South African small and medium-sized enterprises (SMEs) are struggling with cash flow with 72% resorting to personal funds to stay afloat – and while already battling existing financial burdens, they’re also now facing a perfect storm: fuel and electricity costs have skyrocketed, the repo rate is at a record high, and the exchange rate remains volatile.
These forces combine to make effective cash flow management a matter of survival for SMEs.
“In this challenging environment, taking control of their finances is critical for these businesses to stay afloat,” says Reabetswe Motsamai, marketing and communications manager at MakwaIT Technologies.
Emphasising the importance of how SMEs need to prioritise cost-saving measures, she explains that doing so enables these businesses to not only prepare for expected expenses like rent and payroll, but also unexpected ones like sudden equipment failure or a cyberattack.
“A healthy savings buffer can also help SMEs weather disruptions caused by the potential return of load shedding, strikes, and economic volatility – all factors that can significantly disrupt cash flow,” she adds. “But most importantly, it empowers SMEs to invest in their future growth.”
With 56% of SMEs spending more than 5% of their budgets on information and communications technology (ICT) – and around 28% splurging over 10%, according to the latest South African SME Tech Index – Motsamai identifies this area as a prime opportunity for cost-cutting.
“There’s no need to eliminate ICT expenditure entirely,” she says. ‘Rather, SMEs can be smarter about how they allocate these resources. These high ICT expenses can strain already limited cash flow. Often, a substantial portion of this spending might be due to inefficient allocation or outdated technology leading to limited return on investment.”
Illustrating a possible cost-saving solution, Motsamai explains that managed IT services remove the need for businesses to invest in the latest technologies or expensive equipment.
“Instead, this is outsourced to a managed service provider (MSP) responsible for the day-to-day management of a company’s IT infrastructure,” she explains. “This includes proactive network monitoring, cybersecurity, cloud computing, data backup and recovery, as well as help desk support ensuring a comprehensive and reliable IT environment for the business. By outsourcing these tasks, in-house IT staff can dedicate their time to more strategic projects that drive business value.”
Motsamai adds that these services are subscription-based packages that can be tailored to the size, needs, and budget constraints of SMEs.
“This allows companies to plan their IT budget effectively and forecast their finances with greater accuracy,” she says. “The services can also be scaled up or down to meet changing demands. For instance, an SME can easily increase their data storage capacity as their business grows.”
Beyond directly reducing upfront costs, Motsamai points out that managed IT services can help SMEs mitigate other expenses.
“Case in point: with MSPs leveraging cloud services and virtualisation techniques, this reduces the need for physical server space and equipment which translates to savings in multiple areas including office rent, utility bills and hardware maintenance.”
She highlights that cost reduction measures can be further amplified by employing hybrid work models.
Citing Cisco’s latest Global Hybrid Work Study, she reveals that 65% of organisations globally reported that doing so unlocked savings for their businesses.
“MSPs enable SMEs to follow suit by providing secure and reliable connectivity for remote teams,” she says. “This not only ensures that they remain productive, but also enables seamless interaction between them and their on-site colleagues and customers. Proactive IT infrastructure monitoring by MSPs also helps to detect and resolve network issues before they disrupt employees – regardless of location. This preventative approach minimises the impact of system downtime and safeguards the organisation from potential losses in productivity and revenue.”
The shift to remote and hybrid work models has unfortunately exposed a cybersecurity vulnerability, with 61% of companies experiencing data breaches. This is a concern, especially for SMEs, which are often targeted due to their perceived weaker defences.
“Managed IT services can be a powerful solution,” notes Motsamai. “By offering businesses access to enterprise-grade security solutions, MSPs can prevent these costly events from occurring. This empowers SMEs to effectively protect their valuable data without the financial burden of implementing and managing these solutions themselves.”
Over and above enabling SMEs to save money, she says that managed IT services can lead to improved business outcomes. “For example, with business owners able to offload their technical burdens they can dedicate more time to strategic activities that drive growth and profitability such as product development, customer service, and marketing.”
Additionally, Motsamai shares that MSPs can leverage their expertise to optimise business efficiency.