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This month our focus is on managing your business' finances, and we meet our latest square pegs Hifzur Rehman and Mogani and Nalen Padayachee.
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Debt is good for your business, as long as it is well managed

The word “debt” often has negative connotations as something to be avoided. This is because it can be perceived to spell out financial trouble, but Siphethe Dumeko, chief financial officer of Business Partners Limited, believes that debt is more often than not, a vital, nourishing resource that allows a business to grow.

Debt has specific advantages over equity as a source of business finance. It is most often cheaper and can be more readily available as a source of finance, than equity and debt does not come with potential shareholder politics.

The problem with debt only starts when it is not properly managed. Profitability, asset growth and happy employees may all be the obvious outward signs of the success of a business, but for Dumeko, a crucial additional indicator signifying the financial health of a business is the way in which its debt is managed.

He says good debt management starts with the fundamentals of good overall financial management. It starts with implementing a sound control environment; this includes implementing the necessary processes and checks such as controls over the access to bank accounts as well as regular reconciliations and review of them. Another control measure to consider is tight credit control to ensure that your debtors pay on time and that you control their credit terms.

 
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Ten tips for managing the lifeblood of your business

Nothing is as important to the financial health of a growing small business as the constant, predictable flow of cash, because if the cash dries up, the business will die.

Byron Jeacocks, regional general manager of Business Partners Limited, says cash is to a business what oxygen is to a body – it simply cannot survive without it, even briefly.

The one plan that every entrepreneur must have to ensure survival is a cash-flow budget, and you must stick to it as if your life depended on it, says Jeacocks, who offers the following tips for making sure that enough cash keeps flowing through your business.

1. Underestimate your sales and overestimate your expenses

Unfortunately entrepreneurs, being optimistic by nature, tend to do the opposite. Great sales are predicted and expenses ignored, with the result that the cash flow budget starts off from the wrong base. If you are working on the cash-flow budget of an existing venture, base your predictions on the historical figures, and be conservative with any sales increases. Remember to take seasonality into account. With a new venture, use only the most likely, tangible sales that you will be able to make, not some abstract market-share calculation.

 
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July 2017 / Vol.8.7

IN THIS ISSUE:

Entrepreneur proves SA's manufacturing promise

Sometimes it takes a perspective from the outside to see the opportunities in a local market. When Hifzur Rehman came from India to South Africa on a three-week holiday in 2004, he was struck by the enormous number of products imported from China.

Surely, he thought, this is an opportunity for an intrepid manufacturer to start making all of this right here, cut out the middle man, and sell from here to the rest of Africa? Any number of South Africans would probably have responded to him that you simply can't compete with the cheap imports, as shown by the dwindling number of local factories.

But Rehman, who extended his three-week holiday to a six-month study tour before settling down permanently in Johannesburg, has since proven that it can be done. Today, he is the proud owner of a steel wool factory in Robertville, Johannesburg.

 
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Love of take-aways sparks amazing franchise success

A Johannesburg couple, Mogani and Nalen Padayachee, who call themselves serial entrepreneurs, have managed to achieve amazing success in the fast-food franchising industry despite holding down professional careers in unrelated industries.

Mogani Padayachee, an experienced architect, and her husband Nalen, a project in the building environment in South Africa and the rest of Africa, own no fewer than six franchises and have built up and sold many others over the years.

Mogani says that, given their professions, their original plan was always to invest in property. “But it never happened that way. For some reason we always got drawn into the food industry,” she says.

It started with their love of good food, specifically that of a small Chinese take-away store in Durban.

 
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@businesspartners.co.za

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