As the year draws to a close, it’s important to reflect before planning to set your business up for resilience.
2024 was a turnaround year in the calendar for South Africa that saw significant changes across public and private sectors with a direct spillover effect on economic growth.
Business Financial Planning 101: Charting the Past to Forecast the Future
The South African Reserve Bank’s Monetary Policy Committee’s (MPC) decision to reduce the repo rate, the stabilisation of electricity supply, and formation of the Government of National Unity (GNU), a multi-party cabinet, has eased market anxiety.
The S&P Global South Africa PMI shows that the private sector showed sustained growth throughout Q3 2024, which was mainly driven by the wholesale and retail sectors for three consecutive months.
A notable development was the first drop in input costs in over four years, driven by the strong rand, lower fuel prices and reduced interest rates. This allowed suppliers to cut selling prices, boosting consumer spending.
The Bureau for Economic Research (BER) also previously estimated that South Africa’s GDP would increase by 2.2% in 2025.
These and other factors contributed towards favourable economic growth this year and are telltale signs of a promising 2025 to look forward to. Although economic uncertainty remains, it’s always a good idea to use historical financial data that paints a clear picture of past performance to make more informed, realistic and strategic business decisions.
To guide you along your financial planning process for the new year, use this business financial planning checklist to make sure you’ve covered all your bases going into the new year.
Your Business Financial Planning Year-End Checklist
Reflecting on the year that has been, and assessing your business’s needs is crucial for weathering financial uncertainties.
Financial planning helps small businesses allocate resources effectively, identify opportunities for cost savings, and track progress towards goals.
Below is a checklist that serves as a guide to improve cash flow management through business financial planning:
#1: Review the past year’s financial performance and budget
Assessing historical data is key to successful business financial planning.
Review your financial statements: revenue trends, profit margins, expenses and cash flow to get an informed indication of your business’s financial performance in retrospect. Cash flow forecasting is a good way to analyse historical data to predict future cash flow to avoid cash shortages and plan for future growth.
#2: Think twice about your business insurance
Before finalising your budget, check your business insurance to see if there are assets that aren’t covered.
It’s important to regularly update your short-term insurance to reflect any assets your business has acquired or disposed of over the past year. When you acquire new assets such as equipment, property, or vehicles – they may require additional coverage to ensure they’re protected. If your business has sold or retired assets, make sure to adjust your policy to remove coverage for those items so that you’re not paying for insurance on items you no longer own.
#3: Set clear financial goals
After assessing your business’s previous year’s financial performance start mapping out clear financial goals to project future cash flow.
By setting realistic revenue goals based on past performance, market trends and any new products or services, you’ll make more informed, realistic and strategic decisions. You can also determine whether you’ll want to invest profits. Using an investment platform can help with the process.
#4: Review your budget and cash flow
Effective cash flow management is essential for small businesses to ensure there is always enough cash to cover expenses, pay staff and invest in growth. A great way to do this is to create a budget. Start by estimating monthly income, list fixed and variable expenses, prioritise costs, and allocate funds for savings.
Don’t forget to factor in insurance costs or any additional capital you’d like set aside to invest. After setting a budget, continually monitor expenses and look for ways to effectively manage cash flow.
Here are some key questions to ask yourself when putting together a budget for the new year:
- What are some additional expenses or saving your business has had to adjust to this year?
- What expenses do you anticipate in the year ahead?
- Are you expecting certain lulls or peaks in cash flow and is your budget set up to manage this?
#5: Get clued up on your tax obligations for the year
Considering the potential tax liability for the year should be a priority. As a small business in South Africa you’re required to register for tax and submit regular tax returns to SARS. Keeping up to date with tax laws and regulations will help you avoid penalties and fines, plan your tax deductions and ensure your business is compliant.
#6: Prepare your business for funding
You may want to look at planning for your next chapter of growth. Start by determining how much capital you’ll need, set clear growth objectives and if you need extra cash flow to help with your expansion plans, explore alternative funding options like those offered by Lula, angel investment or government grants. The earlier you start planning and preparing, the higher your chances are of being approved for funding.
#7: Get the right tools to stay on track
Having the right tools not only significantly improves operations but can maximise efficiency, impacting the profitability of your business. Tools like Xero, QuickBooks and Sage are accounting software that help businesses manage their finances by automating tasks like bookkeeping, invoicing, payroll and tax calculations.
At Lula, we know how important it is to have access to tools and features that make your cash flow easy. That’s why we’ve built a powerful cash flow management tool – Lulaflow – into all our business accounts. Then, to help you seamlessly manage multiple businesses from one banking profile, we have Multicompany – also accessible within all Lula business accounts.
Kick-start business growth in the new year. Apply for business funding online in minutes and access up to R5 million in funding within as little as 24 hours.
