IN Zimbabwe’s ever-evolving economic landscape, small and medium-sized enterprises (SMEs) are the backbone of the economy, yet they face persistent challenges, chief among them being cash flow management.
As an employee benefits consultant with a deep understanding of financial planning and pension strategies, I’ve seen first-hand how poor working capital management can ruin even the most promising businesses.
But I’ve also witnessed how mastering this area can unlock growth, resilience and long-term sustainability.
In the same way I’ve shared my father’s retirement journey in my article titled When retirement dreams turn into liabilities to highlight the importance of long-term planning, SMEs must also think beyond today’s sales.
Working capital management is the business equivalent of retirement planning — it ensures that when the unexpected happens, your business has the financial cushion to survive and adapt.
What is working capital — and why it matters
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Working capital is the difference between a business’s current assets (like cash, inventory and receivables) and its current liabilities (such as payables and short-term loans).
It’s a measure of liquidity and operational efficiency.
In simple terms, it tells you whether your business can meet its short-term obligations without running into financial trouble.
In Zimbabwe, where inflation, currency fluctuation and limited access to affordable credit are daily realities, effective working capital management is not just a financial best practice — it’s a survival strategy.
The pension parallel: A lesson in liquidity
In my work with retirement planning, I often emphasise the importance of liquidity — the ability to meet obligations when they fall due.
Just as pension funds must ensure they have enough liquid assets to pay retirees, SMEs must ensure they can pay suppliers, employees and taxes on time.
A business may be profitable on paper but still fail if it runs out of cash.
This is where working capital management becomes critical.
Common working capital pitfalls for Zim SMEs
- Delayed customer payment
Extending credit to customers is common, but when payment is delayed, it creates a cash crunch.
Many SMEs lack formal credit policies or follow-up systems, leading to long receivable cycles.
- Overstocking inventory
In an attempt to hedge against price increases or supply chain disruptions, some businesses overstock.
However, excess inventory ties up cash that could be used for salaries, rent or reinvestment.
- Short supplier credit terms
Suppliers often demand upfront payment or offer limited credit terms, especially in high-risk environments.
This puts pressure on SMEs to pay quickly, even when they haven’t been paid themselves.
- Lack of financial planning
Many SMEs operate without cash flow forecasts or working capital analysis.
This makes it difficult to anticipate shortfalls or plan for seasonal fluctuations.
Strategies for effective working capital management
- Streamline receivables
Set clear credit terms and communicate them upfront.
Offer early payment discounts to incentivise prompt payment.
Use mobile money platforms like EcoCash or ZIPIT to make it easier for customers to pay quickly.
Follow up diligently on overdue accounts; don’t let unpaid invoices pile up.
- Optimise inventory
Adopt a lean inventory model: Stock what sells and avoid tying up cash in slow-moving items.
Use simple inventory tracking tools: Even a spreadsheet can help you to monitor stock levels and turnover.
Clear excess stock through promotions or bundled offers to free up cash.
- Negotiate better supplier terms
Build strong relationships with suppliers to negotiate longer payment terms.
Join purchasing co-operatives with other SMEs to gain bulk discount.
Explore local sourcing to reduce forex exposure and lead times.
- Monitor key metrics
Cash conversion cycle: Measure how long it takes to turn inventory into cash.
Current ratio: Indicates your ability to pay short-term obligations.
Net working capital to sales ratio: Helps to assess how much capital is tied up in operations.
- Plan for the long term
Just as we advise employees to plan for retirement through pensions, SMEs must plan for their financial future.
This includes:
Setting aside reserves for emergencies.
Investing in business continuity plans.
Exploring pension/provident/defined ambition schemes for business owners and employees to ensure long-term financial security.
Final thoughts: Building resilience through financial discipline
In emerging markets where economic shocks are frequent and access to capital is limited, SMEs must focus on what they can control.
Working capital management is one of the most powerful tools at their disposal.
By improving how they manage receivables, inventory and payables, SMEs can unlock liquidity, reduce financial stress and build a foundation for sustainable growth.
As an employee benefits consultant, I often say: “Financial wellness isn’t just for individuals — it’s for businesses too.”
Just as we encourage employees to plan for retirement, SMEs must plan for financial resilience.
And it all starts with managing working capital wisely.