This week there was more uncertainty for small businesses as data revealed insolvencies are up by 20% for the June quarter. Veda, Australasia’s leading provider of business intelligence services and solutions, has revealed this week that insolvency data for the April to June 2011 quarter is up by 19.6% since the height of the GFC in June 2008.
Moses Samaha, Head of Commercial Risk at Veda said:
“Concern over a possible global credit crisis, reduced consumer sentiment and delays in customer payments are no doubt adding strain to business cash flow. Tighter financial and credit management practices will now prove vital for SMEs to avoid the risk of insolvency over the coming 12 months.”
Australia’s small business outlook is confused and uncertain. What should a small business operator do? A good starting point is to plan, to think about what might happen under various scenarios and prepare for these eventualities. Businesses need to take control by managing their cashflow. Mick Devine of Calxa Australia says:
“It may be a cliché but lack of cash is the cause of all business failures – much like lack of oxygen to the brain is the cause of all death.”
Forecasting cashflow used to be difficult and the domain of accountants who charged according to the scarcity of their skills. Nowadays complex spreadsheets have been replaced by specialist software that integrates with existing accounting data to make the process of forecasting a whole lot simpler. This is available to all small business owners so there is no longer an excuse for not looking at cashflow. By running cashflow forecasts for different scenarios, business owners can start to review their options and find solutions that, if implemented early, can save many a business. Once you have a forecast, you know what to expect and you can start taking steps to avoid the worst-case scenarios.
Simple solutions like reducing overheads, tweaking prices or offering add-on value to customers can help to put the brakes on a downhill slide. Probably the most effective of all measures that any business can instigate is reviewing debtor and creditor days. By bringing forward debt collection the business gains capital and reduces its own need for costly credit. The key, according to Devine,
“is in really understanding your business. Knowing what your future cashflow might look like is a big part of that. Being in tune with the business puts you in a good position to minimise risks, see opportunities and take advantage of growth possibilities.”
The future is uncertain for most businesses but the right tools can help to manage that future.
About Mick Devine
Mick Devine is a CPA and CEO of Calxa Australia. He has 30 years’ experience of working in and for small businesses, with a particular passion for budgeting and cashflow forecasting.
About Calxa Australia
Recently voted “Most Outstanding Software for MYOB”, Calxa Australia delivers the leading budgeting and cashflow forecasting software for not-for-profit organisations and small businesses throughout Australia and New Zealand. The Calxa software integrates with accounting systems such as MYOB, QuickBooks and Xero, producing error-free reports quickly and easily. The company’s headquarters are located in Townsville, Queensland.
For more information please contact:
Mick Devine, CEO Calxa Australia Pty Ltd Email: [email protected] Phone: 0433 77 88 05