Research from the University of the Western Cape suggests that 70% to 80% of small, medium and micro enterprises (SMMEs) fail within five years.
The Small Business Growth Index (SBGI), a survey by Absa, the South African Chamber of Commerce and Industry (Sacci) and the Bureau of Market Research at Unisa, found that 55.3% of small and medium-sized enterprises (SMEs) could survive only 12 months under current cost pressures.
“A business can look healthy because sales are coming in,” says Joubert, managing director of JBS Advisory and Accounting. “But revenue is not cash. I have seen businesses with strong order books and empty bank accounts.”
Joubert identifies five warning signs business owners should watch for.
1. Cash flow deteriorating despite sales growth
Higher revenue does not necessarily mean more cash in the bank. Businesses may need to pay for stock, wages and infrastructure before customers settle their invoices, leaving them short of working capital.
2. Shrinking profit margins
Rising operating costs can erode profitability even when sales remain stable. The SBGI found that more than 66% of firms reported sharp cost increases, particularly for transport and fuel, utilities and raw materials.
3. Debt becoming harder to manage
Debt used to finance everyday operations rather than productive growth can signal deeper financial problems. Vantage Advisory found that 49% of SMEs were burdened by debt beyond their repayment capacity.
4. An accumulation of unpaid invoices
Late payments can leave businesses unable to meet their own obligations. Business Partners reported that, at the end of the second quarter of 2025, 95,399 invoices more than 30 days overdue were worth a combined R12.4bn.
5. Expenses rising faster than revenue
When expenses consistently outpace income, businesses may have to cut costs to remain viable. The SBGI found that nearly one in four businesses had reduced headcount, while only one in 11 had expanded its workforce.
Not every cash flow shortfall signals a failing business. The key is understanding its cause and whether it is becoming a recurring problem.
“A temporary problem has a clear cause and timeline,” Joubert says. “A large customer pays late, a seasonal dip hits, equipment breaks. A deeper problem is when the same issue keeps appearing, or you cannot explain why the money is not there despite sales.”
He cautions against businesses agreeing to pay suppliers within 30 days while allowing customers 90 days to settle their accounts.
“You are financing your customers’ businesses with your own cash.”
Xero research cited by Joubert found that 91% of SMEs had experienced late invoice payments, with overdue invoices paid an average of 18 days after the agreed terms.
Joubert recommends that business owners review four figures every month: cash available in the bank, the age of outstanding customer invoices, gross profit margins, and the payment terms agreed with debtors and creditors.
These measures can help owners identify emerging problems before they become harder to resolve.
Formal financial records are also important when seeking external funding. Stats SA found that 57% of microenterprises lacked formal accounting systems, according to the figures cited by Joubert.
“If you run a business on a spreadsheet only you understand, you are flying blind,” he says.
Joubert argues that owners should consult accountants before financial pressure becomes acute, rather than waiting until their options are limited. Sound records, cash flow forecasts and financial controls can help businesses prepare for growth and demonstrate their credibility to potential funders.
He adds that access to funding remains a significant barrier for SMEs, with 62% identifying it as a major challenge. SMEs receive 13% of total credit, compared with 51% for corporates, according to the figures cited in the release.
Business owners involved in trusts should also be mindful of their tax and reporting obligations. The release notes that the South African Revenue Service (SARS) opened its 2026 trust filing season on 19 September, with submissions due by 22 January 2027.
Trustees remain legally responsible for meeting their obligations. Joubert says trustees should verify registration details and records, check beneficiary information and submit returns early.
“Financial problems do not announce themselves. They whisper. Review your numbers, understand your cash cycle, and get advice before you need it. That is how you build a business that lasts,” he says.
