Western Cape Funding Fair offers funding of up to R20 million

Wendy Smith, Western Cape leader of BPaaS and Accounting & Financial Advisory at Deloitte, says, “If you are applying for funding, getting your business cash flow positive will go a long way in ensuring the success of your application. If you plan to expand, merge or sell your company, a positive cash flow will make it easier to attract a quality business partner or purchaser.

“Taking charge of your finances keeps you operational and puts you in a position to face unforeseen contingencies. Positive cash flow ensures that creditors can be paid timeously, which is good for your credit rating and will potentially open doors in terms of getting a loan, a line of credit, or funding in the future.

“While cash flow challenges are common for most businesses, there are three key measures to implement that will allow you to take charge of your business finances and, ultimately, your cash flow.”

Know your ABCs

“Accurately tracking your cash flow means you can make informed decisions when it comes to stock management and helps you to manage the timing of monthly payments such as rental, salaries, and suppliers or creditors. It also means you can plan for ad hoc, but necessary, expenses such as maintenance, marketing, promotions etc.”

A cash flow statement consists of three categories:

• Operating activities, which include cash movements due to routine activities that either generate or require cash, including payments from customers and loans and your payroll expenses, rental and other bills. The net amount of cash used by operating activities is the most important figure on your cash flow statement.
  
• Investing activities, which include the purchase or sale of company assets (equipment, land or buildings) and how this affects your cash situation.
  
• Financing activities refer to the cash coming in and going out because of a loan or line of credit. The money coming in represents cash receipts, while the repayment of loans represents cash payments.

  Be rigorous when it comes to payments

  “Late payments wreak havoc with your cash flow situation and have a snowball effect on inventory and operating expenses. Once you make a sale, your business incurs a number of costs. So if you don't collect the money owed you're actually worse off than if you had never made the sale in the first place.”

  “Discuss invoicing and payment terms clearly and early on with customers, collecting what is owed timeously, as well as setting up customer contracts that require pre-payments to enhance cash flow. Business owners should consider incentivising customers to pay on time.”

  Manage your accounts payable meticulously

  “Time your payments to suppliers with your cash flow requirements in mind by balancing the cost of financing with the benefits of extended payment terms. Always ensure that your payment terms to suppliers are in line with, or better than, the terms you provide to your customers,” concludes Smith.

  To apply to the Western Cape Funding Fair, visit www.westerncapefundingfair.co.za.