What Absa is doing for SMEs marks a radical departure from traditional banking

The Absa Business Evolve account comes with a suite of free tools and financing options that do not drain cash flow.
A typical growth pang of small enterprises: having to turn away business because they cannot finance orders of a particular size. Image: Shutterstock

The South African economy may be on the rebound after a devastating year of pain for business, but national economic stats showing 1.1% growth in the first quarter of 2021 mask a brutal reality: tens of thousands of small businesses either shut their doors for good over the last year or are operating at a fraction of their pre-Covid capacity.

“The reality is that most small businesses were unable to weather the shock of the lockdowns introduced in March 2020,” says Ronnie Mbatsane, Absa’s managing executive in charge of relationship banking.

“We keep a very close eye on our small business clients and we can see what impact the lockdowns have had. It’s not a pretty picture. Most businesses in hospitality were completely shut down for several months last year, and many were unable to restart when restrictions were lifted.

“The construction and transport sectors were also badly hit. The retail and wholesale sectors have been relatively stable, with home improvements and hardware doing well. Liquor sales did well when restrictions lifted, but overall, small businesses were taken completely by surprise when the lockdowns were announced.”

The biggest failure among small and medium-sized enterprises (SMEs) is the management of cash, adds Mbatsane.

“You need someone to say no to you to stop you from buying that expensive car. Oftentimes, that someone is the bank.

“We do this to protect our clients because that’s what you expect from a trusted advisor. Those clients who listen to us do better over time than those who don’t.”

Absa Business Evolve solution

Absa conducted a detailed analysis of the health of its small business clients and realised that the traditional banking solutions were inadequate.

Some clients started out as micro-enterprises with a turnover of less than R200 000 a year, but have since grown into fully-fledged corporations with revenue in excess of R200 million a year. Many small businesses are on a journey and their needs change as they grow.

“SMEs are not complicated,” says Mbatsane. “They need to borrow for working capital during growth phases, or for cash flow management, and they need a bank that understands their business and the sector they are in. No two sectors are alike. We realised that from the day you open your account as a sole trader, we need to cater for the day that you become a full-blown corporate.”

One way to simplify matters for small businesses is to offer the kind of software tools that are normally outsourced to accountants: the ability to invoice, run payroll, keep a record of transactions and cash flows, and compile financial statements.

Absa recognised that the recovery of the SA economy depends on the re-emergence of a thriving SME sector, and brought to market a new digital proposition called Business Evolve that ‘evolves’ with the customer.

The offer includes basic banking elements to run your business day-to-day, including a transactional account, a business debit card, a savings account and a cash flow management tool (which is a business management and accounting system) – all at no additional cost.

This represents a significant saving for small businesses.

Mbatsane explains: “A plumber may struggle to pay bookkeeper who might charge R5 000 a month, quite apart from the time spent on bookkeeping issues. We started Business Evolve Zero with zero monthly fee, and that means a saving of R300 to R1 000 that smaller businesses would normally pay on bank fees.

“Then you add the cash flow management tool, which is designed to allow you to run your business without having to pay a bookkeeper, and that could be R5 000 a month. This is a substantial monthly saving.”

Quite apart from this, Absa has a deep-level look into the financial flows of Business Evolve clients and can make snap decisions on when to extend credit facilities for working capital or other needs.

Traditional banking models are poorly adapted to the growth pangs of small businesses. For example, many small businesses turn away business because they cannot finance orders of a particular size. Mbatsane says banks need to understand their clients’ businesses and back them on their growth journeys.

Pay as you transact

The Business Evolve account has various ‘Pay at you Transact’ and ‘Bundled Pricing’ options to suit any size business and is aimed at sole traders with an annual turnover of less than R5 million.

Banking costs can be further reduced by using Absa’s digital channels: all internal debit orders and inter-account transfers are free.

“But what really sets the Business Evolve offering apart is the fact that it includes free access to an integrated business management and accounting tool, which is called Absa Cashflow Manager,” says Mbatsane.

“This allows entrepreneurs and SMEs to stay on top of their financials with automated cash flow insights, and produce online quotes and invoices. It’s very easy to use and you don’t need any accounting knowledge.”

It comes with the following features:

  • Business Owner Reporting, with simple reports that the business owner understands;
  • Contacts Management, providing easy online access to all your business contacts;
  • Money Management, an online quote and invoice generation tool, with pricelists;
  • Staff Payroll, allowing easy capturing and storage of all staff information; and
  • Dashboard and easy data exports, allowing small business accountants to have all the information they need for annual financial statements and monthly management accounts.

The system is easy to set up and comes with free support and training.

Funding options

Absa clients have access to various funding options.

While Absa CashFlow Manager provides the bank with valuable data to determine creditworthiness, the business owner now has the tools needed to make loan applications.

Apart from traditional working capital products such as overdrafts, Mbatsane explains that Absa offers enterprise development facilities to assist SMEs, and partners with its corporate clients to develop qualifying SMEs in their supply and distribution chains in a variety of ways:

  • Development finance solutions;
  • Access to market opportunities;
  • Technology platforms to facilitate corporate lending to the SMEs;
  • Access to business development services, including incubation, training and mentoring; and
  • Access to tools and infrastructure.

“With Business Evolve we believe we have tackled some of the key obstacles that prevent SMEs from succeeding. We are now able to measure their performance virtually in real-time, and we provide them with the tools they need for better decision-making while providing financing options that are flexible and relatively painless in terms of repayment.”

Brought to you by Absa Retail and Business Banking.

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