Are you fully prepared to navigate this year’s January cash flow black hole?
Do you have good cash reserves in your business? Or do ongoing bills keep sucking up your available cash? Are your reserves deep enough to get you through January – when your customers (and their accounts departments🤔) are likely to vanish for several weeks?
In many industries, the great Australian summer shutdown has established itself as an annual cash flow black hole.
As the end of 2024 approaches, yet again we’re facing a whole new level of uncertainty. There are new international political regimes and ongoing international conflict, plus increased ATO pressures, ongoing labour shortages and even higher costs of just about everything.
So this year’s summer “Valley of Death” is shaping up to be a whole lot tougher for a whole lot more businesses than ever before.
Insolvency rates are also on the rise
Accountancy group Worrells formally backed up what insolvency practitioners in my business network are worried about – that failure rates are increasing:
“External administration appointments are currently at record highs. There were 11,053 appointments in FY2024, beating the previous record high of 10,757 in FY2012.” https://worrells.net.au/resources/news/insolvency-update-growth-industry-nobody-asked-for
What this means for many Australian small business operators is that – regardless of how well their own business is tracking – the approaching summer black hole could well take one of their customers to the wall.
One thing HASN’T gone up! The holding costs of a backup credit facility
One straightforward, business-enabling finance tool that can give you some backup against unexpected cash flow disruptions is a non-bank credit facility – such as an unsecured mortgage.
This practical business financing tool offers SMEs some extra liquidity to trade through unforeseen setbacks.
In a post last November, I quoted the holding cost of a non-bank credit facility of $250,000 at $795.
This price hasn’t changed – the holding cost is STILL currently around $795 per year (annual fee).
And for a facility of $100,000 it’s just $495!
If you don’t use the money, then that’s all you pay.
Having that facility means that – If you do get hit by a customer failure (or spot a new business opportunity) – then you have access to the funds you need immediately.
The time to get extra finance – like insurance – is BEFORE you need it!
The time to put a practical, business-building Working Capital Strategy in place to optimise your cash flow is BEFORE you need it – and the earlier, the better.
Checking your cash flow projections on Monday 2nd December and realising then that you need to increase your cash reserves is cutting the decision a bit close.
December is a busy time for finance providers (including their own holiday preparations). It can take longer than the usual 5 days to work out what you need, apply and get your finance approved.
Spring clean your business cash flow strategy BEFORE summer
Check your cash flow projections for the coming 3 months and double check your financing strategy while it’s still spring – in November.
It’s like getting your home fire-ready, checking your fire plan for the summer and checking your smoke alarm batteries – do it early.
If you think that your business could be at risk from the post-Christmas Valley of Death, then schedule a Confidential Working Capital Review today – that way, you’ll be better placed to navigate the looming January cash trap.
