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Insights | Cash flow

Profitable on paper, broke on the 25th: why cash flow sinks South African SMEs

Portrait of Mbali Maziya
Mbali MaziyaData Scientist
· 4 min read

Illustrative image

Late payments and thin cash buffers hurt SA small businesses. What the local data shows, plus three numbers every owner should check each month.

Every unpaid invoice is an interest-free loan you never agreed to give.

The numbers behind the problem

41.9%

of SMEs reported weak or critical cash flow

Absa / SACCI / BMR Small Business Growth Index H2 FY2025, 2 134 MSMEs · Source 2
46%

of small businesses struggling with late payments

Xero State of South African Small Business 2025 (with KLA), 414 small businesses · Source 4
56%

named cash flow among their top three problems

News24 / Lula Small Business Survey, 815 SME owners, July 2025 · Source 3

Cash flow tops the worry list

Share of SME owners naming each challenge in their top three (bars do not add up to 100%)

Cash flow challenges

56%

Limited access to finance

53%

Inflation / rising input costs

40%
Source: News24 / Lula Small Business Survey, 815 SME owners, July 2025. · Source 3

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In this article
Illustrative scenario

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.

Illustrative image: a colourful spaza-style market stall with crates of tomatoes, oranges and onions, painted wooden signs and hanging fabrics in warm evening light.
Illustrative imageA spaza-style market stall. AI-generated; it shows no real business, person or brand.

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

Late payments and owner sacrifices, share of 414 small businesses
MeasureShare
Struggling with late payments46%
Owner sacrificed own salary43%
Used personal funds to stay afloat41%
Spend more than an average of 10 hours a week chasing late payments28%
Source: Xero, The State of South African Small Business 2025 (with KLA) · 414 small businesses (up to 200 employees) · fieldwork 7–20 March 2025 · Source 4
Illustrative image: a small-business owner's desk at night with a desk lamp, stacks of paper invoices, a calculator, a laptop with a spreadsheet, a cup of tea and a phone, city lights blurred in the window behind.

Every unpaid invoice is an interest-free loan you never agreed to give.

Illustrative imageAn owner's desk after hours. AI-generated; it shows no real person, business or brand.

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

Funding expectations, share of 2 134 MSMEs
MeasureShare
Expect to need additional funding in next six months70.5%
Confident they will secure funding29%
Source: Absa / SACCI / BMR Small Business Growth Index H2 FY2025 · 2 134 MSMEs · H2 2025 (article published 30 Jan 2026) · Source 2

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 example

45 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 example

three 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 example

35% → 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.

Want a clearer view of your cash?

If you'd like a simple monthly picture of your cash position, Mawlera Data Group works with South African small and medium businesses on dashboards, KPI tracking and data integration. Our Starter Analytics Review is a practical first step: we look at the data you already have and help you decide which numbers matter most. Get in touch – we're happy to chat.

Get in touch →

Sources

  1. Absa, Small Business Growth Index (SBGI) FY2025 H2 (overview page) – SMEs' share of formal businesses, employment and GDP. https://www.absa.co.za/business/absa-small-business-growth-index-2025
  2. Tustin, D.H. and Kibuuka, P.K. (Bureau of Market Research, Unisa), "South Africa's small business landscape: Insights from the H2 FY2025 Small Business Growth Index", Global Africa Network, 30 January 2026 – cash flow, survival and funding figures. https://www.globalafricanetwork.com/featured/south-africas-small-business-landscape/
  3. Lula in partnership with News24, Small Business Survey Results, July 2025 (815 SME owners) – top challenges. https://lula.co.za/wp-content/uploads/2025/09/News24Lula-SMEsurvey-July2025.pdf
  4. Xero, The State of South African Small Business 2025 (survey of more than 400 small businesses, fieldwork 7–20 March 2025, with KLA) – cash flow, late payments and owner sacrifices. https://brandfolder.xero.com/NE531UQB/at/6t2nhc3k4fqwnc8x7twr25/Xero_South_Africa_State_of_Small_Business_report_2025.pdf