'Financial preparedness goes beyond insurance. It’s about building resilience into your business and making sure you’ve planned for the risks you can’t predict.'
The National Treasury, in partnership with the Financial Sector Conduct Authority (FSCA) and the National Consumer Financial Education Committee (NCFEC) has recognised 25 to 31 August as South Africa’s Money Smart Week.
The aim of the week is to raise awareness around financial literacy and empower individuals with the knowledge and tools necessary to make informed financial decisions.
Pedri Reyneke, CEO of Multilink Financial Services, says this year’s Money Smart Week comes at a time when most small and medium enterprises (SMEs) are experiencing financial difficulties.
Financial preparedness
He expressed concern that while SMEs make up a substantial share of formal businesses, provide employment to many, and play a vital role in the economy, most are still ill-prepared for financial setbacks. This can include break-ins, equipment failure, or losing a key client.
“Financial preparedness goes beyond insurance. It’s about building resilience into your business and making sure you’ve planned for the risks you can’t predict.
“That could mean having an emergency fund, cross-training staff, or having the right insurance cover in place. The important thing is knowing where your vulnerabilities are and having a plan.”
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Five common pitfalls SMEs should avoid
Drawing from years of experience advising businesses across industries, Reyneke highlights five frequent mistakes that cost SMEs thousands — and how to avoid them:
- Believing “It won’t happen to me”
“Many owners delay taking precautions because they have gone years without a major problem. But financial shocks do not come with a warning.”
He adds that it is highly possible for one to lose a delivery truck days before a big order, or facing a supplier default, can cripple operations overnight.
“When nothing has gone wrong for years, it is easy to believe you are immune — until the day it happens. And then the recovery costs far outweigh the preparation.”
- Overlooking key personnel
Reyneke highlights that every business has at least one “indispensable” person, whether it’s the founder, a top sales lead, or the only technician who knows the machinery inside out.
Losing that person to illness, disability, or death can derail the entire operation.
“Too often, SMEs only realise the danger when it is too late. Losing a key person without a contingency plan is like losing your captain and hoping the rest of the team can coach themselves.”
Solutions can include key person insurance, as well as succession planning, cross-training, and having outside consultants on call.
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- Neglecting regular reviews
He adds that one of the problems that SMEs face is treating financial planning as a once-off exercise.
“A contract win that doubles your assets, or a quiet season that shrinks operations, should trigger an immediate review of your financial protections.
“From cash flow strategies to insurance cover, policies should evolve with your business. It’s the silent killer for SMEs – assuming what worked two years ago still works today.”
- Relying solely on personal resources
Reyneke adds that many entrepreneurs rely on their own savings or personal insurance policies to protect their businesses.
“But personal cover is rarely enough. A personal life policy will not cover staff salaries, office rent, or supplier payments if the owner cannot work.
“Likewise, dipping into personal savings during a crisis can put household finances at risk. Tailored business strategies – including insurance, credit facilities, and reinvestment in critical assets – create a healthier safety net.”
- Chasing the cheapest premium or quick fix
He says in tough times, it is tempting to cut costs wherever possible. But choosing the cheapest insurance policy, ignoring exclusions, or overlooking gaps in cover often backfires during a claim.
The same applies to cash flow or credit solutions. “Sometimes you do not pay less, you just pay later – and much more. A skilled advisor can help balance affordability with comprehensive protection.”
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