In Eswatini’s tough business environment, profit on paper means nothing if there’s no cash to pay the bills. While founders often obsess over revenue numbers, smart entrepreneurs know that cash is king.
The Cashflow Trap
A common trap for growing businesses is overtrading. This happens when a company takes on more orders than its working capital can support. They might win a massive contract, but if the client pays in 90 days and the supplier needs cash upfront in 30 days, the business will run out of money and collapse.
Managing the cash conversion cycle is critical. Founders must negotiate favorable payment terms, aggressively chase outstanding invoices, and carefully manage inventory levels. A profitable business that runs out of cash is still a failed business.
Building a Buffer
Experts advise that businesses should always aim to have at least three to six months of operating expenses in reserves. This buffer provides a safety net for unexpected shocks, such as a loss of a major client or a sudden rise in supplier costs.
In Eswatini, where the small business sector often struggles with access to credit, maintaining a disciplined approach to budgeting and forecasting is the safest way to ensure long-term survival.
