Top financial management tips for women-owned businesses

Gugu Mjadu, executive general manager at Business Partners Limited

Considering their unique challenges, there are a few specific ways that women business owners can enhance their financial management skills and build viable and successful enterprises that are designed to last for the long haul. These are four practical ways to do that:

1. Explore your funding options

There are many ways to fund a small business, among them being taking out a business loan, crowdfunding and government grants. Research on how women entrepreneurs choose to fund their small businesses suggests however, that despite having several funding options, most women opt to self-fund or bootstrap their ventures. This is partly owing to the fact that there is still a significant gender gap that exists in terms of access to formal sources of finance. Limited awareness on what is available in the market has also contributed to this disparity. To this point, a survey conducted by the Department of Trade Industry, the International Finance Corporation and FinMark Trust found that only seven in 170 women respondents were familiar with the funding options available to SME founders by various financiers in South Africa.

To close the gap, women need to explore their options widely and to carefully weigh up the pros and cons of each of those options, in order to gain a more holistic view on what would work best for their unique circumstances.

Booking a short session with a business consultant and not being afraid to ask the tough questions is a great place to start. Other proactive ways to become better informed are to attend free workshops and seminars focused on supporting women entrepreneurs, joining women-focused business networks offline and on social media, engaging in mentorship programmes and even reaching out to an industry peer who can share their story as well as the lessons they’ve learnt along the way.

2. Develop clear boundaries

Apart from their role as breadwinners, many women entrepreneurs also fulfil caregiving roles within their households and communities. As mothers, daughters, spouses and community workers, their biggest challenge is separating their business affairs from their personal ones.

This is particularly important in scenarios in which women start businesses out of necessity, which, according to the Mastercard Index of Women Entrepreneurs (MIWE) for South Africa, happens in as much as 91.2% of cases since the pandemic.

In the long term however, not separating your personal financial wellbeing from the state of your small business can become a drain on your revenue and lead to financial difficulty on both fronts.

Practical steps to take include opening separate bank accounts for personal and business use, utilising tools like Xero or QuickBooks to keep detailed records of business-related expenses and income and creating separate budgets for business and personal finances. It may also be useful to apply for a business credit card that will be used exclusively for business-related expenses, implementing a clear and transparent reimbursement policy and conducting regular financial reviews.

3. Invest in time off

Like their male counterparts, women entrepreneurs, especially in the first few years of doing business, are prone to burnout due to working long hours and having to keep up with the demands of their personal lives as well as the needs of their business. Apart from the emotional and mental toll this can take on their wellbeing, burnout can also lead to financial losses when a key individual is unable to work.

To safeguard against this, it’s wise to include the cost of regular breaks in your financial plan. Investing in regular downtime will allow you to recharge, stay focused, and maintain a healthier work-life harmony. By budgeting for activities that promote relaxation and self-care, such as retreats, professional development, or even just periodic time off, you can better manage stress and sustain your business's growth without compromising your own health and wellbeing.

4. Put financial literacy first

The SME Confidence Index – a quarterly study conducted by Business Partners Limited has found that cashflow management is one of the leading challenges facing local small businesses. Managing cashflow effectively involves taking many different moving parts into consideration. It requires, for example, the careful monitoring of the outflow and inflow of revenue, budgeting, financial forecasting and diligent saving.

Research by the Global Financial Literacy Excellence Center, suggests that women may be on the back foot in this regard, with only 30% of women demonstrating average levels of financial literary, compared to 35% of men. As a matter of priority therefore, the best thing women entrepreneurs can do for themselves, and their businesses is to invest in improving their financial literacy.

Simple but effective ways to do this are to take online courses on basic financial practices and principles, attend workshops and seminars, seek monitorship from more experienced business owners and book regular sessions with a financial adviser who can offer practical advice and guidance.