How South African small businesses and traders can up their game for financial success

The better financially educated business owners are, the stronger the foundation of their business will be. Financial literacy has been proven to not only affect both saving and investment behaviour, but also debt management and borrowing practices. Financially savvy traders and SMEs are more likely to accumulate wealth, get better returns on investments, and cover emergency expenses. On the other hand, financial illiteracy is associated with more indebtedness, costly lending practices, and higher transaction costs and fees. Zunaid Miya, MD of Local fintech company Hello Pay, gives these tips to set your small business up for success:

• Stay on trend: Technology is advancing rapidly in all fields and finance is no different. For small businesses and informal traders, who often lack access to traditional financial services, this is good news. Digital banking and payment services not only simplify financial processes but include those who have previously been excluded. Simple, easy-to-use, and cost-effective payment solutions provide these businesses with access to basic financial services such as receiving and making payments, without incurring high costs or requiring complex infrastructure. This can improve their financial stability, increase their sales, and provide a more convenient payment option for customers. Additionally, digital payment solutions can also offer more transparent and efficient record-keeping, reducing the risk of financial fraud and improving overall financial management.

• Don’t exclude yourself: Some business owners prefer to only trade in cash because they might have a misconception about financial services and products. Often, people simply assume that these products are reserved for higher-income individuals and formalised businesses when that’s not the case. Such misconceptions can be harmful, leading to fewer opportunities for personal and business growth as well as increased risk. People who don’t have insurance, for example, expose themselves to both financial and physical risk. By avoiding formalised financial services, you’re excluding yourself from the opportunities they present.

• Don’t fear (all) debt: There are different kinds of debt – bad debt is often unnecessary, while good debt can improve your financial standing. When a business owner borrows money to build assets or buy stock, this debt can lead to increased income and wealth, job opportunities for their community, and an enriched economy. Lending money to buy personal consumer products such as unnecessary clothing, however, is not income-generating and often ends in a debt trap where the borrower is exploited by microlenders and loan sharks. If you do take on debt, make sure it can improve your standing.

• Think long-term: Don’t get tunnel vision when faced with business expenses. Payment devices are a great example: Small businesses often avoid these machines because there is an upfront cost, but don’t realise that offering their customers these payment solutions can boost sales and lead to lower transaction rates in the long run. Always take the bigger picture into account when making financial decisions.