By Zilla Effrat
Survey after survey reveals that there are tough times ahead for the Australian economy, reinforcing the message that small business owners need to keep taking steps to future-proof their businesses.
The September 2023 edition of Deloitte’s Access Economics’ Business Outlook report confirms both a retail recession and a per capita income recession and that there’s significant pain being felt across the economy.
Deloitte Access Economics Partner and report author, David Rumbens, says consumer confidence remains extremely fragile and is near its all-time low point. He adds that business failures have been on the rise throughout 2023, largely in the construction industry but in the accommodation and food services, manufacturing and retail trade sectors.
“A shaken-up Australian economy must not only deal with the cost-of-living crisis of today but also with helping Australia’s business sector look to 2024 as a year for growth,” he says.
Studies show that small business owners are facing a host of challenges, including high interest rates, slowing demand poor consumer sentiment, staff shortages, a falling Australian dollar and uncertainty. Added to that are rising costs, especially when it comes to wages and power bills.
So how can you future-proof your business in these difficult times?
Better cash flow management
Each sector has its own pain points, but a common one for many SMEs is cash flow.
A recent survey by small business platform Xero reveals that 60% of small businesses have been experiencing cash flow issues, with 14% reporting significant challenges.
It also finds that over a quarter of small business owners have had to use their personal savings to keep their businesses afloat and one-third have been unable to pay themselves. Nearly a third of small business owners check their cash flow position daily.
To stay on top of your cash flow requires watching it daily and drawing up quarterly and half-yearly cash flow forecasts that help you identify when it will dip.
To ensure cash keeps rolling in, you need to avoid customer bad debts or late payments. Consider offering them early payment discounts and avoiding those who don’t pay on time. Plus, talk to your suppliers about extending your payment terms to them.
Other ways to navigate cash flow issues are to build up a cash reserve for unexpected challenges, plan ahead to cover your tax bill and keep your business and personal finances separate.
Harness technology
Insights from Xero’s survey show that there are plenty of opportunities to tap into technology tools and resources available to better support cash flow management. These can include setting reminders and scheduling payments, setting up direct debits, eInvoicing and using accounting software to track cash flow.
Consider where else technology could boost your business’ efficiencies and help you cut costs, save time, reduce friction and enhance your customer experience. The answers will depend on the type of business you are in and the sector you serve. But it is worthwhile examining what technology is out there and what your competitors are using. Speaking to your industry body and technology experts may also pay off.
Improve your margins
Margins can unnecessarily eat into your profits. One way to reduce them is to better manage your inventory and avoid stock collecting dust on your shelves.
Another is to raise the price of your products or services, but this needs to be done carefully and strategically, without scaring off customers or making you less competitive in the market.
Other steps could include reducing your costs of sales in areas such as transaction fees and commissions, packaging and shipping.
Keep your customers
Studies show that acquiring a new customer costs much more than retaining an old one. Because of brand loyalty, it takes more effort to convert a new customer than to hold a loyal one. Expenses in attracting new customers include marketing, advertising and sales. And, after all, one of the best marketing tools is word of mouth from satisfied customers.
To boost your customer experience, you need to be across your customers’ needs and preferences and tailor your products and services to meet these. It’s also important to invest in customer service training and emboldening your employees to go above and beyond to meet customer needs.
Foster innovation
Boosting innovation at all levels of your business can help you stay competitive and relevant. Consider your employees as an important asset in achieving this. Reward their creativity and experimentation and regularly discuss ways to improve how you operate. Encourage collaboration. Hire people with different perspectives, backgrounds and passions. And give the time and space to innovate.
Examine your debt
If you have debt, understand the interest rates you’re paying and focus on paying down the highest rates. Can you improve your position by restructuring your debt? Should you be considering releasing working capital through options like invoice or asset finance? What other solutions are available?
Contact us for tailored funding solutions for your business.