Get set for growth in 2010
With signs that the global financial crisis is over and the Australian economy forecast to grow strongly in 2010, it’s time to get set for growth. The Commonwealth Bank’s Symon Brewis-Weston explains how to fine-tune your business finances so you can pump up the volume.
It’s official — according to Ken Henry, head of the Australian Treasury, “What people have called the global financial crisis, that has passed, I think it is safe to say.”
Glenn Stevens, Governor of the Reserve Bank, seems to agree. “Now we must turn our attention to the challenges of managing an economic expansion,” he recently told a parliamentary committee.
In its January World Economic Outlook, the International Monetary Fund forecast that the Australian economy will grow by 2 per cent in 2010 and 3 per cent in 2011. That’s a sharp increase on the sluggish 0.5 per cent growth we recorded in the year to September 2009.
For small-business owners, all of this is cause for celebration. Yet it’s also a good reason to re-examine your business finances and make sure you’re in shape for the upturn. Because nothing tests a business like rapid growth — and it seems that growth is what we’re going to get.
Why fine-tune your finances?
As your sales grow, you need to invest more back into your businesses — hiring staff, buying supplies and equipment, perhaps even moving to larger premises. You also have to process more invoices, more payments, more tax and (hopefully) more profits.
That’s why it’s so important to be prepared. Unless your financial systems are fast, efficient and as automated as possible, higher sales volumes can stretch them to breaking point.
If you spend large amounts of time processing payments manually, then you’re facing significantly greater administrative overheads at best. At worst, you could find your finances spiralling out of control, as you scramble to keep tabs on cash flow.
Then there’s the question of how you fund all of that new investment. Depending on the scale of your growth, revenue from sales may not be enough. Once again, the key is to plan ahead and make sure you have access to capital before you expand. Nothing’s worse than trying to find funding when you’re under pressure and time is running out.
So here are some tips to help you re-engineer and stress test your finances ready for the year ahead.
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