Muhammad Bham | firstname.lastname@example.org
18 February 2023 | 10:00 am CAT
Managing finances as a business owner is a year-round effort. The new year offers re-evaluation and improvement opportunities, allowing you to re-examine your fiscal management and make changes. In that case, it’s essential to do so responsibly because liquid capital and cash flow are the lifeblood of your business.
Speaking to Radio Islam International, Yusuf Bhamjee from Integrifin said that on the topic of business, Allah revealed in the Holy Qur’an in Suratul Jumu’ah, “and when the Jumu’ah prayer has been concluded, disperse within the land and seek from the bounty of Allah.” He added that those sleeping after the Jumu’ah prayer lose out on a blessed time.
The bleak economic landscape and emergence from COVID-19 brought numerous financial challenges, especially for small businesses, and this trend is likely to continue in 2023.
Bhamjee explained that global inflation is almost at a 40-year high, and with high inflation, most central banks around the world tend to raise interest rates. The rising interest rates mean that lending becomes extremely expensive, and access to capital is complex. As a result, consumers are also less likely to spend on discretionary or luxury items.
He added that South Africans are accustomed to operating in an inflationary environment. However, in Europe, this is a new phenomenon. Rising food and energy costs are severely impacting what are generally first-world economies.
However, on a micro level in South Africa, the biggest challenge is loadshedding. Many businesses are trading under highly challenging conditions, with many having limited resources to trade through this period. A recent study released this past week said that retail sales in December 2022 were down 6% in 2021, clearly revealing that consumers are spending less even though we are supposed to be emerging from COVID-19.
There are also significant supply chain challenges for businesses, and recently it was noted that a few food outlets had to close because they did not have sufficient stock to meet the demand.
For many business owners, the year ahead will be a challenge, especially from a financial standpoint.
Despite the gloomy outlook, people should foster optimism, urged Bhamjee. He further added that as Muslim businessmen, we should believe that our livelihood is predestined. As businessmen, we should never be static or reactionary; we should constantly strategise and plan. ‘We should never waste a good crisis.”
A successful entrepreneur, he said, will look for opportunity in these difficult times and trading through COVID-19 has also taught us many lessons on many levels.
Some of the more apparent opportunities, Bhamjee said, are that it provides an opportunity to raise prices, but it should be done cautiously, responsibly, deliberately, and methodically. He reminded that the temptation to price gorge and take advantage of the situation went against the tenets of Islamic business principles, and those should be avoided at all costs.
It also provides an opportunity to re-negotiate with suppliers, landlords etc., as everyone across the value chain is struggling, so therein lies the opportunity to take advantage.
He further cautioned that consumers should avoid borrowing as there was a lot of uncertainty, but if done in a wholesome Islamic manner where profit rates or percentages were correctly fixed, that would provide excellent opportunities. Bhamjee advised there was an opportunity to cut expenses to run a lean business by using resources better, switching assets, and maximising efficiencies and that despite the gloomy outlook, there were opportunities which every successful entrepreneur could take advantage of.
He said there was a quote about cash flow and liquidity: ‘Turnover is vanity, profit is sanity, but cash flow is reality”, and advised entrepreneurs always to be focused on managing their cash flow because money in the bank is the absolute barometer of a healthy business.
According to Bhamjee, there are many financial tools that small businesses could use. Data is cheap, and subscriptions to traditional accounting packages, previously the domain of accountants and consultants, and payroll software instead of using Excel spreadsheets, one could automate that at a relative fraction of the price are now available to most small businesses.
But he also added that it had become costly to keep generators running, alternative energy supplies etc., but these are some of the resources we need to direct our capital towards because loadshedding is here to stay. Innovation in trading around the challenges faced should become the norm for businesses today.
Listen to the full interview with Ml Sulaimaan Ravat on Sabahul Muslim.