In an election year where COVID continues to circulate and the country looks to recover from the pandemic-induced setbacks and border closures, 2022 is guaranteed to be another tumultuous year.
Thankfully, with a bit of forethought and preparation, Aussie SMEs can avoid some of the worst financial mistakes that may befall their poorly prepared competitors:
1. Lack of diversification
The past two years have been a painful lesson in the problem of putting all your eggs in one basket.
Border closures, shipping bottlenecks, and reduced air traffic constrained supplies of many imported goods. More recently, staff absences have caused supply chains to buckle. Add to this geopolitical tensions impacting overseas manufacturers and routes to market, such as the trade tensions with China and the Russia/Ukraine stand-off.
Start 2022 on a positive footing by diversifying your operations. That means not only supply chains, but also your revenue streams and customer markets too. This is to ensure your business can continue bringing in revenue even if a supplier goes bust, raw materials are delayed in transit or sales in a particular product dry up.
2. Poor financial planning
Cashflow is king (or killer!) in business: It’s crucial to know your numbers, have good recordkeeping practices and devise contingencies for those leaner times. Leverage the knowledge of your financial adviser and accountant for further clarity.
Also, don’t overlook potential impacts from the following in 2022:
- Interest rates: Speculation is mounting that the Reserve Bank may hike interest rates sooner than expected to curb rising inflation. However, many lenders have already moved in recent months. Consider how that impacts your access to and cost of finance, credit cards etc. On the flip side, rising rates may give you cause to increase interest charges on late payments.
- COVID stimulus: Most governments still have COVID support measures in place. Have you claimed everything for which you are eligible? Are you clearly advertising that you accept consumer incentives like NSW’s Dine and Discover vouchers?
- Pricing: Supply shortages are driving up costs for many goods. Analyse whether your own prices need to rise given these higher operating expenses.
3. Ignoring the politics
Australians are due to go to the polls by 21 May 2022 for a federal election, meaning there will be plenty of sweeteners from all sides of politics to try and win the business vote.
Ignore all this at your peril.
There could be major tax and financial incentives outlined – such as further changes to small business tax offsets. Conversely, ballooning public debt could prompt sneaky tax increases to boost the budget’s bottom line.
4. Neglecting your staff
While international borders look to be reopening this year, that doesn’t guarantee a sudden influx of foreign workers to fill domestic labour shortages.
Hence staff retention will be more important this year than ever before – especially amid concerns of a so-called “Great Resignation” in 2022. What is the cost of losing them? Perhaps find out from your staff what motivates them: Flexible hours? More money? Promotions or upskilling?
Also consider how you can supplement income with other perks, such as facilitating financial advice, free consultations with other professionals, or short courses offering work and personal uses
5. Not knowing your market
Many businesses have pivoted their operations because of the pandemic but some will sadly not recover.
Will you need to seek out replacement customers? Are there new customers now that the wheels are turning again? Survey your industry and local market to see what has changed and where things are headed. That will place you on the front foot instead of desperately playing catch-up.