It is not often that South African banks give their services away for free. That is why I’m surprised that not more business start-ups are taking up Nedbank’s offer of ‘free banking’ for 24 months after opening a new account. Transactions that will incur no banking fees are:

• Cash deposits;
• Debit orders;
• Internet banking;
• Cheques written from own cheque book.

Any other transactions, including credit card sales, will be charged. There is a catch, though. To qualify for the free transactions you need to take out a loan to the value of at least R100 000. This could be vehicle finance, a term loan, a home loan, a commercial property bond or plant and machinery finance. Although Nedbank is adamant that the interest rate associated with the loan will be competitive, it’s always a good idea to compare the rate with quotes from the other big lenders. The offer applies only to businesses that have not been in operation for more than two years and are projecting an annual turnover of less than R7.5 million.

Another free service is the Small Business seminars held twice a year. I attended the Cape Town session this week and can vouch that these seminars are not only informative, but also entertaining, inspiring and fun.

Nedbank has also partnered with a company called SwiftReg to enable you to walk into the branch and have your business registered at very competitive fees. They currently charge R360 to register a shelf or a new close corporation and R960 to register a shelf company.

Don’t make the mistake of thinking that this is all pure altruism on Nedbank’s side, though. The first two years are often the time when small businesses are particularly fragile and most likely to fail. Nedbank is thinking long-term. By aiding business owners through this perilous period, the bank is counting on a larger number of mature fee-paying businesses ending up on their client book.

“Turnover is vanity, profit is sanity, cash flow is reality.” From the many emphatic nods it is clear that the attendees of this year’s Nedbank Small Business seminar know what business coach Thayn Niemand is talking about. And Niemand has several suggestions that could help small businesses shape up their cash situations.

Use long-term finance when buying long-term assets. The interest rate on long-term, asset-backed finance is usually much lower than the rate associated with short-term finance, such as an overdraft facility. Yes, you’re right, if you pay cash for your long-term assets, you won’t have to pay any interest at all. But if you take out a long-term loan and the assets under discussion are used to generate business income, the interest on the loan can be deducted from your taxable income. More importantly, though, financing the assets means you are freeing up your cash to employ it where your business strategy needs it most. And you are less likely to end up paying the exorbitant interest rate on an overdraft when you run into cash flow trouble.

Don’t pay all staff bonuses in one month.“Your biggest overheads walk on two legs”, I’ve often heard business owners say. And Christmas time can rock your cash flow boat particularly hard. Niemand suggests mimicking the old government system of paying annual bonuses in the month of an employee’s birthday to improve your December cash flow substantially.

Move the dates of your debit orders. Do you find that most of your debtors only pay you after the 1st of the month? Would it then not help to move your expense debit orders to the 7th of the month – when you know you would have received most of your income due?

Get your money in quickly and let it go slowly. While you want to remain hot on the heels of your debtors, if your creditors grant you 60 days to repay your debt, use that grace period, especially while you’re earning interest on any positive balance in your bank account.

Keep your stock levels at the optimum level. When your wholesaler offers a large discount on one of your products, it may be tempting to buy as many units as you can possibly lay your hands on. But this large purchase may make it difficult to settle some of your other bills at the end of the month. It’s no use having a warehouse full of bargains if you eventually can’t pay the rent on your building.

Sub-let any excess space. While we’re on the topic of buildings, do you have any storerooms or garages that you could sub-let and earn some extra cash (if your contract allows this)?

Review your short-term insurance policies. The responsibility of updating the insured value of your vehicles and other insured assets lies with you, not the insurer. Insuring your assets at their current second-hand retail value instead of their purchase price could save you a handsome sum every year.

With Nedbank Small Business Services listing ‘poor management of financial activities’ as number one among their surveyed seven biggest reasons for business failure, the expertise of Niemand and other financial coaches seem to be much needed in South Africa today.