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Economic uncertainty is an ongoing worry for any business owner.

You can control your own financial management, but you don’t have any direct control over the wider macro-economy. And in the first few years of the 2020s, there have certainly been plenty of tricky ups and downs for your business to navigate.

Current economic uncertainty stems from a number of factors, including:

• Fluctuating markets
• Geopolitical tensions
• Pandemic recovery
• The impact of climate change.

This unpredictability poses significant challenges for sustained growth and stability – but there are simple steps you can take to react to these challenges.

Simple strategies for overcoming the challenges of economic uncertainty

Good financial management is the key to riding any period of economic uncertainty. When sales, revenues, supplier prices and operational costs are all highly dynamic, it’s good to know that your business has cash in the bank and a solid financial strategy to stick to.

But how do you get tighter control over your business finances? And what are the main areas to focus on, track and manage as a business owner or financial director (FD)?

Here are five straightforward ways to tackle economic uncertainty:

• Manage your cashflow effectively – cashflow management is the process of tracking your cash inflows and outflows, identifying potential problems and being proactive about taking action. It’s helped by running regular cashflow forecasts and sticking to budgets.
• Carry out spend management – spend management involves tracking your expenses and identifying areas where you can cut costs. You do this by switching to more cost effective suppliers, cutting back unnecessary expenses and having tighter approval processes.
• Negotiate better terms and prices with suppliers – negotiation can help you save money on your raw materials, labour and other important costs. You can also negotiate better payment and credit terms by building trusted relationships with your suppliers.
• Embrace AI automation to cut costs – artificial intelligence (AI) tools are a great way to automate tasks, such as customer service, billing and inventory management. This frees up time for strategic activities and saves you money on labour costs.
• Diversify into new products or markets – diversification helps you reduce your dependence on a single product or market, making your business more resilient to economic downturns. It’s important to choose products or markets that are complementary to your existing business, and that have good growth potential.

Talk to us about strengthening your financial management

With the world in such an unstable state, it’s always difficult to know exactly what lies around the corner for your business. But it’s safe to say that with a robust and agile financial strategy, you’re in a better position to flex your revenue streams and overcome any cashflow pitfalls.

As your adviser, we’ll help you get tighter control over your cashflow, budgeting and financial forecasting – giving you the numbers you need to navigate uncertain times.

What is cashflow?

Cashflow refers to the movement of money into and out of your business over a specific period.

In the most basic terms, cashflow is the process of cash moving out of the business (cash outflows), and cash coming into the business (cash inflows). The ideal scenario is to be in a ‘positive cashflow position’. This means that your inflows outweigh your outflows – i.e. that more cash is coming into the business than is going out.

When you’re cashflow positive, the main benefit is that you have the liquid cash available to fund your daily operations and debt payments etc.

On the flip side, if you’re in a negative cashflow position, this can be a red flag that the business is facing some financial challenges – and that some serious cost-cutting and/or revenue generation is needed.

How does cashflow affect your business?

Not having enough liquid cash is one of the biggest reasons for companies failing. So it’s absolutely vital that you keep on top of your company’s cashflow position.

Five key cashflow areas to focus on will include:

1. Monitoring your cash inflows and outflows – this means regularly tracking your cash inflows from sales, loans and investments, as well as managing your cash outflows from expenses, purchases and debt repayments.
2. Managing your account receivables and payables – efficiently managing your customer receipts and supplier payments helps smooth out your inflows and outflows – and delivers stable cashflow that’s easier to predict and manage.
3. Getting proactive with your budgeting and forecasting – creating realistic cashflow budgets and forecasts helps you predict your future cash position. By anticipating your future cash needs, you can actively plan for potential shortfalls or surpluses.
4. Being in control of your stock inventory – having excess stock in your warehouse ties up cash. So, it’s a good idea to optimise your inventory levels and to only manufacture/order the items you need on a day-to-day basis.
5. Investing in your cash reserves – with emergency cash reserves in the bank, you know you have the funds to handle unforeseen cashflow issues or sustain your operations during lean periods. This makes your whole cashflow position more stable.

How can our firm help you with cashflow management?

Positive cashflow is the beating heart of your business. Working with a good adviser helps you keep that cashflow healthy, stable and driving your key goals as a company.

We’ll help you keep accurate records, track your inflows and outflows and deliver the best possible cashflow position for the business.

Want to know how to beat the most common business challenges? We’ve highlighted five common challenges and the simple ways to overcome them.

Founding, building and growing your own small business is a hugely rewarding experience for many entrepreneurs. But the road ahead isn’t always smooth.

There are common challenges that crop up and ongoing issues that need to be factored into your business plan, your strategy and your own personal thinking.

So, what can you do to beat these challenges and make the journey as frictionless as possible?

5 proactive ways to overcome your business challenges

We’d all love to know what lies around the corner when it comes to the future path of your business. The truth is that every business journey is unique. But there are common challenges that every owner-manager or CEO will be faced with – and being prepared for these hurdles is the best way to leap over them and take each challenge in your stride.

We’ve highlighted five common challenges and the simple ways to overcome them:

• Uncertainty: No-one has a crystal ball to know exactly what’s coming around the corner. But there are ways to be prepared for some unknown circumstances. You can’t fully predict the main external threats like government policy, economic conditions or freak weather conditions. But you CAN use forecasting and scenario-planning tools to build up contingency plans so you have a Plan A, Plan B and even a Plan C. With forecasts of your business data, finances and industry trends, you can be ready to react, pivot and take positive action.
• Competition: Small businesses often face stiff competition from larger, more established companies. To stay ahead of the curve, it’s important to be nimble and agile. It’s also vital to find your niche and to know precisely why your customers value your offering. By ploughing a unique furrow and keeping your customers happy, you can give yourself an edge over larger, slower-moving corporate-size competitors.
• Access to capital: It can be a struggle to secure funding as a startup, particularly if you have limited financial resources or a poor credit history. Having a detailed funding strategy is a crucial way to overcome this problem. Keep your finances in order and make sure you have in-depth financial reports to show banks, lenders and investors. It’s also helpful to focus on paying suppliers on time, keeping debt levels under control and ensuring your cashflow is in a positive position. These are all excellent ways to improve your business credit rating and show you’re a stable, risk-free prospect for lenders.
• Hiring and retaining employees: Attracting and retaining talented employees is difficult, especially during the ongoing talent shortage. Offering competitive salaries or benefits packages can be one way to attract people. But it’s also important to think about your brand reputation, your sustainability credentials and your CSR policy – all things that Millenial and Gen Z workers value alongside decent pay and benefits packages. Employees want to be proud of where they work, so make your company a progressive, satisfying and rewarding place to work.
• Keeping up with technology: Business technology is evolving at a rapid pace. It can be daunting keeping up with all the available apps, tools and software solutions that are aimed at your business. The trick is to be informed but selective about the apps you use. Start with the operational and financial needs of the business and look for apps that can automate, improve efficiency or provide improved data and management information. Talk to other business owners and your profressional network to find out what the essential apps are in your industry. And do your research and homework before you choose any software solution to add to your app stack.

Talk to us about being an agile small business

Looking to the horizon for the upcoming pitfalls is essential as an ambitious and informed business owner. As your adviser, we can help you generate the most informative management information, to keep you agile and ready for what lies around the corner.

We’re also on hand to discuss your ongoing strategy, how to react to upcoming risks and the best ways to access capital and manage your company’s finances.

Arrange a meeting and let’s see what the future may bring for your business.

In July 2023, the superannuation guarantee statutory rate will rise to 11%. Annually, the rate is increasing by 0.5% until July 2025 when it will reach the legislated 12%.

• Review your current superannuation costs for all employees, both hourly and salaried.
• Review any salary packaging arrangements. Is the agreement inclusive of superannuation or is super paid on top of the agreed salary?
• For salary packages inclusive of super, you will need to check the contract’s wording to make sure you apply the changes correctly. This change may also impact annualised salary arrangements.
• Calculate your revised payroll costs from July, showing the current wages and superannuation expense compared to the new rate from July. Highlight the increased amount per month or quarter, so you know precisely what the impact will be.
• Discuss the super rate increase with your employees now. Let them know that there will be an increase of 0.5% each year from now until July 2025 when the statutory rate will reach 12% and remain there.
• Remember – short payment or late payment of super can incur hefty penalties – plan now for higher payroll expenses from July, so you don’t get caught short.

If you’d like help reviewing payroll costs and employee agreements, talk to us now, and we’ll make sure you have accurate reports to make planning for the rate rise easy.

Getting organised now means that you’ll be well prepared for your business’s increased costs when the first payment is due later this year.

Your business may compete head-to-head with a number of other companies, but this doesn’t mean you have to treat ALL other businesses as if they are the competition. In fact, there are real benefits in creating strategic alliances with other like-minded organisations.

When you look at the wider marketplace, you’ll see that there are businesses out there that may well compliment your offering. And by working together (rather than against each other) it’s possible to become valued strategic partners, collaborating to serve your joint customers, improve brand awareness and, ultimately, expand your target market.

If this sounds like a positive strategy, now’s the time to do your homework and start hunting down the best strategic partners for your business.

Working to serve a shared customer base

Strategic partnerships are all about finding the common ground between you and your intended partner – and this means finding the best ways to combine your efforts. If you can share the same customer audience, and create a complimentary way of meeting their needs, that creates a broader, more connected way of growing both companies.

Finding a company that’s interested in forming a strategic alliance

1. Find partners in complementary sectors – if you’re an accounting firm, like us, it makes sense to partner with solicitors, lawyers and other professional services providers who can help your clients. If you’re a maker of shoes it makes sense to partner with a clothing manufacturer that shares your same sense of style and purpose. The key here is to find a shared audience or customer need, and to create some real synergy between your two businesses.
2. Take part in business networking and events – to get a wider understanding of your local, or industry specific, business network, it’s worth taking part in plenty of online and offline business events. You’ll meet new people, hear about new brands and will find it easier to find your ideal strategic partner. The wider your business network, the more choices you have for an alliance.
3. Look at crossover between your target audiences – once you’ve found a potential strategic partner, it’s important to take a detailed look at the crossover between your partner’s audience and your audience. Do they shop through the same channels? Do they fit a certain age group or social demographic? Are these customers local, or are they part of a national or global online customer base? How large is their database?
4. Cross-reference your customer databases – by sharing and comparing your client relationship management (CRM) data, you can cross-reference both sets of customer data and see where there’s overlap, or where you may already share some of the same customers. The better you understand each other’s customers, the more likely it is that you’ll find some common ground for shared marketing and promotion.
5. Run joint events and promotions – presenting joint webinars with your strategic partner, or running joint promotions. By finding a common theme, you bring both audiences together and reinforce the alliance between your two brands. You also reduce the expenditure by sharing the costs and reach a wider audience.
6. Combine your R&D efforts – to move your alliance forward, you can also try combining your research and development (R&D) activity, to find new products, new services and new ways of keeping your joint customers happy. By sharing the time, costs and effort of developing new offerings, both companies will benefit – and you keep your businesses at the cutting edge of their respective sectors or specialisms.

There’s plenty of advice available to help you manage your business finances. But what about the tips and hacks you need to get fully in control of your personal finances?

We’ve outlined seven essential tips for managing your personal finances and making the best of your investments and savings.

1. Create a budget and stick to it

Having a budget helps you keep track of your income, expenses and debts. It also ensures that you’re spending money in the right places. A sensible budget keeps your expenditure in check, but also gives you the cash you need for your day-to-day needs and purchases.

When creating a budget, think about all your regular outgoings and the major purchases you’ll need to make over the coming months. Be realistic about your expenses and make adjustments as needed. Remember to allocate money for savings and investments, too.

1. Pay off any debts and liabilities

Other than for major investments such as buying property, borrowing money should always be a short-term solution. High-interest debt, such as credit card debt, can eat away at your savings and hold you back from achieving your financial goals.

It’s a good idea to make paying off your debt a priority. Review your credit card debts, personal loans and overdrafts and focus on paying off the debt with the highest interest rate first. Consolidating all your legacy debts into one easily manageable debt can also make sense – lenders can help you consolidate these debts and bring down your overall repayment costs.

1. Save regularly and look for the best interest rates

We all know it’s good to have a ‘nest egg’ behind you for those times when cash gets tight. Building an emergency savings fund gives you a more solid financial foundation and protects you against unexpected expenses and unplanned purchases.

Whether it’s a sudden expensive car repair, or losing your job and salaried income, with savings in the bank you always have liquid cash available. Aim to save at least three to six months’ worth of living expenses and make sure you shop around for the savings accounts with the best interest rates. It’s also sensible to set up a standing order from your main bank account, so you automatically pay a set amount into your savings account each month.

1. Invest in your future to build solid foundations

It’s all very well to have money in the bank today – but what about further down the road? Make sure you’re making provision for the major life events such as marriage, starting a family, buying a house and (eventually) retiring and stepping back from employment.

Investing in stocks, bonds or a pension plan can help you grow your wealth over time. Consider working with an independent financial advisor to achieve your investment goals and help you create a diversified investment portfolio that aligns with your goals. They’ll also help you achieve the best risk tolerance with your investments.

1. Keep an eye on your personal credit score

Your credit score is an important factor in determining your financial health. A personal credit score measures your risk to a potential lender – the lower your risk, the more likely it is that a provider will lend you money, safe in the knowledge that you’ll make the repayments.

Many of the big credit agencies now offer personal credit reports. Make sure to check your credit report regularly to ensure that the information is accurate and to gauge the impact this score is having on your ability to borrow money. Simple steps, such as paying your bills on time and reducing credit card balances, can help to improve your credit score.

1. Stay informed about taxes and reliefs

Taxes are a necessary part of paying our way in society, but tax costs can also have a significant impact on your personal finances. It’s important to stay informed about changes to tax laws, especially those around income tax and capital gains tax, and to understand how they affect you. We don’t have an inheritance tax in Australia, however there is a need to consider future tax ramifications for your beneficiaries so having a properly-considered and professionally drafted will is essential.

It’s worth working with a tax professional who can review your tax situation and suggest all the available tax reliefs and incentives that may be open to you.

1. Review your finances regularly

Keeping a close eye on your finances is the best way to keep things in check. Most banks now offer apps that make it much easier to review your income and expenditure, and to see exactly where you’re spending your money. With so much financial information available, there’s no excuse for letting your money management get into a mess

Regularly reviewing your finances helps you stay on track and make adjustments as needed. You can even use one of the many personal finance software platforms to help you stay organised in the cloud and make well-informed financial decisions.

Talk to us about getting your personal finances in order

Managing your personal finances, investments and savings well requires discipline, knowledge, and a good understanding of your end goals. By following these seven top tips, you put yourself in the financial driving seat and set the foundations for a solid financial future.

Where you need a helping hand, we’re available to introduce you to the best independent financial advisors and to work with them to help plan to manage your taxes.

Does your business need to improve its cash position? Poor cashflow is a problem for many businesses, whether you’re a start-up or an established family business. Talk to us about how you can get proactive with cashflow management.

It’s a well-worn phrase, but cashflow really is the lifeblood of your business.

When your cash inflows are greater than your cash outflows, that puts you in a positive cashflow position – giving you the liquid cash needed to trade, improve and grow as a business.

But if costs start to outstrip your income, that can leave too little cash in the pot. This results in mounting debt, problems paying suppliers and (in the worst cases) the failure of your business.

So it’s vital to get proactive with cashflow management!

Fast ways to improve your cashflow

Cashflow is an ongoing process, where you need to constantly track, monitor and act on the numbers you see in your regular cashflow statements.

A negative cashflow position can be due to a number of factors, whether it’s insufficient sales, slow payment of invoices or poor cost management. The solution to these issues is to take a proactive and holistic approach to improving the company’s cash situation.

Some key ways to boost your cash position include:

• Improve your sales and marketing – creating more sales and boosting income
• Make it easy to get paid – using the latest in payment tech to speed up payment times
• Track and manage debts – chasing any late payments to reduce your aged debt
• Manage spending effectively – and start to track, review and reduce your costs

Talk to us about improving your cashflow

If cashflow is becoming a headache for your business, we can quickly help you get back in control of your cash position – and attain that all-important positive cashflow position.

Get in touch to improve your cashflow.

Are you interested in comparing your business performance against the ATO Small business benchmarks? It can be a useful exercise to see whether your business is performing well, on average, or lower than the benchmark figures.

Each year the ATO publishes industry-based data to highlight specific ratios of financial and other types of performance.

For example, you can compare your cost of sales to turnover, total expenses to turnover, or labour cost to turnover. Comparing to average data gives you an idea of how your business performs compared to others in your industry.

It’s no problem if your ratios are different – but it can be a helpful starting place to look if you want to improve financial performance or reduce costs. If your ratios are very different from the ATO’s, then it could be worth diving deeper into your financial reports to see if you have problems that can be addressed. For example, a hospitality business might realise that its food cost is much higher than average and then take action to change suppliers and manage wastage.

The ATO benchmarks are based on your business industry code used in your activity statements and tax returns. If you’re not sure what industry you fall under, check the ATO Business industry code tool to find the correct code for your business.

To start comparing your business, you’ll need some information from your accounting software financial reports.

• Gross sales income
• Salary and wages expenses, including superannuation
• Vehicle expenses
• Interest on credit cards and loans
• Cost of sales
• Total other business expenses, including all running costs, administration, contractors, suppliers, rent, freight, training and website fees.

Once you have these totals, either from your software or your last tax return, you can compare your figures to the ATO benchmarks.

Want to learn more? We can analyse your business performance using the ATO benchmarks as a starting place for comparison and discuss areas you can target to increase profitability, reduce costs and streamline operations.

Keeping on top of your cashflow is even more important during tough economic times.

With a global slowdown on the cards, energy prices soaring and supply chain still challenges, cash is likely to be tight over the coming year and beyond. Cloud technology and fintech apps, can give your business the best possible control over its cash.

Why is cashflow so important?

To keep your business operating, you need enough money coming into the business to cover your outgoings – with enough surplus cash to deliver a profit. When recession begins to hit, this can have a significant impact on your income.

Consumers will have less disposable income to spend on your products and services. Business customers will be looking to reign in their spending on suppliers. As a net result, your business is likely to make fewer sales and will bring in smaller revenues.

This means:

• Reduced income coming into the business
• Less cash in the business to cover your operational expenses
• Not enough money in the bank to pay suppliers, utility providers or payroll costs
• In the worst-case scenario, insufficient cashflow for you to continue trading.

What can you do to improve your cashflow situation?

The more informed you are about your cash position, the more you can do to prepare for any cashflow gaps. It’s this foresight that can make all the difference when you’re battling against tough external economic forces and a downturn in sales.

If you want to safeguard your cashflow, these are some sensible steps to take:

• Switch to cloud accounting – accounting and finance technology has moved on in leaps and bounds in the past decade. The latest crop of cloud accounting platforms all offer a detailed reporting of your cash position. These software tools will generally offer real-time data, giving you up to date cash numbers.
• Integrate with cashflow forecasting apps – cloud accounting platforms let you add third party apps to create a custom app stack of helpful business tools. There are plenty of cashflow forecasting apps to choose from, giving you the ability to predict your future cashflow position.
• Plan ahead for the cashflow gaps – when your forecast shows a shortfall of cash coming up, that’s the time to take evasive action. If you can see that there’s a cash hole approaching next month, it’s time to look at ways of raising extra finance to fill that hole. That could mean extending your bank overdraft, taking out a small business loan or taking out an invoice finance facility with a lender.
• Look for opportunities to cut your overheads – one way to even up your cashflow is to cut down on your expenditure. If you can cut back on overheads, expenses and unnecessary costs, this can help you re-balance your cash position, even when cashflow is getting tight. Look for cheaper suppliers, buy in smaller quantities and take every opportunity to cut costs and keep your spending more sensible.
• Update your prices and your sales strategy – raising your prices is one way to bring in more cash, with the same volume of sales. But it’s a balancing act. Putting your prices up can alienate existing customers and could see you losing customers, but if you can find the sweet spot for your pricing AND also drum up more sales, you can quickly increase revenue and give your cash inflows a healthy boost.
• Review your cashflow reports regularly – it’s important to look at your cashflow numbers and reporting regularly, not just at period-end. This is particularly important when economic times are tough. With the most current cash information to hand, you can make informed business decisions and aim to keep the business operational.

Talk to us about updating your cashflow processes

With your business in a healthy cashflow position, you give yourself some solid financial foundations for riding out the global recession. No business is invulnerable in these conditions, but with liquid cash in the business, you have more flexibility and more capital to play with.

Book a meeting and let’s see how we can improve your cashflow processes.