Why every business needs a bigger piggy bank
Cashflow ranks among one of the biggest pain points for Australia’s 2 million odd SME’s. Many have experienced the harrowing sleepless nights as they lay in worry, trying to figure out how they will make ends meet. And yet despite this, as a nation, we’re still ranked among the worst savers in the world. According to the 2010 National Savings and Debt Barometer, only 11% of people were confident that their savings would last at least 6 months if they were suddenly out of work. And 80% of the population has no household budget. The bad news is that we’re carrying these bad habits over into our businesses.
Even with the GFC speedbump, the 00’s will be remembered as the decade of easy credit. It’s never been easier to get what you want, when you want – and they’ll even throw in 60 days interest free before that crippling 20% rate kicks in. We no longer need to save; we are afforded instant gratification for the latest gadget…and we’re paying the price as repayments eat into our cash reserves.
And we’re neglecting to save our pennies for a rainy day.
One of the most concerning trends emerged from our latest Business Monitor Report – BAS and GST, in which we found that a massive 31% of SME’s do not put GST owed to the tax office aside, meaning that they must find the money on the spot when it’s due. With reports that the ATO is in mass crack down mode on outstanding BAS payments (businesses as little as six months in arrears are being forced into liquidation), the pressure has never been greater on business owners to find their BAS payments, fast. I urge all business owners to start squirreling away their GST payments, to avoid becoming yet another statistic in an uncertain economic climate.
And it’s not just tax payments putting the on the squeeze. Anyone who hasn’t received an energy bill in awhile is about to get a shock at the mail box, with the price of electricity and gas soaring. Thanks in part to the carbon tax, coupled with a largely unregulated sector, the price of energy has risen over 30% in Australia in just four years. This trend is tipped to continue as the industry passes on price increases in coal and gas, and new infrastructure costs onto consumers.
Conditions are also being aggravated by the widely noted deterioration of prompt client payments. The worst offenders? Australia’s large corporations who, in the June quarter, took a staggering 56 days on average to pay their outstanding invoices, forcing SME’s to wait anxiously for much needed funds.
While Aussie businesses are definitely starting to get the right attitude, we’ve got a lot of ground to make up. Post GFC, the average small business owner is saving $1.27 for every dollar spent – but there are still many who don’t have any savings to fall back on at all. With increasingly tough trading conditions, it’s important that every SME has a savings plan, and trading terms that promote healthy cashflow. It’s time to rein in those outstanding debtors, talk to your accountant or business advisor about setting up good savings habits, and ensure that your piggy bank is well fed.
It’s the easiest way to get a good night’s sleep.