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World Savings Day: How to build up cash reserves

World Savings Day, celebrated on Monday, 31 October, is an event created to increase the public’s awareness of the importance of savings for modern economies. Photo: Supplied/Ventureburn

2022 has offered more than its fair share of challenges for start-ups, including frequent load shedding, a volatile exchange rate, rising inflation and interest rates, and ongoing supply chain disruption. These difficult trading conditions highlight the harsh economic environment, a beyond-resilient market, and the importance of financial management.

Perhaps one of the biggest lessons of the past two years is how useful it is to have some savings in the bank for difficult months when sales are slow or debtors miss payments, says Viresh Harduth, vice president: small business for Sage in Africa and the Middle East.

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World Savings Day, celebrated on Monday, 31 October, is an event created to increase the public’s awareness of the importance of savings for modern economies. With this, Harduth developed five suggestions to shave down some costs and generate revenues to create savings you can bank for that rainy day.

Viresh Harduth, vice president: small business at Sage Africa and Middle East. Photo: Supplied/Ventureburn

1. Figure out your cash reserve

A cash cushion can help your business get through difficult financial periods without needing to borrow money. First, to figure out how much money you should have in reserve, add up your average monthly expenses. Next, decide how many months’ worth of expenses you want in reserve.

Some experts advise three months, others six. Once you’ve settled on your numbers, start transferring the money into a separate bank account. Keep building until you reach your amount, and don’t touch it unless you absolutely need to.

2. Pay down interest-bearing debt

Not all debt is bad. Longer-term debts such as vehicle financing, loans to purchase manufacturing equipment, and mortgages are investments in your business. However, paying off expensive, short-term debts like credit cards and overdrafts can take a bite out of your operational cash flow, especially with rising interest rates. Before thinking about saving money for a rainy day, it’s a good idea to clear as much of this debt as you can.

3. E-commerce enables your business

Most products and services can be sold online and getting started is simpler than many SMBs imagine. This is a great way to open access to new pools of customers and grow your revenues. Depending on what you sell, you may be able to use a platform like Takealot, Mr D Food, or Uber Eats to sell online.

Building your e-commerce store is also not as complex as it once was. You can host with a provider like Shopify or Netcash Shop, which provide quick and easy tools to build your website. Or you can create a website using tools like the WordPress content management system and WooCommerce e-commerce solution.

4. Get rid of manual processes

Automation and digitalisation can be a significant cost saver for your business. An affordable, cloud-based accounting solution will allow you to send professional electronic invoices to your customers each month, generate VAT returns, and keep accurate records of your expenses.

You won’t need to waste your time with paper invoices in shoeboxes or filing cabinets. You can cut back on admin if you have employees by using payroll software for payroll calculations and PAYE returns.

5. Take your marketing online

A strong presence on Google and social media platforms like Facebook, Instagram, and, for B2B companies, LinkedIn, can be a powerful way to generate leads and build customer relationships. Compared to traditional advertising and direct marketing, the costs are low, and the results are measurable.

Claiming and refining your business listing on Google My Business (GMB) is a good start; so is establishing accounts on the social platforms your customers use.

Every start-up can benefit from a financial safety net to increase its stability and take advantage of growth opportunities. With interest rates rising, it’s better to have surplus cash than to use credit. Once you save money, be sure to put it in an interest-bearing account to make more money for you.

If you run a limited company, bank it in a business money market account. If you are a sole proprietor, consider opening a tax-free savings account to earn interest, tax-free.

ALSO READ: Entrepreneurial success needs interconnected ecosystem

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