In this article
Picture this – an illustrative owner, not a real one.
It's the 25th in Johannesburg. Thandi runs a catering company that fed 400 guests at a corporate year-end function three weeks ago. The invoice was flawless. The client was delighted. The money hasn't arrived. Payroll for her twelve staff goes off on Friday, the SARS VAT payment is due at month-end, and she has already called accounts payable twice. Polite voice, same answer: "It's in the system."
Thandi's business is profitable. Her bank account doesn't know that yet.
Thandi's business is profitable. Her bank account doesn't know that yet.
A big economy built on thin cushions
SMEs are no side act in South Africa. According to the Absa Small Business Growth Index, SMEs make up 91% of formal businesses, contribute around 60% of employment and approximately 34% of GDP.
Yet many have little room to breathe:
- The H2 FY2025 Small Business Growth Index, which surveyed 2 134 businesses, found 41.9% of SMEs reported weak or critical cash flow. Only 38% said they could survive more than 12 months under current cost conditions without support.
- In a News24 and Lula survey of 815 SME owners (July 2025), 56% named cash flow challenges among their top three problems – ahead of limited access to finance (53%) and inflation or rising input costs (40%).
- Xero's State of South African Small Business 2025 report found that 41% of small businesses had experienced some degree of cash flow issues in the past year. To stay afloat, 43% of owners had sacrificed their own salary and 41% had used personal funds.
Read that last pair twice. When the business runs short, the owner's own pocket quietly fills the gap.
The invoice is not the money
A sale only helps once the cash lands. In the same Xero report, 46% of small businesses said they were struggling with late payments, and 28% were spending more than an average of 10 hours a week chasing them. That's more than a working day, every week, spent asking to be paid for work already done.
Chart C
When customers pay late, owners pay first
Share of small businesses · up to 200 employees
| Measure | Share |
|---|---|
| Struggling with late payments | 46% |
| Owner sacrificed own salary | 43% |
| Used personal funds to stay afloat | 41% |
| Spend more than an average of 10 hours a week chasing late payments | 28% |
Every unpaid invoice is an interest-free loan you never agreed to give.
Borrowing isn't easy either. The Growth Index found 70.5% of SMEs expect to need additional funding in the next six months, but only 29% are confident they'll get it. For most owners, the most dependable source of cash is the money customers already owe them.
Chart B
Seven in ten expect to need funding. Fewer than three in ten expect to get it.
Share of SMEs surveyed
| Measure | Share |
|---|---|
| Expect to need additional funding in next six months | 70.5% |
| Confident they will secure funding | 29% |
Three numbers that see trouble coming
You don't need a finance department – just three honest numbers on one page, checked monthly. (The rand examples below are illustrative.)
1. Debtor days: how long your money is out on loan
Debtor days = (amount customers owe you ÷ credit sales for the period) × days in the period.
Illustrative example45 days
Say customers owe you R180 000 and last month's credit sales were R120 000. That's (180 000 ÷ 120 000) × 30 = 45 days – on 30-day terms. Your clients are effectively borrowing from you for an extra two weeks. Add a list of overdue invoices by age and you know who to call first.
2. Cash runway: how far the tank will take you
Cash runway = cash in the bank ÷ average monthly net cash outflow.
Illustrative examplethree months
If you have R150 000 in the bank and, on average, R50 000 more goes out each month than comes in, your runway is three months. A shrinking runway is your early-warning light: it flickers while there's still time to trim costs, chase debtors or call your funder.
3. Gross margin: what each sale really leaves behind
Gross margin = (sales – direct costs) ÷ sales.
Illustrative example35% → 30%
Sell R200 000 worth of work with R130 000 in direct costs and your gross margin is 35%. If ingredients, fuel or parts push those costs to R140 000, it slips to 30% – R10 000 gone, without a single customer leaving. Rising costs rarely announce themselves. This number does.
Rising costs rarely announce themselves. This number does.
Rhythm beats heroics
None of this is difficult. The power is in the routine – same numbers, same day, every month – so the trend speaks before the crisis does. The data already sits in your accounting software, bank statements and invoices.
Thandi can't make her client pay faster today. But with these three numbers in front of her, next month's 25th looks very different.