With multiple major players in the global economy stirring up trade tensions, it’s no surprise that businesses in Australia and New Zealand are also beginning to feel some adverse effects. While governments in neither country believe that a recession is already underway, both are seeing a notable drop in consumer confidence. The ANZ-Roy Morgan Australian Consumer Confidence index shows that Australia has reached a 2-year low in consumer confidence in July, whilst the Westpac-McDermott Miller consumer confidence index in New Zealand shows an ongoing, but unsteady decline since reaching a high point in 2014.
It’s much more difficult to be successful as a business in those kinds of conditions than when consumer confidence is strong and growing. For retailers, declining consumer confidence typically means fewer prospective customers, decreased spending by remaining customers, and an overall decline in revenues. Then, their suppliers and other B2B businesses are hit as payment times increase and order volumes decrease. In order to grow in this type of environment, businesses need to develop excellent cash flow management, and the financial flexibility to capitalise on every growth opportunity.
Cash flow resilience is essential for dealing with unexpected issues
Increasing consumer uncertainty translates to irregular consumer behaviour. Specifically, customers who feel forced to cut back on spending might forego seasonal purchases surrounding major holidays, or might delay major household purchases. Alternatively, they may become more responsive to incentives and sales events such as Black Friday, depending on their personal financial situation.
In order to succeed in such an environment, businesses need to be able to deal with revenue shortfalls without losing the ability to anticipate and take advantage of future opportunities. A business that, for example, lacks the working capital to properly stock up for the holiday season due to unexpectedly low revenues in the preceding months, may run out of stock when the holiday rush is at its peak. As a result, it will miss out on an important opportunity to recoup its prior losses, and to drive growth. To avoid a scenario like this, businesses need access to alternative funding sources that help them to manage shortfalls, and to take advantage of important growth opportunities.
Get cash flow under control with invoice and supply chain finance
Alternative finance tools like invoice finance and supply chain finance can help businesses get control of their cash flow quickly, and without taking on debt. This not only allows businesses to manage short term budget shortfalls, it also helps them to maintain a healthy debt to equity ratio. This, in turn, is critical to accessing business loans and attracting investors for larger scale growth efforts.
Get an advance with invoice finance
A slowing economy means lower revenues for retailers, but additionally also later payments for their suppliers. In order to keep their operations running, these businesses need a financial boost. Invoice finance allows businesses to get paid for any outstanding invoice, at any time. Instead of waiting for the client to pay, the business simply trades the invoice in to a financier for a cash payment. The financial institution then takes responsibility for collecting the payment from the client, and then pays any remaining funds. This eliminates the issue of delayed payments, ensuring that businesses always receive the revenue that they’re due for work that they’ve already done.
Supply chain finance frees up short term capital
A great way to access short term capital is to use supply chain finance. For example, a business can use it to access funds to stock up for a seasonal increase in demand, such as the holiday season. Instead of needing to pay suppliers immediately using their own working capital, a financier issues payment on the business’ behalf. Payment to the financier is then deferred by up to 90 days, giving the business the time it needs to generate profits from the investment before the payment is due.
These versatile financing tools can be leveraged to manage all manner of short term cash flow issues. This ensures that businesses don’t have to deal with operational interruptions, and that they don’t destabilise their own supply chains by delaying their own outgoing payments to make ends meet. Most importantly, they don’t involve taking on any new liabilities, meaning that these cash flow adjustments don’t appear on the business’ balance sheet. That means that, when the time comes to set up and execute a larger growth plan, businesses can count on their clean balance sheet to help them get the loans and investment they need.