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EasyBiz: Budget allocations for SMEs – too little, too late?

They say love makes the world go round – or is that money? If the latter is true, then business is at the heart of it, and particularly small-to-medium-sized businesses (SMEs), research shows. Then why are so many SMEs still gazing out to sea, wondering when their ship will come in? In the latest Budget speech, certain adjustments hinted at a much-needed financial lifeline to be thrown to both citizens and businesses, but will this lifeline be accessible or have a gigantic anchor attached to it? Gary Epstein, Managing Director of EasyBiz Technologies, suppliers of QuickBooks online Accounting software, comments on this.

Can we hold our breath yet?
Great news from the Budget speech, particularly for SMEs, is the reduction in the corporate income tax rate to 27 per cent; however, the years of assessment will only commence on or after 1 April 2022. It’s encouraging, though, that interest deductions and assessed losses will also be limited. Consideration will be given to further rate decreases, but this is only a consideration, not yet a definite plan. So, no breath-holding competitions just yet, folks – yes, we know you’ve been practising.

It’s absolutely fabulous, darlings!
The 27% reduction, when implemented, will benefit SMEs significantly. It will help them to grow and become more sustainable and profitable. They’ll be able to employ more people, which will positively affect unemployment in South Africa. Being more profitable also means that they can become more competitive, improve their cash flow, and very importantly, build business confidence. All good so far.

Almost, almost … missed!
So, is it a lifeline or merely a reed to breathe through while SMEs paddle frantically back to shore? Time will tell. Epstein believes that not enough is being done to support SMEs. In the past and still today, it’s very difficult for SMEs to raise capital, especially debt financing. Promises of financial aid are like those machines at the arcade with a mechanical grab – the hope of claiming the cute toy is alluring enough to keep you feeding the coin guzzler.

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It is incredibly tough for new businesses, especially SMEs, to start up, as they are hindered by strict regulations and government requirements. All the red tape makes it difficult for start-ups to get financial assistance, for example, to pay salaries. While political organisations and financial institutions keep promising to relax the rigid regulations, SMEs are left rubbernecking from one to the other for a solid commitment.

Hands out of the cookie jar!
The Finance Minister also stated in his speech that “the Department of Small Business Development has allocated R4 billion over the medium term to the township and rural enterprises, including blended finance initiatives”. Government coffers are by no means bare, but it’s difficult for SMEs to get their hands on any of the dough to finance their operations.

Would you like a side of fries with that loan?
As a result of COVID-19 and the lockdown, many small businesses have collapsed. Can the intended assistance from the Government help these enterprises to recover? If some of the relief proposed by the Government is provided quickly, and lockdown remains at Level 1, then certain businesses will be able to recover. Epstein suggests that if the tax reductions and incentives are implemented for a minimum of a year, and the removal of unnecessary red tape is actioned quickly, it will improve the cash flow of these SMEs and help them to rebuild their businesses. It’s at a stage of urgency now where SMEs will soon be needing drive-thru financial aid to get the sustenance necessary to rebuild.

Help wanted!
Despite the programmes implemented by the Government, unemployment continues to rise significantly each year. Jobs can only be created if companies receive the help they need. Then they can start generating business, and the money they’ve saved and invested will allow them to get out of the survival mode they’re currently in. Only then will it have a positive impact on unemployment.

I scratch your back, you scratch mine … harder
Government must try to make funds more accessible, notwithstanding banks and other financial institutions. There are also funding operations that help SMEs; however, these are all organisations that expect to be paid back – with interest. The only other option is an investor. There are many people with a lot of money who want to invest in SMEs because they are looking for alternative ways of getting a return on their investment.

Betting on debt
One would think that it would be unwise for small businesses to incur debt; however, in our current financial climate, they don’t have too many options. SMEs are in survival mode, and they’re dealing with the negative impact of COVID-19, so they don’t have a choice – they either incur debt or hang up their hat – on the door that says ‘Closed for business’.

One for the humans
When starting a business, getting the right financial advice is crucial. Some business owners make the mistake of thinking they can purchase accounting software to avoid the expense of a financial advisor. Online accounting software is an excellent tool to effectively manage the finances of a business. It provides a good indication of money coming in and money going out. However, it cannot give you financial advice. For that, you need a ‘homo sapien financialus’, more commonly known as a human financial advisor.

Spend money to make money
The difficulty for SMEs is that many don’t have the money to hire a financial manager or consult a financial advisor. Epstein maintains, however, that all businesses must allocate funds for financial advice, as it’s critical to a business. When business owners allocate funds for financial advice, they should spend a portion on a financial advisor and a portion on online accounting software – the two go hand in hand. So, no more doing calculations on the back of a cigarette box and hoping for the best.

Get serious!
For small businesses to not only survive, but grow, Epstein offers some valuable advice: SMEs must monitor their finances on a daily basis and act accordingly. It is critical that, every day, they keep an eye on money coming in and money going out, and they must cut unnecessary costs. It’s also essential to have a solid strategy and business plan, which must be evaluated regularly to determine whether it is being followed correctly, as the important question is: What
is the SME’s yearly plan?

Epstein stresses that the owner or managing director must believe in their employees and trust them. He/she, as well as the staff, must also believe in the company, the service it provides, and its values. These values need to be monitored regularly and must also be instilled in their customers.

Get with the times

Time management, too, is significant now more than ever, and so is technology. This is non- negotiable. If an SME wants to stay relevant and keep up with the changing business landscape, it must digitise its processes. Not every business can digitise all of its processes, but the areas that can be digitised must be.

Mayday! Mayday! Government, come in Government!
The challenges for SMEs are many, but Government has the power to provide some of the financial aid that these businesses desperately need. This will in turn boost the economy and lower the unemployment rate. If the Budget proposals come to fruition soon, many existing businesses can be saved, and start-ups and new businesses will have a fighting chance. Proposals are nice, but real help is needed. Let’s hope it won’t be like that advert: Ship’s captain: “Mayday, mayday, we are sinking.” Control Centre: “Vell vot are you sinking about?”

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