Signum Business Advisers, Chartered Accountants, Parramatta, NSW

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The Year That Was - 2010

2010 was certainly an improvement on 2008 and 2009, however there were still many problems affecting Small Medium Enterprises (SMEs). 

Economic growth was approx. 3%, and unemployment approx. 5.1%.  The inflation rate is just under 3%, cash rate (as set by the Reserve Bank of Australia) was 4.75% on the 6 December (not quite the 5% forecasted at the beginning of the year) but it is expected to continue to rise in early 2011. 

The relationship between the Australian dollar and US dollar has fluctuated; it is currently around 98¢ to the US$1.  The strength of the Australian dollar, as compared to forecasts at the beginning of the year (when most economists thought it would average at around 82¢ for 2010) indicates the strong pressure being suffered by the US economy, higher interest rates in Australia and Australia's safe haven image. 

The Chinese economy has continued to grow and this has been the most significant event that has enabled Australia to avoid many of the problems associated with the global financial crisis.  Banks have continued to tighten their lending criteria and, unfortunately, liquidators are forecasting increased activity for their profession during 2011.  The Fair Work Act is now fully operational and a number of prosecutions have already been conducted against small business and significant fines assessed for alleged misdemeanours against the Fair Work Act requirements.  This highlights the necessity for SMEs to be fully aware of their obligations under the Fair Work Act, or to retain competent industrial relation advisers.

The economy is still running on a two speed basis around Australia, with Western Australia and Queensland benefiting from the mining boom, but even within Queensland there are still major problems with some mining operations not back to full production and the high value of the Australian dollar is causing havoc for many tourism operators.

Cashflow management continues to be the No. 1 concern for many small businesses; debtors' days' outstanding is still very high (approx. 54 days) and, with banks adopting tighter lending criteria, it highlights the necessity for SMEs to be very vigilant in their cashflow management activities.

If you would like to discuss any aspects of your business' preparation for 2011, please do not hesitate to contact us.

Avoiding Christmas Function Problems

Work related functions and events are a major high risk zone for businesses.  Just think of the problems that have occurred at one major retailer in the last year.  With Christmas 2010 fast approaching, perhaps it's appropriate to review planning for Christmas functions.  A recent webinar conducted by Workforce Guardian titled "Christmas Headaches - Functions and Events" referred to the following issues:

• A significant number of complaints and law suits relate to events organised by an employer.
• Protecting employees' health and safety is the employer's responsibility.
• Workplace policies should still apply at a Christmas event, where the same responsibility applies to the employer as it would if the event was held on the employer's premises.
• If an event is being held at the company's premises, it will be considered a work event. 
• If a work related activity is being organised at off-work premises, in virtually every case, it will be considered a work event.
• If managers are going to leave the function and no senior person is left in charge, then the function should be shut down. 
• Care should be taken when hosting events at another venue.  Even when the event has finished and some employees have moved to another venue, if the manager "shouts drinks" and the company pays, should any problems emerge from that post function event, the company will probably be responsible. 

Workforce Guardian advise that, by making appropriate preparation, you can prevent disasters from occurring including:

• send out an email in advance, advising of the event and indicating to employees that normal workplace behaviour standards will be expected at the work related event;
• plan the event in advance because employers have a responsibility relating to protection of employees;
• if you are going to hold a work event in a large bar area that you cannot restrict other people from attending, then perhaps you should move to another site where you can control access to your event;
• prior to the event, have a meeting with the venue management, advising them what your employment policies are and, in particular, insist that food is served with alcohol; and
• a senior manager should be in charge and he/she should adopt a no drinking stance for that function.

Courts have ruled that employers are responsible for safe onward travel after a work sponsored event.  Think about providing taxis for your employees/spouses/partners to ensure their safe return to home.

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Managing Cashflow In Holiday Period

A number of industry commentators have indicated that they believe that sales in the Christmas and New Year period this year will be lower than many business people's expectations.  This looming problem will place additional pressure on many businesses to effectively manage their cashflow over the next 3 months.  Some suggestions for effective cashflow management at this time include:

• prompt despatch of invoices as soon as a sale is complete (rather than waiting till the end of month);
• prompt despatch of November debtors' statements;
• follow up any overdue amounts;
• closely monitoring stock re-orders to determine whether stock reordering can be delayed until the following month so as to move the cashflow commitment away from the holiday period;
• contacting major suppliers now and making arrangements for delayed payments for stock purchases; and
• preparing a realistic cashflow forecast covering the next 3 months (if the cashflow forecasts indicate that short term financial assistance will be required, contact your bank now to discuss assistance).