Tough times? For tough businesses.
Everyone is talking about a downturn. A declining sharemarket. Erosion of wealth. Lower consumer confidence. Recession. Some businesses are starting to hurt.
Lets look at some economic basics. People, and what they spend, drives the economy.
On the Sunshine Coast we are fortunate to be in one of the highest population growth areas of Australia. Australia’s population is still growing, including the expats who are returning home, cashed up, to the relative safety of our economic climate. People are still coming to South East Queensland and the Sunshine Coast.
Don’t be complacent however. In a downturn it is important for businesses to get back to basics. It is time to look a bit closer at your cash flow.
Where can you find some hidden cash?
A few of the better known and often used sources are:-
- Review expenses – reduce unnecessary overheads but not at the expense of customer service.
- Reduce stock levels – have a sale of slow moving stock.
- Extend accounts payable.
- Reduce accounts receivable.
- Switch loans from principal and interest, to interest only.
- Increase borrowings or an overdraft.
Three less obvious sources of cash are as follow:-
Cash out the equity in your vehicle or equipment.
If you have had your vehicle for some time, consider trading it in and purchasing another one. The equity in your current vehicle can be used for cash in your business. The repayments on the replacement vehicle in many cases will not be much more than what you are currently paying. You will receive the additional benefits of reduced maintenance costs.
Sell your business premises to your superfund.
This option is limited to a few specific circumstances however it is worth considering. If you or your company owns your business premises, it could be sold to your self managed superannuation fund. Superfunds are now allowed to borrow to purchase certain types of assets. Talk to your accountant or financial advisor.
Debtor finance
Approved businesses can borrow up to 80% of the value of their invoices without the need for an overdraft or mortgaged property. The impact of this additional cash is immediate and is most effective when it is used to fund the growth of the business. Debtor finance facilities are now seamless and confidential. It no longer has the negative stigma of factoring.
Sunshine Coast businesses have seen many economic downturns over the years. Our local economy is now larger and more diverse than before when it was reliant on only a few industries. The population base is larger and it is still growing.
The businesses with the cash are one ones that will be stronger and will benefit from any tough times.