Fair Work Ombudsman (FWO) Sandra Parker issued a statement on 6 January warning employers that they face penalties and back-payments if they’re found to have misclassified independent contractors as employees. This comes as the FWO launches a crackdown on employers who illegally treat workers as contractors, even though their work relationships entitle them to be regarded as award-governed employees.
Cash flow interruptions can have dangerous knock-on effects on businesses by disrupting their operations, and sometimes also those of their suppliers. That’s because, by the time a business is aware of an impending budget shortfall, it often has to take extraordinary measures to come up with the funds it needs. Taking out loans can take weeks or months and businesses need solutions in time to make upcoming payments.
For many businesses, a lack of healthy and predictable cash flow is the single biggest barrier to success. This is illustrated by ASIC’s most recent insolvency report, which shows that inadequate cash flow is the most common cause of business failure. Of 7,498 administrators’ reports lodged in the 12-month period before June 2019, 51 per cent indicated this as the most common cause of insolvency. The top industries affected were manufacturers, wholesale traders, and accommodation and food services.
Despite an ongoing trade war, and other occasionally troubling indicators in the global economy, Australia and New Zealand have maintained growth in their economies in 2019. Today, though, businesses rely on the global economy to facilitate their growth—simply ignoring global economic developments is not an option. This is highlighted by the World Bank’s stark warning on 20 December 2019 that financial markets may face another global crisis. Businesses need to be aware of, and manage the risks that their national and global economy faces while pursuing their own success.
It’s easy to get distracted by the daily challenges of leading a business. Business owners and leaders are always faced with an endless to-do list, usually forced to prioritise the most immediate short-term threats. For all but the most disciplined, that inevitably means that long-term concerns like growth strategy are sidelined, eventually falling off their radar entirely. To get back on track, they need to improve cash flow management, strengthen their supply chain, and ensure their ability to access growth capital and investment.
Late payment is the single most common type of cash flow interruption faced by businesses all over the developed world. Faced with growing scrutiny from the ASBFEO, the Australian government, and major businesses in recent years, it’s become a high profile issue concerning particularly SMEs. Cash flow interruptions, like late payments, can hamper a business’ ability to grow, interrupt growth plans and make it extremely difficult to budget reliably for the future.
Businesses are complex organisations’ that rely on the seamless integration of many different parts to function. Managing cash flow, production, quality control, sales and marketing, taxes, payroll, and human resources is more than enough to occupy the time of any leadership team.
While the period leading up to Christmas represents a growth opportunity for businesses, the summer holiday itself presents a number of significant cash flow challenges. After the holiday rush, businesses are still left paying for parties and holiday bonuses, leaving their budgets strained. Because of this, many don’t have sufficient working capital on hand to manage their costs during the month-long quiet period.
A business can’t make money without first spending it. Traditionally, that means using saved working capital, a line of credit, a business loan, or investor support to fund operations. Those funds are then invested in the business’ operations, purchasing supplies, paying for labour to create products, and spending to market and sell those products. Then, once the products or services are sold, the business can collect its revenues and earn a profit.