Educating SMEs on navigating through recession
By Dennis Isaacs
Standard Bank’s Head of Enterprise Banking
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 businesses; 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.
It is therefore imperative that SMEs are educated on how to save money for the 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.
All SMEs should have savings of between 3 months to 6 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, 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.
While this is something that most entrepreneurs do not think of, 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 this difficult economic times and that starts with taking any and all steps to reach to the top.
Caption: For more information on how your SME can save, visit your nearest branch, Standard Bank website at www.standardbank.com.na or on the bank’s Facebook page.