Article credit: Sage 

South African CFOs and senior finance decision-makers recognise that the world is changing, with a perfect storm of technological and social forces changing the rules of business in this digital era.

COVID-19 adds more complexity to the mix, putting companies under financial pressure and simultaneously serving as an accelerator for digital transformation.

So how do you adapt to this new world? It starts by looking at the three broader trends driving the corporate finance function:

1. The digitalisation of the finance industry
2. More demand for strategic decision-making
3. A younger workforce with new priorities

Digitising finance

During these times, CFOs understand that technology has an important role to play in elevating efficiency. In PwC’s Pulse Research, nearly two-thirds of CFOs (Africa: 63%; Global: 62%) expect their technology-related spend in the next 12 months to be focused on growth, cost reduction and compliance.

As a CFO or senior finance decision-maker, you’re always looking for ways to improve your department’s efficiency so that you can serve the business better; data-driven insights and automation are valuable ways to achieve this. Automation is a reliable way of obtaining predictive financial analytics, which can enhance the productivity of your financial/accounting team members.

The benefits of automation include:

• The minimisation of manual intervention in financial operations and other accounting-related tasks, such as ledger entry and reconciliations
• Auto-population, using data from ERP and other systems
• Reducing the potential for human error
• Faster turnaround times
• The improvement in the use of staff time, thanks to a reduction in manual processes

With automation, it is now possible to aggregate a vast amount of data to unlock insights.  With data-driven insights, CFOs and senior finance professionals are better equipped to be a strategic advisor for their business, focusing on generating value for their organisations. It’s also a good idea to identify which metrics you could track in real-time, as this improves the data quality and gives greater visibility into the business.

Building a culture of automation can increase your productivity thanks to fewer manual processes, fewer errors and faster processing times. Automation encourages quicker enterprise-wide decision-making while improving regulatory compliance and ensuring accurate financial statements. 

More demand for strategic decision-making

Finance decision-makers are seeing their role evolving from number cruncher to business strategist. As a finance leader, you now have a new mandate – to move beyond the traditional role where you measure past performance to leading your business as a gatekeeper of data and analytics.

The insights this provides will help create a vision for the future of the business, which you can then start to plan and forecast for. The CEO may expect you to guide the business through an uncertain future, to provide strategic direction on digital spending, managing risk, imposing governance and responding to regulatory change.

It is your opportunity to take the lead in digital transformation, redefining the finance function to play a more significant role in data governance, data flow, cybersecurity and other business priorities.

A younger workforce with new priorities

According to Stats SA, the youth (aged 18–34) constitute almost a third of the population (18 million) in South Africa. With millennials taking up more senior roles in enterprises and more members of Generation Z moving into the workforce, new technology priorities are starting to emerge.

There is a divide between senior accountants and new breed accountants who use technology to automate basic number crunching and admin tasks. 
Finance is becoming increasingly technical and strategic. To strengthen your position as a strategic business leader, take a look at a few ways to make sure your organisation manages and analyses data thoroughly, optimising information flow to ensure KPIs are being hit. You could do this by harnessing the value of a young tech-savvy workforce, that will naturally accept what you’re trying to do.

Your team may well start to take on responsibilities around IT and regulations, and learn to be masters of actionable business intelligence. Harness this wave of millennial creativity and embrace innovation across the business. Still, it’s sensible to have seasoned finance professionals on the team whose experience will be invaluable, especially in a function which carries so much influence.

 The future of finance

To lead finance in a digital world, creating a diverse team with a mix of backgrounds and experience is essential. Alongside newer technological and analytical skillsets, financial fundamentals, and corporate stewardship are still relevant, and experienced people are well-equipped to take a long-term view when it comes to the business.

Article credit: Sage 

COVID-19 is having a devastating impact on the economy, forcing thousands of businesses to close and leaving millions of people out of work. But even before the coronavirus first arrived in South Africa, the country’s economy was in a recession – with high unemployment, low growth, rising delinquencies (on a corporate and consumer level), and the falling state of government debt.

“We went into this crisis already on our knees,” says entrepreneur and venture capitalist Vusi Thembekwayo. “We were not ready for a fight. We were on our last breath and now we’ve had the wind taken out us.”

The SME sector employs 47% of South Africa’s workforce. How can these vital businesses sustain themselves through the pandemic, and what resources are available for them to do so? Here are Vusi’s five practical tips for small businesses and entrepreneurs to help them survive COVID-19 and even thrive in what comes next.

1. Forget about the old rules

COVID-19 has had a devastating impact on the global markets, with capital drying up and it now being impossible to predict what the stock market will do from one day to the next. And even though Vusi has been in business for over fifteen years, he admits that he’s had to change his thinking in a way that he’s never had to before, and that this is new territory for all of us.

“We’re living in a different time to anything we’ve experienced in the past, and I think there’s almost a lack of the appreciation of the moment we’re in,” Vusi says. “The presumption that the previous methodology of how we did things needs to apply now is precisely what needs a rethink. So, if your business structure was built for a particular economy with a series of assumptions, that economy is no longer the case and those assumptions no longer hold. The only thing we can be sure of is that this is the new normal.”

2. Be essential to your customers

When deciding how best to adapt your business during COVID-19, it helps to think about how crucial your offering is. For example, it was interesting to note that the companies that could continue operating during the initial phases of the lockdown were those that provided essential services. And even though everyone would like to believe that the work they do is essential, this clearly isn’t the case (at least as far as the government is concerned). That’s why Vusi recommends that SMEs reconsider whether they are critical to their clients or if they’re just, to put it bluntly, optional ‘frills’.

“The way we advise businesses that we’re either invested in or that we put through our accelerator programs is to ask where they are on their client’s income statement,” Vusi explains. “If you’re in the ‘cost of goods sold’, then you’re critical because without you they have no goods to sell. But if you’re in the SGA [sales, general, and admin expenses] portion of the income statement, then you’re not critical because that’s what they’ll cut first. So, the opportunity for the pivot is to ask yourself: are you an essential service to your customer? If the answer is no, then you need to start rethinking your business model.”

3. Keep your best relationships

According to entrepreneur and speaker Simon Sinek, a small business owner is someone who owns a small business while an entrepreneur is someone who solves problems. Indeed, with COVID-19 putting balance sheets under strain, now is also a good time to get creative with solutions. It also means being flexible before you cut the relationship off.

“When we’ve had creditors call us, I’ve had to teach them a little bit about the value of time,” Vusi says. “If you’re not selling a simple product or service, you’re talking about a complex sales cycle of six to twelve months. Ask yourself: are you willing to forgo a relationship that you took a year to create because you’re going through a short-term crisis?”

4. Do the hard work

As we move beyond the short-term uncertainty of COVID-19, SMEs can start thinking about strengthening their operations for the long-term. This means moving beyond the immediate money concerns.

“I started this firm with a great tutelage and support of Dr Richard Maponya, who was our chairman until he passed away this year,” Vusi says. “One of the key bits of insight from him was that money is usually only 20% of the problem; the other 80% comes from issues like technology, infrastructure, and so on. That’s why we began to build a support system to help the businesses we’re invested in. And almost every single one of the businesses that has either graduated from our accelerator programs or is still in our investment portfolio has said that the things we made them do – the things that they hated doing – is what’s kept them alive.”

5. Build systems for the future

An example of the previous point concerns a transport and logistics business that Vusi’s company got involved with a year and a half ago. It’s was run by a man in his late 60s, who co-managed it with his three sons. But even though they were generating over R60m a year, they had no pricing system at all. The owner would do all the costing manually, one client at a time.

“It took us twelve months to convince him to create what we call ‘the second brain’ in the business so that it could do the accounting, independent of him,” Vusi says. “But when I was on the phone with him recently he expressed how incredible it’s been to be able to click a button on the system and have everything done.”

Conclusion

Ultimately, the only way to be ready for the next crisis (and there will be another one, pandemic or otherwise) is to make sure this one makes you stronger.

“This moment is calling on all of us to look at ourselves – the way we think, the way we act, the way we buy, the way we add value – and think about how we bring that to the world,” Vusi says. “The question is: who will you be after this moment? You should be a better version of yourself.”

Article credit: Sage 

“I’ll never forget the day I lost my first client to COVID-19. She couldn’t afford my services anymore and when I did her final report that month, I understood why. Her revenue had dropped 62% and her margins were so low that she could not pay salaries that month.”

“The effects of COVID-19 were hitting businesses hard. And now it was hitting us, too.”

TJ Ledwaba, the founder of accounting firm Bright Path Business Consultants, says his initial reaction to losing business was disappointment and concern for the future. But a few hours later, the phone rang. It was a new client, wanting to sign up for the same services the business just lost.

“That’s when I came to terms with the situation. COVID-19 is going to be around for a long time. I can either cry about my losses, or I can remind myself about why I started this business in the first place: to help SMEs to navigate their growth journey. Our clients need us now more than ever. With our new client, we had an opportunity to deliver our best service.”

COVID confusion

Bright Path’s customers were confused by the many COVID-19 funding schemes and business relief options.

“They didn’t know which option was right for them. Everything was happening so quickly with some funds already drying up, new ones becoming available – often with short application windows,” says Ledwaba.

“We did a lot of consulting work during this time, advising clients on the right option for them, helping with compliance and applications, and getting their books in order. Some of our clients didn’t think they qualified for relief or didn’t have faith in the system, so it took some convincing to get them to apply. Our mission was to future-proof our clients’ businesses because their success is our success.”

In clearly communicating changes in legislation, tax considerations, and funding options, Bright Path added massive value.

“Our clients were receptive to our advice, on everything from HR and payroll matters, to the best business management solutions and applications. If we identified a synergy between two clients, we’d connect them, so they could explore collaboration opportunities. Nobody knew what to do and I think having us as a sounding board added immense value to our clients in a difficult time.”

“Ironically, this has been the best season for our business, and I believe it’s because we stayed true to our values and our level of service. It was clear that the only way to stay relevant in this time was to build trust and add value.”

Advice on staying relevant in challenging times

So, what advice does Ledwaba gives his clients?

• Be open to change: “The world has changed, people are changing. Allow your business model to change, too. Do you really need an office? Or can you maintain – or improve – your service levels by making everything and everyone easily accessible? We’ve never seen a need for an office because Sage 200 Evolution empowers us to work from anywhere, on any device.”
• Review your pricing and services: “Before COVID-19, we’d charge separately for services like business registration, tax clearance, and B-BBEE certification. Now, we’ve bundled those services into a more affordable package that will helps SMEs to hit the ground running. What products or services can you combine to create more value, for less, for your customers?
• Remember this cash flow secret: “Yes, we lost business, but we also attracted new business because clients are willing to pay for value – often upfront and in full. Focus on helping your customers with their biggest challenges and the cash flow will sort itself out.”
• Interrogate your systems and processes: “Whenever we consult with clients, we ask: ‘Is this your best, or is there a new and better way of doing things?’ Then we ask deeper questions, like: ‘How do you realise your vision? How can you grow your revenue? How do you build and engage a team?’ We often find these answers in the data.”
• Invest in your brand: “If business is slow, use the time to market yourself. We hired a designer to refresh our brand. We also engaged with the media and our partners to position ourselves as champions of small business.”
• Help each other out: “COVID-19 impacted all businesses in different ways, but we can support each other through this. Learn from others in the industry, attend webinars, listen to your people and customers. The lockdown made us stronger as a business and we can share our learning with clients, especially on topics like remote working and using the right tools to enhance business efficiency.”

In any season, there will always be challenges and opportunities, says Ledwaba, but it’s in how you approach the challenges and the smart decisions you make about the opportunities that will keep you relevant.

“Remember, tough times don’t last, but tough people do. Stay true to yourself and stay authentic. If you’re a leader, be present and visible to your teams and customers. Connect often, show empathy, and help them to build resilience,” Ledwaba concludes.

Article credit: Sage 

Supply chains are complex business networks with the inherent risk of unexpected disruptions.  In fact, most organisations identify supply chain risk as their biggest threat.

Yet most companies lack adequate plans to mitigate supply chain disruptions. COVID-19 has revealed these gaps in the global supply chain.

Since China is South Africa’s biggest trading partner, the strain is felt by local businesses that have built their markets on the global trade network. Some are trying to cope with fewer people, while others have seen a dramatic decrease in productivity as customer spending changed drastically.

Accelerated trade growth in recent years means that today’s global supply chains are extremely complex, with manufacturers and distributors vulnerable to just about any disruption.

The impact of China’s prolonged production shutdown between January and March has certainly affected local businesses and manufacturers as they try to deal with the chain reaction of events. The manufacturing sector contributes 14% to SA’s GDP, but during the first quarter of 2020, the seasonally adjusted Absa Purchasing Managers’ Index (PMI) experienced its weakest quarterly performance since 2009.

How COVID-19 affects supply chains:

• Procurement of raw materials and finished products,
• Labour, with more people in quarantine,
• Sourcing, with travel restrictions making new business arrangements challenging, and
• Logistics, with disruption affecting capacity and availability at established hubs and supply networks.

So, what should you do in the short and medium-term in terms of contingency planning and what measures should you put in place to ensure you are as prepared as possible in the long run?

Here are immediate and long-term business continuity steps that you should take to future-proofing the supply chain.

8. Put your people first. Your people are your most critical resource, and they’re also having a hard time. Which work arrangements are useful in keeping them engaged and productive?
9. Monitor your ecosystem. Implement a system to get full visibility into your supply chain, especially in countries affected by the Coronavirus.
10. Develop an emergency plan. What if your factory has a confirmed case of Coronavirus? Establish communication and coordination processes, designate responsibility for decision – making and communication with customers and suppliers.
11. Keep your inventory close. Move stock from hard-hit areas and distribution hubs; find local suppliers.
12. Know your and your customers’ legal rights. Get legal advice about your responsibilities if you can’t get supplies to customers.
13. Review your customer contracts. If you cannot fulfil your commitments, a clear understanding of your terms will allow you to plan and prioritise your response.
14. Build a buffer. How can your supply chain be diversified to balance supply and demand?
15. Diversify your supply chain and revisit your risk management approach
16. Work with stakeholders and your most critical suppliers to prepare for potential material and manufacturing capacity shortages.
17. Review business forecasts and run scenarios to determine where you are at risk now (and maybe in the future).

Steps to consider in the future:

Technology-enabled supply chain visibility

COVID-19 highlighted the importance of complete visibility in the supply chain. You should follow alternative plans if you know how the change impacts the ecosystem such as creating routes to other suppliers.

Enterprise Resource Planning (ERP) applications integrate all business areas and connect customers and suppliers. A connected environment helps you identify supply chain exposure, manage or mitigate risks, and reduce disruption effects.

Modern business management solutions leverage artificial intelligence (AI) and machine learning-powered platforms to illuminate supply networks and reveal a level of detail that was previously thought impossible.

Diversify risk

Nearly 75% of companies reported supply chain disruption due to the Coronavirus – and 44% didn’t have a plan to deal with it. Diversity is your best defence against disruption.

Don’t rely on one or two suppliers; find multiple suppliers for all your products, both locally and in neighbouring countries. If you’re heavily dependent on Chinese imports, for example, consider a “China + 1” strategy, which keeps China as your main supplier but also sources from local suppliers.

Having facilities with local suppliers spreads the risk and could cut transportation costs. What’s more, you’ll help stimulate the economy, reduce economic cash outflows, and support job creation.

Prepare for recovery

Eventually, things get better. Businesses equipped for the inevitable upswing will move faster and secure a larger share of the pent-up demand. They’ll also strengthen relationships with their existing customers and attract new ones.