How to save in any business

BREAKING EVEN: DON’T LET THE COSTS OF STAYING OPEN HINDER YOUR EFFORTS TO SAVE

Savings can ensure the long-term sustainability of a business and help profitability.

Keeping a small business afloat – which includes covering operational costs, liquidity and a margin of profit – often hinders owners from prioritising long-term business savings, says Kobus Engelbrecht, spokesperson for the 2018 Entrepreneur of the Year®.

July is “Savings Month” and Engelbrecht explains that, not only are savings helpful in ensuring the long-term sustainability of a business, it can also contribute to its future profitability.

“The value of saving cannot be understated – unlike with equipment or infrastructure where asset depreciation is a factor, the time value of money is assured.”

Engelbrecht says business owners often do not save adequately because they lack the disposable income.

However, savings need not only come from disposable income and profits should be saved in ways that yield growth.

He adds one of the simpler ways of saving is to use operational costs wisely.

“While it is important not to hold more stock than the business can sell, it is equally important to take advantage of the compounding value of buying in bulk.

“This should be based on historical averages and enough bought to earn discounts and avoid inflationary increases in buying costs.”

Engelbrecht says discounts can be placed in a business investment account where they can grow.

He adds that when compounded, savings on day-to-day operational costs make up a significant amount.

“Cutting down on any extra costs will provide additional income to put toward long-term investments.

Tips for saving:

1.

The time value of money is a lesson business owners need to remember. Avoid tying up big sums in advances on operational costs and instead, put this money away in an interestbearing account.

Prioritise growth

2.

Find tools that are geared toward long-term growth. Entrepreneurs should think wisely about how and where to maximise savings. 3. Reach out to a qualified and trusted financial adviser who can provide advice on areas within which you can cut down in order to bulk up your business savings. This is not a one-time exercise, check in to ensure you are progressing toward meeting your goals.

Formalise your savings Talk to a financial adviser