Top financial management tips for woman-owned businesses
By Gugu Mjadu
Women make up just under 60% of the continent’s total ratio of self-employment and contribute around 13% towards Africa’s total gross domestic product, according to The World Economic Forum.
Motivated by various reasons, woman entrepreneurs play a central role in growing the economy and the sustainability and sustenance of households, as well as the well-being of communities.
With the call for gender equality across all spheres of society intensifying, there has never been a better time for women to pursue their entrepreneurial ambitions.
Considering their challenges, there are a few specific ways woman business owners can enhance their financial management skills and build viable and successful enterprises that are designed to last for the long haul. Four practical ways to do that:
Explore your funding options
There are many ways to fund a small business, among them taking out a business loan, crowdfunding and government grants. Research on how woman entrepreneurs choose to fund their small businesses suggests however, that despite having several funding options, most women opt to self-fund or bootstrap their ventures.
This is partly owing to the fact that there is a significant gender gap in terms of access to formal sources of finance. Limited awareness on what is available in the market has also contributed to the disparity. A survey conducted by the Department of Trade Industry, the International Finance Corporation and FinMark Trust found that only seven in 170 women respondents were familiar with the funding options available to SME founders by various financiers in South Africa.
To close the gap, women need to explore their options widely and carefully weigh up the pros and cons of each of the options, in order to gain a more holistic view on what would work best for their circumstances.
Booking a short session with a business consultant and not being afraid to ask the tough questions is a great place to start. Other proactive ways to become better informed are to attend free workshops and seminars focused on supporting woman entrepreneurs, joining women-focused business networks off-line and on social media, engaging in mentorship programmes and even reaching out to an industry peer who can share their story as well as the lessons they’ve learnt along the way.
Develop clear boundaries
Apart from their role as breadwinners, many woman entrepreneurs also fulfil caregiving roles within their households and communities. As mothers, daughters, spouses and community workers, their biggest challenge is separating their business affairs from their personal ones.
This is particularly important in scenarios in which women start businesses out of necessity, which, according to the Mastercard Index of Women Entrepreneurs (MIWE) for South Africa, happens in as much as 91.2% of cases since the pandemic.
In the long term, however, not separating your personal financial well-being from the state of your small business can become a drain on your revenue and lead to financial difficulty on both fronts.
Practical steps to take include opening separate bank accounts for personal and business use, using tools like Xero, or QuickBooks, to keep detailed records of business-related expenses and income and creating separate budgets for business and personal finances.
It might also be useful to apply for a business credit card that will be used exclusively for business-related expenses, implementing a clear and transparent reimbursement policy and conducting regular financial reviews.
Invest in time off
Like their male counterparts, woman entrepreneurs, especially in the first few years of doing business, are prone to burnout due to working long hours and having to keep up with the demands of their personal lives and the needs of their business. Apart from the emotional and mental toll this can take on their well-being, burnout can also lead to financial losses when a key individual is unable to work.
To safeguard against this, it’s wise to include the cost of regular breaks in your financial plan. Investing in regular downtime will allow you to recharge, remain focused and maintain a healthier work-life harmony. By budgeting for activities that promote relaxation and self-care, such as retreats, professional development or even just periodic time off, you can better manage stress and sustain your business's growth without compromising your health and well-being.
Put financial literacy first
The SME Confidence Index,a quarterly study conducted by Business Partners Limited, has found that cash flow management is one of the leading challenges facing local small businesses. Managing cash flow effectively involves taking many moving parts into consideration. It requires, for example, the careful monitoring of the outflow and inflow of revenue, budgeting, financial forecasting and diligent saving.
Research by the Global Financial Literacy Excellence Centre, suggests that women may be on the back foot in this regard, with only 30% of women demonstrating average levels of financial literary, compared to 35% of men. As a matter of priority, therefore, the best thing woman entrepreneurs can do for themselves and their businesses is to invest in improving their financial literacy.
Simple but effective ways to do this are to take online courses on basic financial practices and principles, attend workshops and seminars, seek monitorship from more experienced business owners and book regular sessions with a financial adviser who can offer practical advice and guidance.
Gugu Mjadu is the executive general manager of Business Partners Limited
BUSINESS REPORT