February Report - School's back!

Schools back!! Whilst for some there is an audible sincere sigh of relief to see your children return to their respective schools, I hope you all had the opportunity to enjoy some quality time with your kids.
With uncertainty still prevailing in the world economy at the start of 2012, the barricades being put in place against the disaster predicted by a number of economic forecasters appear to be holding. Issues of poor performing foreign economies and natural disasters will unfortunately always bring uncertainty to any market place. With all the considerable economic data available to us, the question for us all is how we appraise this information and the subsequent effects on our respective businesses.
The main economic indicators affecting SME operations in Australia are:
Activity  Indicators: 
1. Gross Domestic product (GDP)
2. Consumer price Index (CPI)
3. Producer Price Index (PPI)
Inflation Pressure & Interest Rates:  
The reserve bank sets an inflation target each year and then uses interest rates as the main lever to control inflation and money supply. The flow on effect of this affects the cost of loans, leases, hire purchase, debtors’ financing etc. 
Foreign Exchange Rates:
How does the movement in the exchange rate affect your business? Should you be taking foreign exchange cover to lock in a rate at the date of the purchase or sale? The movement in exchange rates can affect market performance of business e.g. high exchange rates discourage international tourists from coming to Australia. If you are a manufacturer or supplier of products to tourism business, exchange rate movements can have a significant effect on your business.
Budget Policy:
State and Federal governments can play a major role in economic activity (expansion or contraction) by introducing special support programs, grants, changes in tax rates, and introducing new taxes like the carbon tax etc.
Relevant Global Conditions: 
Australian banks have to borrow billions of dollars offshore each year therefore problems that are being experienced in the Eurozone, USA and Japan, all have an impact on the price of money. That extra pricing is reflected in interest rates and banking costs that are imposed on small business in Australia.
Unfortunately, there is not much SMEs can do to change the factors that influence these indicators, however developing strategies to lessen their impact is something we all can and should be doing. 
A big thank you to our January Business after Hour’s hosts H+H Architects, Wauters Enterprises and Solargain, and to Graham and his team for showcasing ACCI’s fantastic new premises. See you all this month at Main Roads with Fulton Hogan as our hosts.

Trevor Cosh
ACCI President

Welcome to 2012

by Trevor Cosh

I trust you all had a safe and enjoyable Christmas and New Year!

There is no doubt 2011 was a difficult year for many businesses. It was almost a perfect storm when you consider the simultaneous impact of various issues including a number of natural disasters, the continuing global economic downturn, a high Australian dollar, a dramatic rise in utility costs, an ever-increasingly competitive marketplace that continues to squeeze trading margins and a general increase in business costs across the board.

When you combine these issues with continued political uncertainty in Australia and an overall drop in business activity, all have contributed to a very difficult year. Whilst a recent drop in interest rates has provided some stimulus to the retail and property sectors, unemployment in Australia has experienced a recent upward trend.  

So what now for small business in 2012?

Whilst some commentators continue to forecast difficult times with a few claiming the worst emerging financial position for twenty five years, now is probably the perfect time to do some planning to ensure we survive 2012.

Whilst this issue is one every business should seek guidance for from their own profession financial advisors the following will be issues I’ll be looking at in my own business;

• Have you stress tested your business, reviewing cash management control procedures, particularly relating to: debtors, work in progress and compliance with covenants on any current banking facilities;
• Be careful about over reliance on bank overdrafts because banks have been known to suddenly withdraw facilities with little warning to small business. If it is possible to arrange for a business loan to incorporate a bank overdraft facility then this might be a better approach to securing ongoing bank facilities;
• Have you thought about the carbon tax? The effects of this on your business and the changes you need to make to minimize the effect of the increased costs flow through from this new tax on business;
• It is a good time to undertake waste review - could costs be reduced relative to electricity, gas usage, travel expenses and telephone?
• Difficult trading conditions should not stop small business operators from maintaining a good relationship with their team. To survive in difficult times, small business needs the best possible team they can employ;
• Get on the front foot by preparing budgets and cash flow forecasts for the likely trading scenario in 2012 and arrange a meeting with your bank in relation to the facilities required

Who knows what 2012 will bring, but failing to plan is planning to fail. I again remind small business to seek advice from your respective financial professionals.  

And finally, a big thank you to Whale World, Skywest, Busy Blue Bus, Albany Party Hire & Galafrey Wines for hosting this year’s Christmas Business after Hours. The weather posed a few challenges, however the glowing reports of enjoyment by those attended was much appreciated. See you next month when ACCI, H+H Architects, Wauters Enterprises & Dome Café will be your hosts.

Happy new year