Why Small Businesses Should Use Profits Wisely

Given the current tough economic conditions locally and the highly uncertain business environment, SMEs should fully capitalise on the opportunities presented by the busy festive period by saving and investing profits wisely. Similarly, business owners that are less busy should avoid shutting down and going on holiday early, but rather use the quiet period to review their business plans and adequately prepare for the months ahead.

Elize Giese, Head of Business Investments at FNB says “profits earned during the festive season can go a long way to help SMEs prepare for the tough times and even quieter periods in the beginning of the year. One of the challenges we are seeing in the SME sector is that many business owners are failing to maximise profits earned during the festive season by overlooking the vast savings options available to them.”

She says selecting the right investment and savings options largely depends on the nature of the business as well as its cash flow. For example, a business with unpredictable cash flow projections could be better suited for short term investments that provide for more liquidity and flexibility – should the business owner need to access the funds immediately.

On the other hand, SMEs with a more stable cash flow should consider investing in longer term assets that provide for higher returns. Furthermore, long term savings are essential to ensure the sustainability of businesses, especially in times of economic uncertainty.

Planning ahead

Giese says many small business owners often work 24 hours a day, seven days a week, and hardly find the time to review their business operations. For these SMEs, the festive season is the perfect time to track business performance, overall strategy, financial position, efficiencies and competitiveness, in order to identify problems and further take advantage of business opportunities.

Business owners should remember that a business plan is not ‘cast in stone’. It is a working document that should be reviewed from time to time as business conditions change.

“Before SMEs can take advantage and enjoy profits from festive season sales, it is important to start planning now to make sure they are adequately prepared to meet the needs of consumers that are ready to spend and spoil their friends and families,” concludes Giese.