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Are we headed for another downturn?

Batten down the hatches! Are we headed for another downturn?

How can you prepare?

The next 12 months looks bleak for businesses. The manufacturing industries as well as the retail industries will suffer the most. Weak consumer sentiment, the Carbon Tax disaster along with the high Australian dollar coupled with the possible ripple effect from problems overseas will make for difficult times this year. There is however one positive, unemployment, staying steady at 4.9%.

As I write this article, the interest rate result for this month is about to be announced, with upward pressure on rates, if it doesn’t happen this month then I feel that the inevitable it will happen next month.

With the high Aussie dollar, Australian manufacturers have had to lower their prices by up to 40 percent compared to a year ago to stay competitive. This makes competing with overseas almost impossible. My main concern is that the manufacturing industry is one of this country’s biggest employers and with businesses starting to feel the hurt, unemployment looks to be on the rise. With all this happening, it’s vital business owners develop a strategy to stay ahead.

Developing a strategy to combat against the volatility of the next 12 months is the only way forward. You’ll need to determine what stage your industry is in and how your market is reacting. You should look at your current strategy and look at identifying new opportunities. As a business you need to differentiate yourself and give consumers a reason to spend their hard earned cash with you.

In times like these, cashflow will be your biggest issue. Debtors are paying in 30 to 60 days but creditors still want their payment within 7 to 14 days. A cash flow forecast with a strong focus on collections is how to keep your head above water. You need to know when your money is coming in and what money you need to pay out on a weekly basis. Businesses these days should know what their break even point is on a weekly basis.

Reviewing your strategy is not always at the top of businesses to-do list, but I can’t stress enough that if you get this right and you’ll still be here at the end of the next 12 months. Get it wrong and you may be looking for a job.

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Brad Callaughan

Brad Callaughan

Brad has more than 9 year’s professional accountancy experience. Brad has worked in senior management roles within Taxation and Business Services dealing with a number of clients from a range of business sectors. Brad is an avid property investor and renovator and has always been involved in small business ventures since the age of fourteen. Callaughan Partners was formed to deliver and exceed our client’s expectations; the continuation of this is the driving passion and focus of our business. Brad enjoys developing his own business interests and property portfolio along with his interests in golf, horse and dog racing, sports and fishing.

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