Survival guide for Aussie businesses published

Tips and tools on how to conquer the fiscal finish line revealed

Survival guide for Aussie businesses published

Australian businesses face a challenging FY24 based on leading economic indicators, with many having to navigate a game of survival, according to a commercial credit reporting bureau.

CreditorWatch published its End of Financial Year Survival Guide 2023 to provide businesses with tips, tools, and expert insights, so they can gear up for the next 12 months.

The guide includes an economist’s perspective of the outlook for FY24, as well as industry-leading guidance on how to optimise cash flow and recognise the early indicators of insolvency. It also tackles major changes to Australia’s historically unfair contract terms, which will take effect in November.

Challenges facing businesses

Anneke Thompson (pictured above), CreditorWatch chief economist, said businesses face significant challenges in the 2024 financial year – especially those in the discretionary goods and services sector.

“The impact of the Reserve Bank of Australia’s 11 cash rate increases will have been felt by approximately 40% of Australian households with home loans by September 2023,” Thompson said.

Retail trade volumes are already declining despite nominal retail turnover increasing due to inflation. Australians are spending more on fewer items, depleting their savings, and causing consumer confidence to reach record lows.

“Consumer sentiment is unlikely to improve until there is certainty that the monetary policy tightening cycle has peaked, which is still several months away from any potential cash rate cuts by the RBA.”

The report said that there will be considerable changes in labour force dynamics in the coming year. Despite some confidence in job security and wage increases shielding the wider economy from higher inflation and interest rates, unemployment rate is tipped to continue lifting, due to the combination of the decline in job vacancies and the rise in labour supply through migration. This trend is expected to create unease among workers and drag down consumer spending further.

The food and beverage industry, in particular, faces significant risks in the coming year – this despite strong trading conditions, CreditorWatch said. Rising and unpredictable supply costs, coupled with softer demand, have been identified as key challenges for restaurants and cafes. Despite labour supply becoming more accessible, the anticipated sharp rise in energy costs, particularly gas, in September will have far-reaching implications for energy-intensive sectors. The worst of inflation may be over, but increasing energy prices, high interest rates, and rents will continue to limit consumer spending, which in turn, will result in increasingly difficult trading conditions for Australian businesses. 

Strategies for businesses to get ahead

As we head towards FY24, businesses should be aware of the challenging economic landscape and adapt their strategies accordingly. 

Within the report, Glenda Lewis, president and CEO at Step Out. Transform., talked about the importance of businesses optimising their cashflow. This can be done through such activities as filing tax returns quickly, invoicing promptly, offering early payment incentives, accepting multiple payment methods, and assessing their cash conversion cycle.  

Macpherson Kelly’s Prue Greenfield, principal lawyer of litigation and dispute resolution, and Eliza Sinclair, lawyer of trade and commercial, analysed the recent changes to unfair contract terms, offering counsel on what the changes mean for consumer and small business contracts, including the greater consequences for those that breach the contracts, and increased powers for the courts assessing them.  

Rachel Burdett, senior partner at Cor Cordis, identified 11 key warning signs businesses can use to assess whether a business is heading for insolvency. Burdett provided guidance on how to navigate risk and governance requirements and discussed the importance of evaluating your own and your partners’ business practices.

CreditorWatch CEO Patrick Coghlan said there’s plenty to be hopeful and excited about despite the adversity facing many Australian businesses.

“The businesses that have weathered the storm of the pandemic have now emerged as leaner, more efficient entities, fuelled in-part by the power of digital transformation,” Coghlan said.

“Those that now take proactive measures to prepare for the challenging conditions ahead and push to achieve their healthiest financial position possible, will gain a significant advantage over their competitors when conditions improve.”

Click here to download The End of Financial Year Survival Guide.

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