The need for entrepreneurs has never been more vital in South Africa. Overwhelmed by late payments and working capital shortages, businesses struggle to survive. Empowered by the latest digital tools, accounting firms have the power to help South African businesses thrive.
THE SOUTH AFRICAN PARADOX
Accountants know it better than anyone: sometimes, numbers don’t add up. According to recent IFC and GEM SA reports, while 50% of the country’s workforce is employed by SMEs with 34% contribution to GDP, only 11,9% of citizens have entrepreneurial intentions, with fewer than 15% of start-ups going the distance and 75% of micro, small, and medium enterprises (MSMEs) having their credit applications rejected by banks.
THE URGE FOR BUSINESSES TO THRIVE
According to the Quarterly Labour Force Survey (QLFS), in the first quarter of 2022, the unemployment rate reached 63,9% among 15−24-year-olds and 42,1% among 25−34-year-olds in South Africa. The current official national rate stands at 34,5%. In this context, the need for entrepreneurs to step up for the nation and thrive has never been more vital. Still, newly established businesses struggle to survive because of many hardships, including working capital shortages.
THE CORE PROBLEM: BLEEDING CASHFLOW
Let’s go to the source of the problem. Banks are reluctant to finance for longer-term outcomes: consequently, small and medium-sized businesses must rely on internal liquidity to support their goals. But with a fragile cash flow drained by late payments, how could this be a functioning strategy? Recent research led by Xero revealed that 91% of South African SMEs experience outstanding payments averaging R99 801, forcing companies to draw on their working capital to pay their bills and increasing the risk of insolvency.
BRING ON THE ACCOUNTING SUPERPOWERS
Accounting firms have the power to tackle the problem’s source by helping to guide their clients to more effectively manage their working capital and accounts receivable. By helping to inform their clients of the right approach and digital tools, accounting firms can be the heroes of South African entrepreneurship by guiding them to −
- Make billing simpler − By harnessing the power of automation, South African businesses can save time and reduce human error through timely invoice generation, tracking, reporting, and simplifying and streamlining payments.
- Time is of the essence when it comes to debt collection. Clients pay their bills faster if they receive them shortly after enjoying their services. Automating final invoices and sending them as soon as the deal shows up in the books makes customers more likely to pay their bills on time.
- Make payment facilities smoother − Simplifying the billing process also means encouraging businesses to offer a wider range of payment options to their clients, such as those offered by modern A/R management and collection solutions to allow instant fund transfers through digital means. These modern tools can also be used to expedite repayment using the right tone, channels and timing to best engage clients, without compromising customer relationships.
- Make collection more efficient − A digital A/R solution sending reminders when needed and taking care of the chasing and dunning process is a game changer. With up to 90% of successful recovery and five times faster collection, all-encompassing digital solutions can dramatically reduce the length of businesses’ money cycle to achieve a higher recovery rate and help businesses thrive.
- Processing and chasing payments and customers and sorting invoices are time-consuming and prone to error. Automation does it better and faster, saving teams time and energy. By cutting off even 30 minutes per day of work time, businesses can free up over 10 hours per employee every month to focus on other high-value add priorities.
- Make tracking and forecasting accessible − Optimising working capital makes it essential to secure clear visibility into current status and trendlines. However, obtaining current account balances takes hours of staff legwork. It implies logging into different bank portals and copying data to spreadsheets or finance applications. Thanks to A/R automation, it is possible to give businesses better insight into their working capital in real-time to enable management to make informed decisions.
Instead of using 40 different applications, multiplying the work vainly, API and integrations ensure applications work together. An API interface between your systems and your bank gives you real-time connectivity, and an account balance API is a great starting point for optimal working capital.
WHERE TO GO FROM HERE
Accounting firms can make a difference for South African businesses to help them to not only survive but to thrive and contribute to the future of the nation. They can be game-changer allies in this fight by simply harnessing the power of technology to help their clients to better manage their working capital and cash flow at its source.
If you and your team are interested in learning more, register for Digital Transformation in the Office of the CFO: The South African Perspective, an upcoming webinar hosted by Kolleno and Business Day, with the participation of SAICA, to talk about the most innovative digital solutions being implemented in South Africa on 6 September 2022.