Everytime a new headline appears about interest rates and inflation, it seems dire and can be scary for anyone, let alone business owners who have themselves and a team to take care of. If you’re a business owner, you know this first hand. It can get to the point where you equally want to avoid news on the subject, but feel responsible for staying on top of the information. So, when it comes to rising interest rates and inflation, what does it actually mean for business? Should you be worried? Or is it all a bit of hyperbole?
We can’t deny or escape the fact that inflation is happening. We only have to see the rising total on grocery and fuel receipts to see the scaling cost of living, and we know that instability overseas, the interest rate announcements and new government (for better or for worse) are tangible markers that things are changing. However, perception can be your reality, and you can have some control over moving the needle in this regard.
The impact on business is not going to be one single thing. You may have higher outgoings, a change in your tax responsibilities, and issues with staff onboarding and retention, but the impact really hinges on the impact these things will have on your customers; what is their foreseeable future? How does that impact their business or buying behaviours? Your customers are your business. So, start there.
For example, Covid had a huge impact on a lot of businesses in Australia (globally, for that matter). But, some businesses were able to improve their position purely because their service or product was beneficial to the changing market (food delivery services, for example), while other businesses had the capacity to pivot to suit the changing market (adding delivery to their service). The market dictated the success or failure of businesses, not simply if their own outgoings had increased.
You can only control what is going on for you, your business and your customers. Identifying their potential hurdles, pain points and opportunities will better help you identify the impact these changes will have on you, and give you foresight to adjust your business strategy accordingly, where possible.
A great way to stay in front of any hurdles is to continually monitor your financial position and future cashflow. During these times you should be looking at your financial projections for 2022/23, both profitability and cashflow. Consider your budgeted income and capacity to be able to achieve any marketing strategies for new income. Review your margins, labour costs and overhead expenses. Assess whether costings or greater efficiency can be actioned.
Debt Collection and review of debtors is also important. Do you have any ‘at risk’ debtors that need urgent attention? Are all of your clients able to pay for future work? What actions may be required?
Understanding your financial position, now and expectations for the future are essential in keeping yourself afloat and staying ahead of the pack.
Also, monitor your personal debts. This could become intrinsically tied to your business’s position through the next financial year and should be given equal consideration.
This will be dependent on the work you do today to fully understand every facet of your business, and the financial stability forecast for the next year. In saying that, we understand that this can be incredibly overwhelming when you are busy taking care of the product or service you offer. Maxim are experts at supporting business owners through times like this, offering sensitivity testing, business advisory, personal and professional mentoring and helping you generally to address and monitor all concerns, or prospective concerns.
The best course of action is to act now, assess, stay alert to changes, speak up for advice when you need it and never be silent about concerns of impact to your business – voicing them might be the very thing needed to overcome them.