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Overhaul unsustainable financial habits this national savings month

Jul 26, 2018
Overhaul unsustainable financial habits this national savings month

With Savings Month now in full swing, South Africans should be asking themselves why they haven’t yet made an effort to start saving. Those who already save, ought to be questioning if they save enough - be it for their long-term future, short-term goals or just in case of emergency.

Rich Preece, Global Leader of the QuickBooks Accountant Business, suggests that with the current focus on revamping financial habits for the better, South African businesses (especially SMEs) ought to be following suit.

Savings Month is the South African Saving Institute’s national savings awareness campaign, which runs every year for the month of July.

Preece says, “There is no doubt that it is our responsibility as individuals to work on creating a culture of saving and we need to take action quickly before the situation deteriorates further. It was just a few months ago that Investec and the Gordon Institute of Business Science released their annual Savings Index* which showed that the country’s savings rate has dropped to the lowest levels in 27 years.”

“Just as it is essential for all South Africans to save to ensure their financial well-being down the line, businesses should take this time to reflect on some of their bad financial habits. With a surge in savings awareness, Savings Month is the perfect time for businesses - SMEs in particular - to look into how to create a savings culture within their organisations, taking note of how saving can assist in achieving financial goals,” he explains.

Preece highlights the three biggest benefits of saving for a SME.

  1.  Start-ups and small businesses are likely to run into unexpected challenges and expenses. Having a savings or emergency fund will make addressing these issues a lot easier.
  2. Let your money grow. By opening a savings account, you can earn interest on the money you put away. While it may not seem like much each month, it really adds up.
  3. Instead of accumulating debt, saving up for nonessential but ‘nice to have’ office supplies and paying in cash rather than with credit keeps monthly expenses in check.

“Other bad habits for SMEs to consider tend to be related to sticking to budgets and keeping expenses in line, as well as successfully managing tax requirements every year,” he adds.  

Preece highlights that, despite the significant role a budget plays in ensuring the long-term sustainability of a business, many SMEs fail to develop and stick to these plans.

“The best place to start is to review your finances from the last year and figure out your overhead. This amount isn’t likely to fluctuate very much and it is a great foundation number to use moving forward. With your revenue, gross profit targets and projections in mind, you should have an idea of whether your expenses from the previous year may have outweighed expected returns, and where to cut back this year.”

“It is often surprising to SMEs just how much they can learn about their business by taking some time to examine their finances. For example, one of our clients, a florist, had been buying a significant amount of greenery but wasn’t charging for it in bouquets because it was just a ‘filler’. However, once he began using QuickBooks, he noticed that he was spending way too much on greenery and was also not charging enough for it. This insight has saved him thousands,” he says.

If SME’s are struggling to develop a workable budget, Preece suggests getting in touch with a professional accountant or financial expert for help.

“You can also use online budgeting tools to make it easier and more convenient to refer back to your budget later in the year.”

“Ultimately, if you are able to prioritise your expenses, it will be easier to set and reach goals regardless of your company’s financial limitations - because you will be spending within your means.”

“Remember, keep a record of every purchase, no matter how much - or how little - it costs. Not only will this help you keep on top of your businesses expenses, and out of debt, it also comes in useful when tax season rolls back around,” he adds.

Preece notes that the 2018 Tax Season is likely to have finance professionals and small business owners feeling the pressure to get their numbers in order.

He says, “This time of year can be particularly stressful, but it doesn’t need to be if you have the necessary financial tools in place to anticipate and plan for your businesses tax requirements well in advance. You really want to have your books up-to-date all year round and not just in preparation for tax submissions – a habit which should definitely be amended this financial year.”

Leading companies, like QuickBooks, are always working on new tools and products to help businesses be more efficient in their processes. One such offering - which makes budgeting more accessible, enables easy tracking of expenses and takes the stress out of tax returns - is QuickBooks Online.

“With this innovation in the marketplace, SMEs have a real opportunity to get ahead of the game when it comes to taking control of their finances.”

“No matter your circumstances, whether you are a small business battling to come to terms with tax documentation or someone who is just generally interested in starting to save for the future, you can bring an end to bad financial habits,” Preece concludes.

*Gordon Institute of Business Science Annual Savings Index