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Starting and sustaining a successful business is no child’s play, and many entrepreneurs will agree – if not all.
While most entrepreneurs can provide excellent services and high quality products, some might not have financial management skills needed to sustain a business.
Chapu Accountants founder and executive chairman Rhangani Mbhalati shared some tips for entrepreneurs starting out.
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When it comes to managing your business finances, Mbhalati said bookkeeping was key.
Speaking to The Citizen, he emphasised the importance of collecting data about one’s business to make sound financial decisions.
“To better manage finances, an entrepreneur must have historic records of their business finances which will help to identify strength and weaknesses of the business.”
While generating income is the primary goal for most entrepreneurs, it’s equally as important to understand your sources of income.
“Understanding where your revenue comes from and where you spent it helps an entrepreneur to forecast and make data driven business decisions,” Mbhalati said.
The expert also said that record-keeping was essential for compliance purposes.
“South African law require businesses to file their earnings, produce financial statements and pay taxes,” he said.
“Without record of business finances, an entrepreneur may incur avoidable fines and penalties for non-compliance or even overpay on taxes,” he added.
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As the age-old adage goes, ‘with great power comes great responsibility’. The same principle applies to running a business.
While being your own boss comes with some financial freedom, it’s important to resist the urge to dip into your business account for personal expenses.
Mbhalati strongly advised entrepreneurs to keep their finances completely separate.
“Moreover, this helps you have a clear view of how your business is performing and do proper cashflow management.
“It is also important to note that tax filling can be a challenge as you will need to produce your financial activities during filling season.”
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Hiring an accountant to manage your financial records can come in handy, enabling you to effectively manage your income and expenditure.
Unfortunately, many entrepreneurs may not have the budget to afford enlisting the services of an accountant, especially in the early days.
As an alternative, Mbhalati suggested using basic accounting software programmes, adding that some banks offered basic accounting systems.
“However, one needs to constantly review their business growth and needs and consider getting professional services if the business expand,” he said.
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