Now more than ever, a small business accountant near Cape Town is vitally important. Economies are sensitive, and are often disrupted by myriad factors, including governmental activity, a specific country’s wage gaps, tax rates, laws and policies, the list goes on. On a larger scale, the world economy is also sensitive, but severe disruptions can lead to the dreaded “R” word; a recession.
A small business accountant near Cape Town may be able to help your business out during such a time of financial downturn. Keep reading to learn more about SureBooks and how our trained professionals can help you keep your small business afloat.
Small Business Accountant Near Cape Town
A recession is characterised by a decrease in economic activity for two or more consecutive financial quarters. There are also a number of tell-tale signs associated with the onset of a recession. These typically include:
- Unemployment rates spiking
- Mass retrenchments across specific sectors
- A rise in inflation
- Consumers spending less money
- Salaries decreasing or being temporarily reduced by a percentage
- A decline in trade and manufacturing
- Geopolitical instability
Typically, there are some industries that suffer more than others. These are usually industries that provide goods and services that are deemed a luxury or unnecessary when money is tight. According to economists, the industries that are most likely to suffer during a 2023 recession include:
- The hotel and leisure industries
- The retail industry
- The restaurant industry
- The real estate industry
- The travel and tourism industries
- The manufacturing industry
Unfortunately, large multinationals tend to survive recessions with minimal impact while small businesses bear the brunt of the economic damage. Multinationals have the ability to restructure their businesses and more space to cut back on unnecessary spending and operational costs, whereas small businesses have a more limited capacity to instate the same, or even similar, business-saving measures.
At SureBooks, we offer a complimentary consultation. If you are looking for a small business accountant near Cape Town, reach out to us today!
How A Recession Impacts Small Businesses
While we often think of a small business as one that operates on a micro scale, such as an Etsy shop vendor that makes home decor wares from their bedroom or a two-person dessert catering company, the true scale of a small business’ definition may shock you. Commonly, small businesses are defined as a business or company that is managed by one person and/or has fewer than 100 employees.
Small businesses are in danger of being shut down or incapacitated by a recession due to their lack of scale. There is a lack of financial cushion, as well as market power and leverage within the small business’ chosen industry, and this is not thrilling to lenders.
Lenders are less likely to make a loan to a business that does not have large cash reserves or capital assets. These serve as collateral during periods of financial difficulty and allows a lender to feel more assurance that they will be able to recoup their loan. Small businesses then find themselves in a difficult position during a time of economic downturn or financial difficulty, as they have limited options for raising funds.
This is why it is common for small business owners to sell their own personal assets such as homes or offices to access more capital during a recession. This has the implication of not only putting their small business at risk, but the owner’s own comfort and personal ability to weather the storm of a recession at risk.
Large companies also have access to a path that small businesses do not; they can lobby the government for financial assistance during times of economic hardship. One of the only global exceptions to this was the Covid-19 pandemic, where many governments assisted businesses of all scales and sizes in surviving bankruptcy.
Let’s look at some of the major impacts of a recession on a small business:
Reduced Cash Flow: Small businesses often don’t have access to big sums of money, so their working capital cycle is fairly tight. Delays in receivables that result in protracted cash cycles could put the entire organization at risk. Additionally, companies with high inventories will experience severe cash flow constraints as a result of either being unable to sell the product quickly enough to cover fixed expenses and overhead or being compelled to give steep discounts.
Marketing Difficulties: Spending on marketing is being reduced as a result of weak demand and financial restrictions brought on by the lack of financing. Most businesses may experience a decrease in marketing efforts, which may lead to higher advertising rates as a way for the advertising agency to make up the lost revenue. Smaller organisations might find it more challenging to resume their typical marketing requirements as a result.
Reduce In Demand: Household real income typically decreases during recessions as a result of rising inflation or potential job losses. By reducing non-essential spending, these factors change consumers’ consumption patterns.
For instance, in the case of B2B-centric enterprises, small businesses depending on a limited number of significant customers for their sales are likely to encounter difficulties in the event that one of the clients defaults or the market has a sharp decline in demand. A loss of revenue can be harmful to small business owners in both scenarios since it would result in a sharp decline in their income.
Loss Of Staff: Cost-cutting techniques are frequently implemented in response to a credit constraint and poor demand. Unfortunately, firing employees might be the most straightforward way to accomplish this.
As a result, the remaining staff members might be overworked, which would limit the company’s ability to make extra sales. A round of layoffs, whether it occurs before or after, and regardless of which side of the dismissed or still employed a particular employee falls on, at the least, causes fear, concern, and angst for a staff body.
Credit Crunch: Reduced cash flows are also a result of credit markets drying up and lending to small businesses becoming riskier. Default probabilities increase during recessions due to the increased level of uncertainty, which leads to an increase in interest rates and tougher loan terms.
Private corporations cannot raise cash through the issuing of shares, corporate bonds, and commercial papers in the capital markets, in contrast to public limited companies, which may increase the risk of default.
While economic recessions tend to negatively impact small businesses, do not lose hope yet. Finding a small business accountant near Cape Town, such as SureBooks, can help your business survive with expert advice and top-quality services. Reach out today!
How A Small Business Accountant Near Cape Town Can Help Your Business Survive
Consulting with an accountant from a reputable firm is vital to receiving valuable advice and services to help your business weather the storm of an economic downturn. It is recommended to work with an accounting firm that specialises in supporting small businesses, such as SureBooks.
Here are some ways in which a small business accountant near Cape Town can help your business:
Debt Restructuring: Business owners may be able to investigate their funding requirements before recessions by carefully anticipating their cash flow condition.
A small business could use credit lines in advance to make sure they have enough cash on hand to survive. To alleviate cash shortages during the anticipated slowdown, accountants could also recommend debt restructuring before a slump.
Forecasting And Cash Flow Analysis: Accountants may examine a company’s cash inflows and outflows while also offering insightful advice on how to handle it successfully. They can offer forecasts for both short-term and long-term cash flows.
Accountants may also offer solutions to various business problems. To make sure that the business owners always have a strategy in place, they frequently offer an analysis of the best case, worst case, and most feasible situation. Other potential techniques that might not be immediately obvious to an owner/operator or management team who don’t spend as much time in the financial source data include raising money through the sale of idle assets to support the company’s cash balances.
Exploring Ways To Increase Profits: An accountant for small businesses can conduct in-depth analyses of the company’s operations to identify opportunities to increase profitability.
They frequently advise examining each individual business section to make sure that only those making positive contributions are active. Reducing unprofitable sales may result in a decline in market share and customer losses, but it may also boost the bottom line.
An Analysis Of Account Receivables: Because the likelihood of debtor default rises during economic downturns, credit risk tends to rise.
Accountants are skilled at carefully examining a company’s receivables and can promptly advise management on possible remedial steps to take against customers who can’t pay on time. Small business accountants can advise owners on the best course of action, including whether to accept cash only transactions, offer discounts for prompt payment, or request upfront payments.
How To Choose A Reputable Small Businesses Accountant Near Cape Town
Many small businesses do not have a dedicated, on-staff small business accountant. While it may seem like an asset to have an on-staff accountant, many small businesses are still growing and do not yet have the resources to factor in the monthly salary and benefits to ensure an on-staff accountant is paid fairly.
When you are considering your options for a small business accountant near Cape Town, consider the following:
- The initial and ongoing costs of hiring an accountant or accounting firm
- Their hours of availability and office hours
- Their previous experience working with businesses like yours
- How the firm communicates
- If you are audited, are they able to represent you before the South African Revenue Service (SARS)?
- Whether you will be working with the same small business accountant
While the options for a small business accountant near Cape Town are boundless, there are a number of red flags to look out for that will protect your business from incompetent or unqualified accountants. These include:
- An accountant who advises you not to maintain receipts
- An accountant who does not provide an estimate of how much their services will cost until your tax refund has been calculated
- An accountant that does not communicate effectively or stops communicating entirely
More About SureBooks
SureBooks is an accounting, payroll and tax compliance service that offers great advice to help your small business grow.
At SureBooks, we believe in every small business that approaches us for help. If you do not have the time or the experience to take care of your own books, we are here to help. Our services will turn your small business into an efficient machine that unlocks valuable cash-flow.
Our experts have started businesses and managed them successfully. We offer top-quality and considered advice to help your business grow from enterprise level to beyond. We have more than 20 years of experience, both as accountants and as business owners, and have also managed blue-chip-level finances.
Reach out to us on 0764906497 or email us at email@example.com for your complimentary consultation today!