Why it’s more important than ever to improve your working capital position, and the best ways to go about it.
Is your business struggling to access liquidity for financial flexibility? You’ll probably find that you’re not as alone as you think.
Is your business struggling to access liquidity for financial flexibility? You’ll probably find that you’re not as alone as you think.
Cloud accounting software is a fast growing and popular resource for many small and medium business owners. On 30 September 2019, Xero announced over 2 million subscribers globally. While it took more than 10 years to accumulate the first million subscribers, it took just 2.5 years to add the next million. In addition to this, Quickbooks has over a million paying subscribers, with MYOB is on track to hit its first million in 2020 (and these aren’t the only providers on the market).
Have the economic impacts of COVID-19 left you searching for new ways to not only keep your business above water, but make it even more successful than it was before?
It’s a common misconception that getting finance for your business is always time consuming. Although that is still often the case with traditional business loans from banks, there are now faster, more efficient means of financing your business.
The economy in Australia is slowly improving as things start to get back to normal after the effects of COVID-19. While this may be the case, it’s still tricky for businesses to obtain finance at this time, as banks and lenders continue to be cautious about approving prospective borrowers.
Consistently looking at methods of improving your business’ cash flow is key to maintaining a healthy and successful company. But as Australia enters its first recession in 29 years, it’s more crucial than ever before.
Owning and running a small business is an exciting and rewarding journey for many business owners, although more often than not, the challenging part of this process is finding the right funding to help the business grow and thrive. Funding falls primarily into two categories: "debt financing" (getting a loan) and "equity financing" (selling a share of your business to investors).
It’s no secret that for many businesses, we’re entering a period of great uncertainty due to the impacts of the COVID-19 pandemic. After months of some businesses receiving little or no revenue, the worst may be yet to come for Australian businesses.
Remote working has increased dramatically as a result of the coronavirus pandemic. With almost everyone who is able to do their job from home currently doing so, businesses have had to shake up their policies on working practices. It’s also looking like after the pandemic is over, these policy shifts will stick.
Are you looking to keep your business afloat during these difficult economic times? Perhaps you’re searching for ways to grow your business, or to start to take advantage of bigger contracts? Whatever your goals are, understanding working capital is paramount to the process.
In a time of uncertainty, it’s hard to know who to rely on. This time last year, 33% of Aussies reported a loss of faith in the banks as a result of the Banking Royal Commission. As of 5 May 2020, Treasurer Josh Frydenburg announced that banking reforms recommended by the royal commission would be delayed to allow banks to deal with the coronavirus outbreak.
It therefore goes without saying that many small business owners looking for assistance from the banks during the coronavirus outbreak might be fearing imminent disappointment - or have already been met by it. And while the Australian Government’s Coronavirus SME Guarantee Scheme seems like a guiding light amidst the current economic darkness, how much can we rely on the big banks to help our small businesses in this time of need?
With more customer-owner banks, non-bank and fintech lenders being approved for the scheme, is there a better option when it comes to acquiring business finance during COVID-19? In this article we discuss how the scheme works, which customer-owner or non-bank lenders are currently participating, and how you can make the best decision when applying for business finance.
The Coronavirus SME Guarantee Scheme is a part of the government’s second-wave stimulus package aimed at helping Aussies survive the impact of COVID-19, announced on 22 March 2020.
Businesses struggling as a result of the coronavirus pandemic are able to access government backed business loans via approved lenders. Loans under the scheme:
To qualify for finance for the scheme, businesses must have an annual turnover of less than $50million and be facing hardship as a direct result of the outbreak.
Lenders participating in the Coronavirus SME Guarantee Scheme consist of a combination of banks, customer-owned banks and non-bank lenders.
*All data was sourced from treasury.gov.au and was accurate as of 13/05/2020
Customer-owner banks, also known as credit unions or mutual banks, are banks of which the shareholders are its customers. Generally, customer-owned banks put their profits back into providing better rates and fees for their customers.
The term ‘non-bank lender’ generally refers to lenders that are not ADIs (Authorised Deposit-Taking Institutions). This means that they cannot accept deposits from members, e.g. current accounts or term deposits.
Unfortunately, there's no cut and dry response to this question. This is because your answer will likely depend on the unique financial circumstances of your business.
However, business owners should be aware that while loans under the Coronavirus SME Guarantee Scheme are designed to help businesses that are struggling as a result of pandemic, the bigger banks have stated that they are not available to businesses that may have been facing earlier financial issues.
Commonwealth Bank group executive of business and private banking Mike Vacy-Lyle stated on the subject:
“There are unfortunately going to be some businesses that we end up saying no to. For a business that was in difficulty pre-coronavirus, we cannot use a coronavirus guarantee to help that business.”
How a pre-existing difficulty will be determined by the banks is uncertain, but it may prove problematic for businesses in need of finance who naturally face factors such as seasonal cash flow fluctuation, or those who have less than perfect credit histories.
Invoice finance can be a great way to unlock capital tied up in your unpaid invoices. There are two main types of invoice finance: Invoice factoring and invoice discounting. While similar in nature, there are some notable differences. Find out more about invoice factoring below, how it differs from invoice discounting, and whether it’s right for your business.
Cash flow for Australian businesses has already taken a hit en masse as a result of the recent pandemic. And unfortunately, many businesses are predicting the situation only to worsen in the near future.
Invoice discounting is a form of invoice finance. Invoice finance, also known as debtor finance or accounts receivable finance, is a common way for growing businesses to fund increasing working capital requirements, by unlocking the capital tied up in unpaid invoices.
Winning a big new customer is exciting and has many obvious benefits for a small business. But an over-reliance on one or a few big customers also comes with risks that business owners need to be aware of and manage accordingly.
Typically, the tightest month of the year for Aussie businesses is February. With Xero Small Business Insights reporting just 47% of Australian small businesses having positive cash flow, on average, over the past five years. February is a tough month for businesses, as invoices tend to be paid later than in other months. It’s also a time when to fork out for stock top ups post Christmas period. All factors which can contribute to a negative working capital.
More and more Australian small businesses are sold on the benefits of cloud accounting software and are making the move. Easy-to-use platforms like Xero save small business owners time and effort with bookkeeping and provide useful information to help with better decision making. Cloud accounting software has been a game changer for millions of business owners in how they run their business, and a lesser known benefit is that it can help Australian small businesses access business finance more simply than in the past.
You may have heard of invoice finance and how it can be a great option for businesses looking for some extra cash flow to support growth. In this blog we answer the two big questions: What is invoice finance and how does invoice finance work?
The use of cloud accounting software by small businesses is skyrocketing. On 30 September 2019, Xero had 1.2 million subscribers in Australia and New Zealand alone, which was a 28% increase on the previous year. MYOB, Quickbooks and other accounting software businesses are also quickly improving their online products and growing fast.
We’re picking up from where we left off in Part 1 of this series. Here are some more ideas on how to best prepare yourself and your business for 2020 so you can start the new year strongly.
The end of 2019 is almost here but before starting to wind down too much, it’s worth putting some thought into what your business will look like in 2020.
Running a successful business starts with the fundamentals and getting those little things right makes all the difference. Focus on these and you’ll build a strong foundation for the coming year. So if you’re a small business owner, here’s our to do list to prepare for 2020.
According to a study conducted by Deloitte, 200,000 Australian SMEs leaders have difficulty accessing capital in order to grow and expand their business. And, as we discussed last time, when small business owners are faced with the daunting task of borrowing money from banks, it can be a stressful and time-consuming process – particularly if they’re newly established. And if businesses don’t have any real estate assets to borrow against, the odds really aren’t sitting in their favour.
Running a business isn’t easy. It’s all consuming, ever-changing and with the wave of digitisation, means modern businesses are practically running 24 hours a day, 7 days a week. Many people will remember the 'Crackberry' almost 20 years ago as an early catalyst. It was one of the first mainstream personal devices that allowed people to send work emails from home which was not great for work-life balance, but fantastic for showing your boss that you're still beavering away at midnight!
Fast forward to today. With the proliferation of smartphones and the heightened need for instant gratification, most goods and services can be bought, sold or shared in just a few clicks. And just like the modern 24 hour news cycle, the business environment has become much more dynamic and fast-changing. It's become necessary for business owners to keep up or be overtaken by more agile competitors. A lot of aspects of running a business have kept pace with the changing world and cloud accounting is a great example of this. However, until recently, accessing business finance has been lagging developments in other areas.
Traditionally, your local bank – most likely the one you have banked with since you were a kid – would be your first port of call for some funding for your business. They would have asked for a business plan, reams of supporting documents, probably a mortgage on your home, and with a little luck you might have received an approval two months later.
These days, the process for applying for business finance from a bank is pretty much the same and they take just as long to give you an answer. The main difference for small businesses is that the outcome is commonly a 'no'.
Now, that’s not to say banks won’t lend to you. They're generally very happy to lend to large businesses and are more comfortable if you put your house up against it as collateral. Outside of this it can be a drawn out, frustrating and ultimately disappointing experience for many small businesses.
Managing cash flow is an ongoing task for any business owner and can be challenging at times. Cash flow stress can be due to a range of factors including extended invoice payment terms, clients slow-paying their invoices or simply the need for a short-term cash boost to take advantage of an attractive business opportunity. Even the most established and successful businesses can be confronted with cash flow issues, creating stress for the business owner, impacting growth and sometimes even the viability of a business. With this in mind, there is a good chance that you may one day need to access funds to keep your business sailing smoothly and this week's blog aims to help you better understand the difference between invoice finance and unsecured business loans.
Akansh Prasai, Director of Talent Crowd, has always had a deep passion for technology. As a curious child, he’d take apart his Nintendo console and put it back together to understand how it worked.
Akansh has enjoyed a diverse career in the IT space from managing technology support teams right through to developing a niche skillset in the area of technology recruitment. It was in 2014 that he founded his first business: a technology recruitment firm built on the principles of integrity, transparency and trust. “I found this area of IT to be deeply rewarding, but eventually felt restricted by traditional recruitment firms, who valued profits over building long-term relationships with clients,” Akansh says.
The timely payment of income from our employers keeps us going; it helps to pay for our day-to-day expenses – the mortgage, electricity, water, phone bill, loans and groceries.
You could say that mastering the art of business cash flow can be compared to mastering the art of balance and equilibrium. It’s all about knowing what’s coming in, whilst managing what’s going out. Whether you’re an established small business or right in the start-up phase, having a clear understanding of cash flow is imperative and is the key to long-term growth.
Even if your business model is second-to-none, you’re showing signs of profitability and you have investors knocking on your door, you simply won’t survive if you can’t manage your business’s cash flow. Cash is the lifeblood for any business, keeping it afloat. If you don't have cash in the bank to support this, there’s a good chance your business will sink very quickly.
Kate Chalker is the type of person you want in charge of a growing business. Intelligent, enthusiastic, and articulate, she has the air of someone who while juggling multiple balls at once is always in control.
As we discussed in part-one, while delayed payment on accounts payable is often accepted among the business community as a fact of life, it can have serious ramifications on small businesses.
Managing working capital and ensuring that you have access to cash when you need it is a critical part of being a business owner. However, according to Xero Small Business Insights, only 56 per cent of Australian small businesses were cash flow positive in December 2019.