Three Realistic New Year’s Resolutions For Your Small Business

As 2022 begins, what are your business goals for the year ahead? If you’re planning to expand, explore new opportunities or simply keep your finances healthier than they were last year, here are three top tips.

1. Protect your cash flow

No matter what industry you’re in, having ready access to cash resources is critical. Even when your income looks good on paper, your working capital could still be tied up in assets such as your accounts payable, leaving you with a poor cash flow.

If you’re selling on credit terms, you could wait months for the cash that’s owing to your business. Depending on the other resources that you have available, this could put your cash flow under pressure. It may become challenging to cover your operating expenses that keep your business running optimally.

Alternatively, you may be able to cover day to day business running costs, but find that you have no spare working capital to invest in the growth of your organisation. Even if you’re not planning to expand this year, what if an unexpected opportunity comes your way? If you don’t have the funds to invest in the necessary raw materials, stock, equipment, technology, skills or other resources you may need to meet these new demands, will the business go to a competitor instead?

Keeping your cash flow healthy should be a top priority for 2022. The last thing you want is for your company to be stuck in a rut, where you never have enough cash available to innovate, improve your offering, explore new possibilities or strengthen your competitive advantage.

2. Consider diversifying your sources of business finance

We’re operating in a volatile economic and political climate. By diversifying your sources of business finance, rather than relying on one funding avenue, you can protect your cash flow more successfully.

Many SMEs in South Africa are not aware of the various funding options that are available to them; and they therefore follow the more traditional path and apply for a conventional bank loan or overdraft. Unfortunately, in an environment where financial institutions are under immense pressure from regulators to take a risk-based approach, many smaller businesses are finding it challenging – or time-consuming – to get funding applications approved.

Due to the amount of due diligence required, qualifying for a bank loan can be a long, drawn out process. The bank needs to review your company’s financials, assets and liabilities, and credit history. This can take months, putting severe pressure on the financial health of your business.

What happens if you need this working capital urgently, to cover expenses or process a large new order? This is where it makes sense to diversify your funding strategy, by adding a fast and flexible working capital solution like factoring.

Factoring boosts cashflow swiftly, enabling you to meet expenses or seize opportunities as they arise. This funding mechanism makes it possible for you to raise funds against your accounts receivable.

3. Strengthen customer relationships, but set firm boundaries

Like you, many of your customers are looking for ways to keep cash in their businesses. This means that they are likely to ask for credit sales terms. While you do have to keep your good relationship and competitive advantage intact, be careful not to automatically agree to 90- or 120-day terms.

Try to negotiate credit sales terms of 30 days or less. This will put you in a much healthier cash position. It’s important to keep reminding yourself that credit is a privilege – not a right. It’s also important to assess your customers’ creditworthiness on a regular basis to be sure you’re only extending credit to organisations that can pay you on time and in full.

Merchant Factors can help you to make these goals a reality during 2022

Merchant Factors was founded 34 years ago to provide growing businesses with an alternative to traditional bank loans and overdrafts. As a leader in local and cross-border finance, the firm has the expertise and flexibility to support your business financing and growth goals – in a way that nurtures and supports your valued customer relationships.


For fast, flexible business finance – contact Merchant Factors today

Finance beyond the Numbers.