Cash flow is the life blood of any business.
Many businesses are having cash flow issues. Maybe it is from losing customers, or customers not paying on time, or customers taking time to place orders. Maybe is is that the outflows (expenses) are higher than the inflows (revenue).
What ever the cause or reason, maintaining cash flow is crucial.
Lack of cash flow is one of, potentially the most common, cause of a business to fail.
The economy is facing uncertainty, having capital gives you confidence.
A good safety measure for cashflow is to have 3 months is capital as a reserve to ensure that your business can keep operating even with short term cash flow pressures.
By 3 months, I mean enough money to cover all your expenses (outflows). So, if you expenses are $25k a month, you should have $75k in capital.
That 3 months of capital, and by capital I mean either cash, or a working capital facility like an overdraft or line of credit, can save your business.
It can also mean you are in a better position to get opportunities. For example, you have more money in the bank so you can bid more aggressively on pricing a new project, or you might be able to order more stock and negotiate a discount with your supplier for upfront payment.
You might even get the opportunity to acquire another business, one of your competitors, because they might not have the capital to keep running and you could buy market share.
We work with around 50 banks and non-bank lenders for all sorts of cash flow lending solutions.
Some of them use property as security to get a lower rate, some of them use your business assets like invoices or equipment, some are unsecured.
The right solutions depends on your business, how much you need, when you need it, and what security you have or want to use.
If you want to boost your cashflow and put in a working capital facility the time to do it is before you need it so we have time to explore all the options for you.
Reach out to me anytime to discuss what options there might be and to see how we could get you the 3 months capital needed to keep confidently running and growing your business.
In this month’s newsletter, we’ve got a diverse mix of stories covering everything from economics and tax to business loans and car finance:
Inflation rises to 4.0%
ATO issues tax advice
Business loan tips
Big jump in EV sales
Read more below.
Inflation has still not been tamed, with the consumer price index reaching 4.0% in the year to May, according to the Australian Bureau of Statistics (ABS). That compares to 3.6% the month before and 5.5% the year before
That said, the inflation picture is slightly better than it first appears, with the ABS's head of prices statistics, Michelle Marquardt, noting that the headline inflation rate is often impacted by items with volatile price changes, like petrol, holiday travel, and fruit and vegetables. Excluding those items from the consumer price index, underlying inflation was still 4.0% in May – but had fallen from 4.1% the month before and 6.4% the year before.
One significant contributor to the headline inflation rate was electricity prices, which rose 6.5% in the year to May, compared to 4.2% in April.
Out-of-pocket costs for electricity are gradually increasing as rebates from the federal government's Energy Bill Relief Fund are progressively being used by eligible households.
“The introduction of the Energy Bill Relief Fund rebates from July 2023 has mostly offset electricity price rises from annual price reviews in the same month. Excluding the rebates, electricity prices would have risen 14.5% in the 12 months to May 2024,” Ms Marquardt said.
The Australian Taxation Office (ATO) has provided helpful advice for paying less capital gains tax (CGT) at tax time.
“You can reduce the capital gains you've made [in the 2023-24 financial year] by offsetting them with your capital losses from [2023-24] or previous years to reduce your CGT. However, you need to use the losses you’ve carried forward from previous years first. If these losses reduce your current year gains to zero, you can carry over any remaining losses to offset future gains for as long as you need,” according to the ATO.
The ATO also noted that you can choose which gains to offset with your losses. “The only exception is gains you make from collectables, including artwork, jewellery and antiques. You can only use a capital loss from collectables to offset a capital gain from collectables. Think carefully about which gains you want to offset first. Starting with gains that aren’t eligible for the CGT discount will help reduce your CGT as much as possible.”
Companies are allowed to deduct previous net capital losses from capital gains in the 2023-24 financial year provided the company is either still in the same line of business or substantially under the same ownership and control.
One of the keys to maximising your company's profitability and success is to be able to access the right loans on the right terms at the right time.
There are a range of criteria that will affect your ability to secure favourable borrowing terms, or even qualify for a loan:
The financial position of your business. That includes your assets and liabilities; it also includes your income, savings rate and profitability, as well as their trend line (i.e. whether they're getting better or worse).
The purpose of the loan. The stronger your business case, the more confidence lenders will have in your ability to repay the loan.
Your credit history. Lenders will want to know how well you’ve managed previous loans. Late payments or defaults would be concerning, but not necessarily deal-breakers.
Other criteria also apply, which can vary from lender to lender.
Applying for a business loan can be very difficult to get right on your own, but is a much smoother process when you work with a broker who understands the different credit policies of numerous lenders.
More and more consumers and businesses are switching to electric vehicles (EVs), based on the latest data from the Federal Chamber of Automotive Industries (FCAI).
Of the 632,412 new vehicles of all kinds that were sold in the year to June, 50,219 were EVs – up 16.5% from the year before.
“We hope to break the significant milestone of 100,000 EV sales in 2024,” FCAI chief executive Tony Weber said.
There are three ways to finance an EV purchase – visit your regular bank, use dealer finance or consult a specialist broker.
The problem with approaching your bank is lack of choice. Obviously, your bank will only push its own products; it won't tell you about better car loans being offered by other lenders.
Dealer finance has the same problem: car dealerships generally work with just one lender, or a handful, which means they won't compare the market on your behalf.
But when you consult a specialist broker, like me, you get a couple of big advantages. First, I work with a diverse panel of lenders, so I can shop around for you. Second, I'm a finance expert, which means I can recommend a lender that will suit your scenario.
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