Namibia’s economic climate over the last four quarters has proved to be a force to be reckoned with as some SMEs struggle to weather the storm of the recession.
The unforeseen issues that come with a recession can permanently damage the operations of any business; however SMEs are at a higher risk, with some having to close their doors indefinitely.
“One of the things that I have noticed since the economic crisis is that SMEs do not have any cash cover as a form of collateral when they don’t have any other means of security,” Standard Bank’s head of Enterprise Banking, Dennis Isaacs, said this week.
He added that it is therefore imperative that SMEs are educated on how to save money for unforeseen circumstances.
“One of the key issues with SMEs that put them at a disadvantage is that they invest money on buying goods, instead of taking a portion thereof and invest it for a rainy day. However, I cannot stress enough how important it is to have a contingency fund, this is cash that you can use when times are tough and you really need it,” he stressed.
Isaacs said he advises that all SMEs should have savings of between three months to six months of their operating costs in their savings account.
“My first advice for our SMEs is that if they do not already have a structured, long term saving plan in place, they should buckle down and get started on it immediately. Standard Bank offers a variety of savings or investment options which offer flexible terms so I urge all our SMEs to find one that best suits their business.”
After putting a structured savings plan to bed, Isaacs advised that budding entrepreneurs should start looking at cutting costs in order to put more money in their savings or investment account.
“SMEs need to cut down on all non-essential spending because it drains their finances and do not add value to the business. Another mistake most SMEs make is also hiring too much staff too soon. This will put a strain on your finances and you will be spending more than you save. You can work with freelancers or outsource any of the additional skills you need without having to break the bank,” Isaacs advised.
While this is something that most entrepreneurs don’t think of, Isaacs also said another thing that can siphon money from an SME is utilities. Utilities such as water and electricity can amount to thousands of dollars so it should be the responsibility of everyone in the business to actively save on them.
“The future and success of your SME lies in the palm of your own hands. You need to take all measures necessary to ensure that is excels in these difficult economic times and that starts with taking any and all steps to reach to the top,” Isaacs stressed.