How can you prepare for FY22-23 and avoid the Covid Hangover!

 

EOFY is almost upon us, which means, once again, it’s time to wrap up your books for tax season. And this year, more than ever, it is critical to conclude the financial year on a high note.

Why is that you ask? Well, where do we start…

We’ve talked before about not getting caught in a Covid hangover. This is caused by the combination of evaporating government stimulus, increasing employee recruitment and retention costs, supply chain constraints and the downturn in consumer confidence. All of which has created a state of shock for any business that was unprepared for the sudden change.

But now, we see a few more ingredients being thrown into the mix.

 

Who’s interested in Interest rates?

Perhaps the most relatable of these recent additions has been the shift in interest rates. Interest rates – or, to use the official term, ‘monetary policy’ – is one of the Reserve Bank’s main tools to combat inflation. The theory being that the increased price of money reduces demand and, therefore, prices (i.e. inflation).

That interest rates are rising is perhaps not so much of a shock in itself; it would seem highly improbable to most people that rates would remain essentially at 0% forever. Rather, it is the pace and rate of increase.

Interest rates are now 0.85% and are forecast to hit around 2% by Christmas and then peak around 3% – 4% in roughly one year. Whilst depositors may rejoice, borrowers will cringe – businesses and individuals alike. The extra cost to service debt will be around $3,500 pa (roughly $300 per month) more for every $100,000 borrowed. Suddenly, a $1M Home Mortgage or Line of Credit doesn’t look so attractive.

The knock-on effect of this is cash-flow tightness, which for businesses, particularly small businesses, can mean chasing debtors and juggling cash flow. And inevitably, more write-offs.

 

So, what’s the plan?

How wonderful it would be if there were some handy instruction manuals lying about so that we would know how exactly we could not only get through this tumultuous time but thrive despite it—something like a practical stage direction that would tell us precisely what to do.

Ideally, this would come in the form of something Tennessee Williams would have thoughtfully put together (a notoriously descriptive fellow who was heavy on detail). But alas, we have something akin to Shakespeare’s more light-on approach in A Winters’s Tale…

‘Exit, pursued by a bear’!

 

If in doubt – preserve your reserves

They say cash flow is king and if there is no other plan in sight – then at least ensure your cash reserves are sufficient to weather the rocky road ahead. But with consumer confidence rapidly declining, supply chain impacts causing delays in stock, business loan repayments on the up and electricity prices soaring – it is little wonder small businesses are suffering. With each of these jig-saw pieces falling into place, there is less and less cash in the bank in reserve.

It’s no secret that most small businesses that fail do so because they run out of cash. Without cash, employees, suppliers and lenders don’t get paid, and with interest rates at the start of an upward trajectory, the cash reservoir is in further doubt.

Preserving that vital cash flow is imperative to a healthy future for any business. Any viable option a business has to preserve that cash flow is worth consideration, and whilst you can’t change the interest rate, you can make small changes to help combat the impact.

 

It’s not all doom and gloom.

Amazingly, despite the current financial situation, most Australian businesses are still optimistic about the future. Moreover, they plan on investing in improving their technology and growing their business in the 2022-23 financial year. According to recent research conducted by Honeycomb Strategy on behalf of Banjo Loans, 61% of SMEs plan on investing in new technology as a direct result of the pandemic.*

It would seem that Australian businesses are a hardy bunch. Despite growing geopolitical tensions and rising costs (just about everywhere!), we are confident in our ability to succeed. However, the reality remains that to do that, any business must overcome the hesitancy consumers have about parting with their hard-earned cash when it comes to issuing their invoices.

It’s all about getting ahead of the curve and getting the jump on your competitors. If you aren’t adequately prepared, it will only get harder to remain competitive in the current market. When that market is complicated by decreasing consumer confidence – the investment needs to be focused on internal improvements and ensuring your customers can comfortably afford your fees.

For businesses, collecting from your outstanding debtors is the easiest and most logical way to build up your cash reserves. If you can get paid on time and close those outstanding accounts, you will have more money in the bank to invest in your growth.

What’s more, if your clients can get the service they need today without breaking the bank, they will be more inclined to invest in getting the financial or legal advice they need to prosper.

 

Money in the bank

If your customers are pinching pennies because they want to preserve their cash flow, it makes sense to give them every option you can to achieve this. With QuickFee payment plans, your customers have the option to pay their invoices over monthly instalments while you get paid in full upfront. It’s a win-win situation that helps businesses maintain a healthy cash flow whilst their customers enjoy the flexibility of smaller monthly payments.

With QuickFee’s secure online payment portal, you can use our Fee Funding solution to clean up your books this end of financial year. 

 

If you struggle getting paid for the work you’ve done, call our QuickFee team, who will provide you with tips and tricks on using our Fee Funding and Secure Online Payment solution to clean up your books this end of financial year.