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Published 09 January 2013 08:48, Updated 14 January 2013 07:15
With a recent survey showing that Australian small businesses are the least optimistic within the Asia-Pacific about the 2013 economic outlook, there may be a need to revisit your business strategy.
“While businesses may experience uncertainty, opportunities will still emerge,” says CPA Australia’s business policy adviser Gavin Ord. “Don’t turn a blind eye to such opportunities if they are consistent with your strategic direction and can be properly funded.”
He says business owners may also need to create opportunities by seeking out new markets, especially in Asia. “Indonesia and Malaysia are economies with very high business confidence that could be markets for your product or services,” he says.
CPA Australia has five main tips to kick-start 2013:
1. Reduce your reliance on external debt
The CPA Australia Asia-Pacific Small Business Survey 2012 released late last year found that Australian business leaders were more likely than their Asian counterparts to draw on cash reserves. Notably, 75 per cent of 500 Australian small businesses surveyed ran down their cash position because they couldn’t get bank finance.
The survey also found 47 per cent of Australian business operators using personal credit cards to finance business activities over the past year.
Improving cash flow can free up money to fund necessary purchases or investments without having to seek external finance and can be used to pay down debt. To improve cash flow:
·Follow up on outstanding debts.
·Prepare regular cash flow forecasts.
·Prioritise your marketing to products and services that can be turned into cash quickly.
·Make full use of your suppliers’ payment terms, but don’t pay late.
·Reduce stock levels and replace slow-moving and obsolete stock with stock that has a faster turnover.
·Sell unnecessary assets.
2. Improve business productivity
You’ve heard it time and time again, but getting more from your assets and staff is crucial. Businesses should:
·Evaluate performance – collect data on business performance and compare it to the previous year’s performance, industry benchmarks and strategic goals.
·Identify the business key drivers and areas for improvement, areas of risk and trends. Set goals accordingly.
·Monitor the effectiveness of evaluations, adjusting the strategy if necessary.
3. Review your cost structures for savings
Businesses are under pressure to cut costs. This week’s Dun & Bradstreet’s National Business Expectations Survey of 1,200 business owners and senior executives across Australia showed the outlook for selling prices during the first quarter of the year fell to a historic low.
When cost rises can’t be passed onto customers, it’s harder to control costs. To prevent cash flow issues and risks to the viability of a business:
·Review costs under your control. Be strategic in cost-cutting as it is not uncommon for businesses to cut aggressively, only to have to reverse some of those cost-cutting measures later on.
·Don’t be afraid to ask suppliers for discounts and change how and when they deliver stock to your business. For example, business owners can reduce warehousing costs if suppliers give “stock on consignment” or if they supply on a “just in time” basis.
·Compare business cost structures with other businesses in your industry and with your past results to identify areas for improvement.
4. Adopt appropriate risk management strategies
Uncertain times may expose your business to risks that threaten its viability. Reduce the following risks:
·Relying too heavily on a small number of major customers.
·Relying too heavily on one supplier.
·Relying too heavily on one type, or source, of finance.
·Selling on credit without appropriate checks and not following up late payments.
5. Review your business plan for the changed environment
Revisit your business plan and budgets and amend them to reflect current and expected circumstances.