Finance leaders share tactics that SMEs need to grow and thrive, with automation the key lever.
Jonathan Smit, Founder and former CEO, PayFast, shared his first-hand experience as a business owner who bootstrapped the growth of his business into a thriving enterprise which changed the online payments landscape of South Africa at the Finance Indaba.
As a non-traditional leader, Jonathan hates policies and paperwork and said in the early stages too much red tape would have been a hindrance to the growth of PayFast, but as time went on, he realised that he had to pull the trigger and get proper software and systems into place, as well as the people behind them.
He said putting in controls meant having to trust people with a crucial part of his business. “For 11 years we didn’t have proper budgeting; all the processes and controls were not quite in place. Eventually it all became too complex and I had to hire people. This meant handing over the reins and trusting them to make good team choices and continue to be frugal.”
He said hiring a CA created incredible business value and made the enterprise more efficient. He added that when you hire good people first and let them pick the team, you need to also get rid of bad people faster, because in a small enterprise, they are really toxic and pull down morale, teams and damage relationships.
An audience member asked a question about dealing with regulators as an SME, pointing out that changing rules can be destabilising for a small enterprise, which may not have the resources to meet new or changing rules. Jonathan responded by saying that it’s important to take a proactive stance with regulators and educate them in areas where there’s innovation. He said, “Regulation is always going to be there, so be as proactive as possible rather than be caught off-guard.”
Choosing the right solutions
Simon Magner, founder of Iridium Business Solutions and Xero partner, noted that the world is moving more towards outsourced finance and this is something that SMEs should take advantage of. He said that while a small business can run its own books, a lot of MDs unfortunately don’t have a good grasp of numbers, which can lead to problems down the line. He explained that with the right tools in place, SME owners can have a better overview of their finances, and those insights go a long way in informing which levers to pull to grow their business.
Simon said software and tech are amazing, but you need to know what problem you are trying to solve. He emphasised that it’s not just about following the crowd and buying a solution everyone is raving about and that before adopting any solution, SME owners need to ask themselves, what problem they are trying to solve, how they are trying to solve it and what technology they need to solve it.
He said at Xero, “We are in the people business – we just happen to be good at communicating numbers.”
Nienke Kruger, product manager financial reporting: Caseware Africa responded to an audience question about when the ideal time for SMEs to automate is. She said the right time is when an SME owner finds themselves spending more time on doing the books and reporting than on actually developing their business and implementing its mission.
She noted that at all times businesses are at different phases of their technology journey and that depending on where the business is located, access can be a challenge. Nienke said:
“We see a broad spectrum of entities. We have small firms that are leading when it comes to digital innovation, and big firms stuck in the Stone Age. Therefore each has different needs and needs to adopt software that fits their size and purpose.”
A complex ecosystem
Liberty Africa operates through entities which fall into the SME sector throughout the continent. Ravi Singh, CFO of Liberty Africa, said there are various levers for growth within this band, but the most important are IT and automation, product and pricing, sales management and customer-centricity. Other accelerators include cost management, outsourcing, project management and people. He pointed out that post-pandemic, many factors have shifted in the insurance industry and now many elements including supplier costs, strategic partnerships and project delivery have to be re-thought.
Ravi said finance leaders in SMEs should be involved in continuous process testing and suitability and be vigilant when implementing new products and constantly scan for red flags.
He said in SMEs, MDs need their finance people to be strategic players, and not bogged down in mundane tasks and continuously chasing reporting. He says this can be achieved with systems automation.
Ravi said that having a finger on the pulse of your business is crucial for SME owners. He emphasised that it’s even more important to be close to the ground when your business is distributed across various geographic regions. He stressed that having constant communication with suppliers, partners and regulators is key to not getting caught of- guard and being agile in responding to challenges.