case your current supplier goes under
Although the economic climate may not look great for small businesses at the moment, Octagon says that we need to keep in mind that many great businesses have been started in times of economic or political uncertainty. “In my opinion, the uncertain economic climate is a blessing as it forces the entrepreneur to not take anything for granted.