Trading in Tough Times – Accountant Balcatta

Business from an Accounting Perspective – Accountant Balcatta

Author │ Simon Liddicoat – MAS Tax Accountants Duncraig-Warwick

Trading conditions in the Balcatta and surrounding areas have recently hit some difficult times. Many of our business clients from differing industries have noted a shift in customer demand and tightened spending. To assist local businesses to get through their quieter times, our MAS Tax Accountant Balcatta has put together some useful tips for trading in tough times.

These difficult times are likely to be due to an economical shift, as many big construction projects are coming to completion, which has had a trickle-down effect onto local small businesses. Although the Resources sector, a primary driver in our economy, is starting to show some signs of turning around, the add-on flow to small-to-medium sized businesses will take some time. The experts at MAS Tax Accountants Duncraig-Warwick have complied their Top 4 Tips for Businesses. Designed to help you get through the not-so-busy periods, it can also help to put you in a solid and ready position for when customers start spending again.

Tip #1: Manage Your Cashflow

For many businesses, the most significant and hard hitting issue is poor cash flow. If you have less money coming in, but the standard amount going out, your profit margin will fall and you may find it difficult to breakeven.

Ideas to improve and correctly manage your cash flow, include:

Prepare regular cash flow forecasts, so you’re prepared and know what to expect
Improve your debt collection processes, so that outstanding debts can be converted into cash in a shorter timeframe
Make full use of your terms of trade, and ensure that payment deadlines and conditions are clearly stated to the customer
If you are undertaking trading activities, reduce stock levels and replace slow-moving and obsolete stock with stock which has a faster turnover
Consider the deferral of capital investments or discretionary spending

Tip #2: Prudently Contain Costs

During tough times, it is important that you focus on more than the usual cost-related controls. While it is vital to keep a close eye on your costs, it is common for stressed businesses to become too inwardly focused. This can cause you to become trapped by the notion of tightening expenditure and lose focus of your customers, products or services.

Excessively focusing on costs can help you to save you a few dollars, but if you lose sight of your product or service, you may lose customers which will affect your long-term revenue stream. It is important to find the right balance that suits your business plan. Your local Accountant Balcatta and surrounds can provide you with reliable advice and resources to assist with this decision process.

Tips to cut costs, but not lose quality, include:

Focus on the costs within your control. Look at cost centres, rather than individual transactions
Be flexible with your staffing arrangements. You may need to temporarily reduce your casual staff’s working hours.
Check that you are paying a fair rental or leasing price. Commercial rent or leases can fluctuate. If the lease renewal is coming up, ensure that it is in line with any market base corrections.

Tip #3: Watch Your Margins

It is important to note, that while you improve your cash position, you should also be maintaining your margins.

Here are some ideas to improve your return on your trading activities:

Prepare regular financial statements and analyse them
Focus on the sales that give the highest margin
Do not discount on low margin products and services
Do not discount unless the same or better gross profit can be achieved through increased sales volume
Control the costs of trading activities
Don’t just chase any sale. Try to seek out profitable sales and opportunities

Please seek advice from your Accountant. For personalised and reliable business and accounting advice, speak to our Accountant Balcatta and surrounds, to ensure these tips are suitable for your business.

Tip #4: Keep in Touch with Your Clients

Your income stream is dependent on your customers. If you lose customers, you risk losing a part of your income. As you increased your focus on margins and costs, do not forget to keep in touch with your customers and continue to nurture that relationship.

Simon Liddicoat CPA, Principal Accountant

Every business is different, so it is a good idea to seek professional and personalised advice from your Accountant. At MAS Tax, our Accountant Balcatta and surrounds specialise in Business Tax, Accounting and Planning, and can help you to manage your business responsibilities.