As the economic landscape evolves, business owners face various challenges shaping their operations and future-proofing their businesses. Looking at the trends we’re seeing in 2024, it’s clear there are several critical issues impacting industries, finances, and risk management strategies.
ATO Debt Collection and Financial Constraints:
One significant trend reverberating within businesses is the Australian Taxation Office’s (ATO) continued pursuit of outstanding tax debts. There’s been a reversion to utilising the full spectrum of debt collection tools available to them, including Debt Payment Arrangements (DPAs) and the reinstatement of garnishee notices – a strategy put on hold during the COVID era. This resurgence in debt collection methods poses a challenge, especially with increasing interest rates affecting borrowing capabilities. So, accessing finance, mainly through tailored financial avenues, might become more challenging, potentially leading to an upsurge in business insolvencies.
Mitigating Customer Insolvency Risks:
Another pressing concern is navigating the challenge of customer insolvency which can leave a business vulnerable if expected revenue is not received. Addressing this challenge requires meticulous monitoring of customer collections, vigilantly tracking outstanding debts, and the proactive management of slow-paying clients. Sticking to sound financial practices is critical. Delaying or neglecting debt collection can inadvertently transform businesses into unwitting financiers for their clients. It’s essential to avoid over-reliance on clients/customers whose delayed payments could lead to severe financial setbacks.
Navigating the Payment Cycle:
Managing the payment cycle is a delicate balance for businesses, especially smaller enterprises dealing with larger customers. Neglecting active debt recovery processes could result in significant losses when clients experience financial challenges. Prompt communication is an effective debt collection practice, starting with friendly reminders when payments exceed standard trading terms. Consistently escalating the tone of communication, as necessary, helps to convey the seriousness of outstanding payments without jeopardizing business relationships.
Continued Construction Challenges:
Looking ahead, the outlook for 2024 maintains or intensifies current challenges. Industries like construction grapple with labor shortages, supply chain disruptions, and escalating costs. The demand for construction projects and potential interest rate hikes continue to strain the industry, creating economic rippling effects.
Strategies for Business Resilience:
To prepare for the anticipated challenges, businesses must reevaluate cost structures, eliminate unnecessary expenses, and ensure short-term profitability. Adopting a proactive approach to passing increased costs onto customers, maintaining flexible contract pricing, and conducting regular cost reviews are instrumental in mitigating financial risks.
Personal Resilience Amid Turbulence:
In times of uncertainty, personal resilience is equally crucial. Seeking advice from trusted advisors—accountants, lawyers, and experienced professionals—offers invaluable perspectives. Open discussions about challenges and seeking external viewpoints can guide decision-making during uncertain times.
Moving Ahead in 2024:
While the challenges of 2024 loom large, understanding these trends and adopting strategic measures can equip businesses to navigate the complex terrain. Proactive debt management, strategic financial planning, and fostering resilience through sound advice and prudent decision-making will be pivotal in weathering what comes and steering towards sustainable growth.
If we can help you or your clients navigate the challenges of 2024 please reach out for a confidential discussion.
Disclaimer
This information and the contents of this publication, current as at the date of publication, is general in nature to offer assistance to RRI Advisory’s clients, prospective clients and stakeholders, and is for reference purposes only. It does not constitute legal or financial advice. If you are concerned about any topic covered, we recommend that you seek your own specific legal and financial advice before taking any action.