Small medium enterprises are quite often the foundation for huge and multi million businesses.The growth and success of these SMEs differ from one market to the other.The factors attributed to retarded growth for many include government regulations, indirect labour costs, access to foreign markets and difficulties in recruiting qualified staff and workers. Perhaps now it is important to consider the keys to turning your start-up into big business.
One of the most difficult financial decisions that an SME has to make on a constant basis is how to balance savings with capital to deploy in the business for requirements such as inventory, technology, marketing, etc. Research has shown that a mismatch between sunk capital and expenses and lack of cash flow and reserves results in business stress and possible failure.
The above can be mitigated by managing costs including paying staff and suppliers and ensuring that maximum value is derived from each rand spent as well as ensuring that there are adequate cash reserves to plug expenses gaps, fund projects or buy assets.
There are certain steps you can take to select the right savings and investment product for your business.The first step is to understand your business cash flow, consider the volatility of your cash flow projections, if income and expenditure are predictable and you know what your cash positions are going to be for the foreseeable future, then you should think about foregoing some liquidity and flexibility and investing in longer term assets that provide for higher returns. If on the other hand, your cash flow predictions change from month to month, then you should rather consider shorter term investments that provide for more liquidity and flexibility, even if the interest rates received are relatively lower.
If the above steps are implemented, you are on your way to having an expanding SME.