South Africa’s transport industry is one of the country’s main contributors to the economy. Businesses rely on road to deliver goods to meet client targets and deadlines, it is no wonder that companies monitor their fuel spending patterns so closely, especially if they want to properly account and manage the business’s cash flow.
Cash flow is what keeps a business running – small and medium businesses, particularly, rely heavily on healthy fuel prices to effectively meet their objectives daily. This of course can negatively impact a company’s cash flow as they must cough up more money towards fuel. In effect, this can sometimes lead to the business seeking financial assistance from banks.
To mitigate any potential future risks, it is important that SMEs become smarter about their cash flow to survive ‘leaner months’ or the reality is that they could face some serious challenges.
Key areas of the Business to keep an eye on are
- Expenses exceeding income: For a business it is normal to work at a loss for the first year, however, should this still be the case after the business has reached the 3-year mark – an evaluation of the businesses spending habits needs to occur to illuminate irregular spending in future, starting with an audit of the books.
- Your product or service offering pricing: An essential element of the business is pricing your services or goods correctly. So, to ensure that the business is able to generate a profit from your offerings you must evaluate what you offer, critically. Pay attention to the cost of fuel (increases and reduction and how this will affect your cash flow), broad maintenance of vehicles, product and employee costs.
In a tight economy, businesses are bound to face some cash flow challenges daily, but there are solutions available to keep the business running and maintain its cash flow despite lack of payments from customers and fluctuating business costs. Therefore, cash flow acceleration through debtor finance and property backed lending are two key areas of alternative business financing that are available but certainly, the right solution should be chosen – dependant on the business’s needs, for it to make a difference.