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How to overcome your supply chain bottleneck woes

Posted on August 8, 2022May 20, 2024 by Duncan Khoury

When international borders were free-flowing, shipping containers plentiful and COVID-19 unheard of, ‘just-in-time’ supply chains made sense.

With the pandemic-induced logistics and supply chain management bottlenecks, many companies switched to a ‘just-in-case’ approach.

It’s easier to meet fluctuating customer demand with a just-in-case inventory model. But it also means increased warehousing costs and the requirement to have more upfront capital to buy extra stock. It’s one of many reasons why Australian businesses are concerned about the ongoing supply chain disruptions.

Supply chain logjams were predicted to ease considerably in 2022. However, the Omicron variant and Russia’s invasion of Ukraine have thrown a spanner in the works.

Now, experts are saying that supply chain disruptions are more “deep-rooted” than previously thought and “any hopes of near-term improvement in supply chain conditions have been shattered.”

However, it’s not all bad news. Even with these recent forecasts, your business can take active steps to protect itself from supply chain disruptions. Here’s how you can prevent a ‘just-in-case’ supply chain from becoming a ‘just-can’t-win’ situation.

First, let’s explore the factors creating the ongoing supply chain issues and their impacts in greater depth.

What’s behind the continuous supply chain crunch?

The pandemic has put enormous strain on supply chains due to:

Shifts in consumer spending from services to goods. During lockdowns, consumers had to change their spending habits. Instead of spending money on in-person services such as dinner at a local restaurant, overseas holidays or an evening at the movies, consumers bought stuff. A lot of stuff. This, in turn, increased demand for shipping and transporting goods.
Manufacturing and distribution disruptions. Lockdowns, staff illness and quarantine requirements meant that manufacturing and distribution facilities experienced unscheduled closures and production pressures.
Border procedure bottlenecks. Additional protocols, border checks and documentation procedures all contributed to transport delays.

As a result of these supply chain disruptions, businesses and consumers were impacted by increased shipping costs and delays.

During initial lockdowns, goods movement was significantly reduced. This meant interruptions in the normal circulation of shipping containers from port to port, causing an imbalance of empty shipping containers across locations. Some ports desperately needed more, while others had an influx.

Ultimately, increased shipping demand, combined with empty container shortages, port congestion and labour shortages, led to surging costs and lengthy delays for businesses and their customers. And these impacts are expected to “persist through 2022”.

Like highway traffic jams, it takes time to clear supply chain congestion and return it to normal flow. The problem is that supply chains were hit with too many curveballs and haven’t had a decent chance to recover.

In 2022, the rise of the Omicron COVID-19 variant impacted major ports in China, as cities were locked down in response. If you’ve been importing from China, you’ll know that shipping delays and congestion have increased again.

Russia’s invasion of Ukraine has also caused supply chain disruptions. According to a recent Australian Financial Review article, the war has increased shipping costs due to route closures, fuel increases and ‘war risk surcharges’ imposed by some carriers.

Photo of a warehouse made of steel. Transposed on top of the photo is an illustration of a delivery app, which includes a box in the middle surrounded by a truck, wine goblet, globe, telephone, customer service person, a trolley and truck. — Well-established brands like Revlon have not been immune to supply chain disruption.

Real world impacts of ongoing supply chain woes

Despite rising costs, delayed deliveries and a shortage of key materials, some Australian companies could face even more significant problems given the persistent supply chain challenges.

Australian importer of premium natural stone slab and tile, Worldstone Solutions, have experienced these issues first hand.

“Factory shutdowns and capacity issues, shipping container availability and port closures have all contributed to the supply chain bottlenecks we’ve had to overcome in the past 18-24 months. We’ve seen client demand change as a result though. Clients are ordering more, and earlier; they’re more focused on delivery timeframes over price or are willing to compromise by selecting in-stock products only,” says Paul Nahon, Director at Worldstone, an Octet Finance client.

Even global, well-established brands have not been immune. In June, Revlon declared bankruptcy, saying that supply chain disruptions had caused a runaway increase in raw materials costs. In response, vendors insisted on upfront payments, and it became all too much for the cosmetics giant.

The RBA released its latest Financial Stability Review in April, which indicated that although the insolvency rate is rising from a relatively low base, more pain is on the horizon. The report states:

“Further increases in insolvencies are also likely, particularly as vulnerable businesses continue to draw down on cash buffers to cover lost revenue or higher costs.”

Mr Nahon concurs with this as he’s witnessing the trickle down pressure of these supply chain disruptions on his business and supply chain partners. He says, “the risk of insolvency is particularly high when we’re supplying stone to a builder who agreed a fixed price to deliver the project. In these situations, there’s an increased risk to all the builders’ suppliers as the builder has to either break supplier contracts for cheaper alternatives or put themselves in a loss-making situation.”

These pressures aren’t going away any time soon, which is why it’s more important than ever to work to protect your business from them.

Photo of warehouse shelves stacked with boxes. Transposed onto is an illustration of an Internet application. — It can be challenging to manage the funding gap when paying suppliers.

How to protect your business from supply chain pressures

Working capital is crucial for your business to weather the ongoing supply chain disruptions. Never has the phrase ‘cash is king’ meant more. However, it can be challenging to manage the funding gap between paying suppliers, waiting for goods to arrive and waiting for buyers to pay.

With Octet’s Trade Finance facility, you can bridge these cash flow funding gaps. It gives you access to a flexible line of credit with up to 60 days’ interest-free and up to 120-day repayment terms.

Alternatively, our Debtor Finance solution may be an option for your business. It lets you tap into up to 85% of the funds tied up in your accounts receivable straight away. Instead of waiting up to 60 days for payment, make your unpaid invoices work for you by converting them into fast working capital.

Through our working capital solutions, you can better manage your cash flow, minimise financial risks and maximise the efficiency of your supply chain.

Power your business growth

In the face of ongoing uncertainties in the business landscape, now is the time to adapt. There are still significant growth opportunities afforded by Australia’s international trade relationships, particularly the interim India-Australia trade agreement signed earlier this year.

Our intelligent supply chain finance and payment solutions can help to satisfy your working capital requirements, particularly for overseas business transactions.

Get in touch with one of our finance specialists today to discover how we can power your business to scale.

Disclaimer: The following comments are only our views and should not be construed as advice. You should act using your own information and judgment. Although information has been obtained from and is based upon multiple sources the author believes to be reliable, we do not guarantee its accuracy and it may be incomplete or condensed. All opinions and estimates constitute the author’s own judgment as at the date of publication and are subject to change without notice.

What rising interest rates mean for Australian SMEs: The best time to plan was yesterday – the next best time, is now

Posted on July 20, 2022May 20, 2024 by Duncan Khoury

In the last few months, the Reserve Bank of Australia has been on a mission to keep inflation under control with interest rate rises. In early July, it announced another rate hike of 50 basis points, taking the cash rate to 1.35%, citing the need to curb inflation as a key driving factor. The next RBA Board meeting and Official Cash Rate announcement will be on the 2nd August 2022.

Quite clearly there is nothing to suggest that the slew of interest rates announcements will calm down any time soon. Treasurer Jim Chalmers has warned the cash rate will keep rising, potentially hitting 2.5% by Christmas – heaping additional mortgage pressure on millions of Aussie households whose monthly budgets are already strained.

These are the biggest cash rate surges in over 22 years, and many Australian businesses, much like homeowners, will have little to no experience of how rising interest rates will impact their outstanding bank and other loans.

For businesses with existing debts, rising interest rates essentially mean bigger repayments and less free cash to spend on inventory or business expansion. Customer’ borrowing capacity will reduce significantly, dampening demand in some areas. In turn, as costs increase, businesses will often have to pass this onto customers in the form of higher prices. This creates a spiralling cycle of inflation that will make it more expensive for businesses to secure stock and harder to sell goods.

Given that inflation won’t be easing any time soon, your clients may well be struggling to access the same funds they were able to only 6-12 months ago. Rather than helplessly watching the business’ working capital position suffer, you could be in a position to help them manage their cash flow issues with products that are outside of the usual service you provide. You should see this as an opportunity to support growing business owners who have profitable operations but need a helping hand to fulfil their potential. This includes offering reputable non-banking options as an alternative to traditional asset-secured finance.

Here are some items that accountants and other financial advisers should be considering to keep their SME clients across during the current economic conditions.

Tailor your advice to the unique conditions

In a time of great uncertainty, many SME leaders won’t have the know-how to react quickly to new financial crises. Financial advisers can therefore offer their valuable knowledge by running “what-if” scenarios to test various potential impacts of inflation, with a view to creating an effective ‘cash flow runway’ for ‘just-in-case’ situations. This is essential in maintaining a solid balance between growth, profitability, and liquidity.

Improving the efficiency of accounts receivable and accounts payable processes will also be vital to ensuring steady cash flow. Accountants particularly can help their clients keep an eye on metrics like expenses, past-due invoices and operating cash flow. Generating and tracking cash reports daily can help business leaders plan for the future, but they’ll need to lean on their accounting and other specialists to make truly informed decisions.

At a high-level, SMEs will likely also have to find a balance between increasing prices for their products or cutting costs in their companies. Some of the key questions that financial advisers can help their clients with include:

Should the client be implementing strategic pricing increases (over a given time period) so that their business isn’t absorbing all of the higher costs of materials and goods, while reducing wastage in an economy that’s becoming increasingly expensive? How will any impacts on customer retention be measured?
Consider ‘trimming the fat’ in your business and ask the hard questions: Do we need to hire more staff? Can we afford to enter new markets or product categories? Do we need to cut down on inventory levels, or is the risk too big, given global supply chain delays?

Find smarter forms of finance that exploit growth opportunities

Given that traditional banks will now be more reluctant to lend and likely to set more stringent terms, satisfaction and in turn, trust may dwindle. In these conditions, SMEs often lean on their accountants and other business advisers for guidance around alternative finance options regarding the procurement of goods from Asia or a local business acquisition or expansion of some variety.

One alternative working capital solution for these procurement and growth type business objectives is Trade Finance, which provides a flexible line of credit to pay local and international suppliers immediately, while the financier is repaid over an extended period of time (often with an initial interest-free period). This guarantees that the business doesn’t miss out on any available sales and discounts due to not being able to afford to buy stock or is unable to take advantage of other time sensitive business opportunities.

However, as non-bank lending is still a somewhat unregulated market, it is often difficult for the uninitiated to access and assess the quality of a lender. SMEs will be depending on their accountants and other financial advisers to connect them with reputable non-bank lenders that proactively meet the responsible lending laws overseen by the ASIC.

The landscape for business financing is ever-changing. But the economic path forward in 2022 has already been somewhat laid out in the ongoing announcements by the Reserve Bank, and via the rapidly increasing inflation figures. It’s not too late to effectively plan for the next six months, when we are almost certain to experience more interest rate increases. With the cost of doing business on the rise, it’ll pay to create a cash flow runway and at least be aware of all available finance options, particularly those that consider the strength of your balance sheet in assessing funding, as opposed to strictly personal property secured lines of credit.

So, whether your clients want to start importing from India or understand how to better pay local and international suppliers, Octet can help.

Get in touch with one of our supply chain finance specialists today to discover how we can power your business to help your clients through the current economic climate.

Australia’s international trade: how your business could benefit

Posted on June 30, 2022May 20, 2024 by Duncan Khoury

International trade is vital to Australia’s economy. It represents 44% of our gross domestic product (GDP) and generates one in five Australian jobs.

These statistics really bring home how essential international market access and favourable trading conditions are for Australia’s prosperity. Trade agreements are an important aspect of improving market access across all industries in Australia.

While international trade opens significant opportunities for business growth, it can be a little daunting to know where to start. We’ve put together this overview of Australia’s international trade and the trade agreements we have with other countries to help your company reap the benefits.

The benefits of international trade for Australian businesses

Australia’s domestic market is relatively small compared to other countries. International trade allows Australian goods exporters to reach larger and more diverse consumer (and business) markets than they would domestically.

To put Australia’s economy in perspective, our national GDP represents only 1.7% of global GDP. In contrast, rapid growth in Asia is forecast to represent 44% of global GDP by 2026.

Overseas market access is particularly important for Australia’s agricultural and resource commodities. For example, 65% of Australia’s exports in 2020 were primary products.

What’s more, 8 of the top 10 Australian goods and services exported in 2020 were primary products.

Similarly, international trade offers access to a much broader client base for Australian service providers. In fact, services represented over 45% of Australian exports in 2020.

The Department of Foreign Affairs and Trade (DFAT) has prioritised the following sectors to improve “market access in global services trade reform efforts”:

Professional services
Education and tourism
Financial services
Energy and mining services
Environmental services
Financial technology

International trade also attracts foreign investment. Australian businesses benefit from extra capital injections that support new industries, strengthen existing industries and finance additional infrastructure.

Ultimately, whether it’s goods, services or investment, international trade helps to maintain and stimulate the competitiveness of Australian firms by encouraging:

innovation from the introduction of new technologies, services and ways of doing business
productivity via increased competition in the marketplace

Photo of a man in a suit pointing to an illustration of a map of the world. — International trade can be beneficial to consumers as well as businesses

How Aussie consumers benefit from international trade too

It’s not just Australian businesses that can benefit from international trade, but consumers too.

By boosting our GDP, international trade helps raise the income of everyday Australians and promotes economic growth. DFAT stated that in 2020 trade as a whole was equivalent to 45 per cent of Australian GDP and directly responsible for one in five Australian jobs.

Australian consumers also benefit from international trade by gaining access to a much wider range of goods and services. And businesses have greater choice of suppliers.

Greater choice encourages competition, which can make products cheaper for consumers. For example, small electrical appliances in Australia were 11.5% cheaper in the 2017–18 financial year than they were ten years prior.

Taking advantage of Australia’s international trade agreements

Like many countries, a key component of Australia’s international trade strategy is the negotiation of free trade agreements (FTAs). Essentially, FTAs benefit importers and exporters by reducing and eliminating tariffs and other trade barriers such as quotas and licences.

Australia has 16 FTAs currently in force, three FTAs not yet in force (including the Australia-India Economic Cooperation and Trade Agreement) and seven FTAs under negotiation.

Here’s a quick overview of Australia’s FTAs currently in force:

Free trade agreement	Key benefits for Australian companies
Australia-New Zealand (ANZCERTA or CER)	Free trade in services, with mutual recognition of goods and occupations.
ASEAN-Australia-New Zealand (AANZFTA)	Extensive tariff reduction and greater certainty for services suppliers and investors.
Singapore-Australia (SAFTA)	Increased market access for Australian exporters of services.
Australia-United States (AUSFTA)	Local companies now have access to federal government procurement in the US.
Thailand-Australia (TAFTA)	Eliminated the majority of tariffs and quotas on Australian exports.
Australia-Chile (ACl-FTA)	Removal of 92% of tariff lines Creation of a liberalised investment and services system.
Malaysia-Australia (MAFTA)	Tariff-free treatment for 97% of Australian exports. All tariffs eliminated for Malaysian goods imported into Australia.
Korea-Australia (KAFTA)	Provides tariff elimination on nearly all Australia’s current exports by value once fully implemented.
Japan-Australia (JAEPA)	Provides Australian services exporters with treatment equivalent to the best Japan has agreed with any other trading partner.
China-Australia (ChAFTA)	China eliminated or rapidly reduced tariffs on several key Australian exports.
Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, Peru, New Zealand, Singapore and Vietnam (CPTPP)	Eliminated 98% of tariffs in the free trade area for Australian goods exports. Improved market access for Australian services exporters.
Australia-Hong Kong (A-HKFTA) and associated Investment Agreement (IA)	Locks in continued access to the Hong Kong market for Australian exporters of education, financial and professional services.
Peru-Australia (PAFTA)	Gives Australian service providers a more transparent and predictable operating environment in Peru.
Indonesia-Australia(IA-CEPA)	99% of Australian goods exports by value are duty-free or have significantly improved preferential arrangements.
Pacific Agreement on Closer Economic Relations (PACER Plus)	Supports Pacific Island countries to become more active partners in, and benefit from, regional and global trade.

Photo of an aeroplane flying over stacked shipping containers. — Part of Australia’s international trade strategies is the negotiation of free trade agreements

The potential economic benefits of the Quad

The Quad, formally known as the Quadrilateral Security Dialogue, is a collaboration that was established between the US, Japan, India and Australia in response to the 2014 Indian Ocean tsunami.

The Australian Financial Review recently described the Quad as “a co-ordinating body for joint efforts to win friends and influence other Indo-Pacific nations …”

DFAT officially described the Quad as “a diplomatic network of four countries committed to supporting a free and open Indo-Pacific that is inclusive and resilient.”

Given that 70% of Australia’s international trade is with Asia-Pacific countries, closer diplomatic ties with Quad members could have important economic implications for our economy.

For example, the Quad has announced its intention to form a green-shipping network to encourage the greening and decarbonisation of the shipping value chain. For Australia, it means that Sydney may be included in two or three “low-emission or zero-emission shipping corridors by 2030.” The other Quad ports nominated for involvement include Los Angeles, Mumbai and Yokohama.

Australia’s economy could also benefit from the establishment of a clean hydrogen partnership proposed by the Quad. The partnership could involve initiatives such as:

technology development
identifying and developing delivery infrastructure
stimulating market demand among the Quad countries

If the clean hydrogen partnership proceeds, it could help to realise the Federal Government’s National Hydrogen Strategy and position Australia “as a world-leading supplier of clean hydrogen.”

An illustration of continents on a blue background with dots and lines connecting continents and countries. — International trade management in Australia must be effective

How Octet can help you leverage global opportunities

Effective international trade management in Australia is crucial for local companies wanting to enter overseas markets. It means streamlining your entire supply chain, from ordering processes and logistics to making international payments. And the end result is a healthier cash flow with increased operational efficiency.

Octet can help streamline your supply chain by:

Centralising your documentation. Our Supply Chain Management Platform lets you store all the relevant documentation and correspondence together with each transaction to reduce confusion and achieve full visibility.
Eliminating the language barrier. With multilingual capabilities, our Supply Chain Management Platform allows you to communicate in your preferred language, while your supplier chooses their preferred language too.
Increasing payment flexibility. Octet gives you the power to pay your suppliers in the way that best suits your business using our Digital Wallet, with added Trade Finance and Debtor Finance solutions.
Making cross-border payments easy. We take care of the hard work for you with one-click payments. Just click, and we pay your suppliers the same day, in their choice of up to 15 currencies.

Expand your business globally

Whether you want to start importing from China or become a services supplier in Korea, Octet can help.

Get in touch with one of our international finance specialists today to discover how we can power your business to expand globally.

Importing from China: what you need to know

Posted on May 6, 2022May 20, 2024 by Duncan Khoury

With Australian borders now open to the world, there are more opportunities to establish or deepen relationships with overseas suppliers. For many local importers, the People’s Republic of China is a popular choice for sourcing goods.

Given China’s advanced manufacturing capabilities and competitive pricing, it’s understandable why it’s been Australia’s number one source of imports from 2009-2020.

And while the pandemic has created some challenges for Australians importing from China, there are still many advantages for local businesses seeking to source goods from the country.

To help your company successfully navigate the process, here’s our guide to importing from China to Australia. It covers everything from taxes to the current state of trade relations.

China and Australia’s trade relationship

According to a recent report from AMP Capital, “China has been Australia’s largest two-way trade partner” since 2009. During this period, Australian exports to China represented 41% of total exports, and 32% of all Australian imports were from China.

Currently, two-way trade with China is worth more than $246 billion a year. In 2018, a PwC Australia report stated that two-way trade with China was more than 2.5 times that of Australia’s next largest two-way trade partners, Japan and the US.

What’s more, according to the PwC report, “Australia has not had a trade relationship of this significance since the 1950s, when the United Kingdom was our major trading partner”.

So when political relations between the two countries deteriorated in 2020, it was understandable that concerns about potential trade impacts would increase.

Initially, the friction stemmed from Australia supporting “a call for a global inquiry into China’s handling of its initial Covid-19 outbreak.” In response, China introduced trade restrictions on several Aussie exports such as lobster, barley, beef, wine, cotton and coal.

However, despite the tensions, AMP Capital reported that the impacts on the Australian economy were mild, and most sectors found alternative export markets. And, as it turns out, 2020 still ended up being a massive year for Australian trade with China.

In a recent Journal of World Trade article, the researchers highlighted that in 2020:

“Australia’s total goods exports to China reached $145.2 billion. This was just 2% lower than the record high set a year earlier. In comparison, goods exports to all other countries fell by 10%, causing China’s share of Australia’s total goods exports to reach its highest ever level of 40.0%. Australia’s goods imports from China also hit record highs both in terms of value ($84.4 billion) and as a proportion of the total (28.8%).”

While trade tensions are ongoing, the Australian government is under pressure to stay committed to a strong trade relationship with China from sources as diverse as:

Australian business groups
universities
think-tanks.

Bank of China building which handles import tax on goods from China — Since 2009, Australian exports to China represented 41% of total exports, and 32% of all Australian imports were from China.

Benefits of the China-Australia Free Trade Agreement

The China-Australia Free Trade Agreement (ChAFTA) came into effect in mid-December 2015. Some of its key elements include:

Tariff reductions: before the free trade agreement (FTA), Australian exporters had a competitive disadvantage. They had to pay significant tariffs that other countries with existing FTAs with China, such as Chile, didn’t have to pay.

After ChAFTA, China eliminated or rapidly reduced tariffs on several key Australian exports.

Meanwhile, Australia completely eliminated tariffs on Chinese imports into Australia. However, you do need to follow some procedures to take advantage of preferential ChAFTA tariff treatment. We’ll go through these in more detail in the guide below.

Most favoured nation clause: this clause means that Australian businesses get access to the same trade terms that other trading partners receive in FTAs with China.
Foreign investment screening threshold increases: these increase the threshold allowed for potential Chinese investment into certain non-sensitive sectors.

Your guide to importing from China to Australia

Navigating your way through the importing process can be confusing. For example, you might wonder if you have to pay import tax from China and if so, how much this import tax is?

To help make it easier, our guide below has all the answers you’ll need to successfully import goods from China.

Importing basics

Firstly, it’s helpful to know that you can import many goods which don’t need a formal import declaration and are free of taxes and charges. In general, these goods tend to be:

low value
software downloaded from overseas websites
most personal effects

But it gets more complicated if goods:

are over $1,000 in value
are prohibited or restricted items (you can check the list of prohibited goods here)
represent a biosecurity risk
require payment of duty and taxes.

Let’s explore in more detail what you need to know to import higher-value goods, which will of course be more relevant to most Australian business importers.

Clearing customs

When your goods arrive in Australia, they’ll need to clear customs, which is run by the Australian Border Force (ABF). To clear customs, all arriving goods require a declaration, unless you have an exemption.

Additionally, goods may need to go through checks for:

biosecurity
food safety
drug control requirements.

You might also need a licence or a permit for some goods.

Importing licences and permits

Currently, the ABF website states that “there is no requirement for importers (companies or individuals) to hold an import licence to import goods into Australia.”

However, for biosecurity reasons, some goods require a permit to be imported (see next section).

Biosecurity and quarantine

To mitigate biosecurity risks, some goods need an import permit from the Department of Agriculture, Water and the Environment (DAWE). DAWE operates a system called the Biosecurity Import Conditions system (BICON).

BICON outlines whether your goods need a permit. You can apply, track and manage your BICON import permits online with a registered account.

Product regulations and safety standards

As an importer, you’re responsible for ensuring that goods imported from China into Australia comply “with all mandatory product safety standards, labelling, lab testing, and certification requirements.”

Additionally, you need to ensure that the goods you import don’t infringe:

copyright
trademarks
protected Olympic expressions
IP relating to major sporting events indicia and images.

Labelling

Certain goods need a trade description, which must be a true description of the goods in English. You may also need to show information about the country of origin for certain food products.

Find more information on the specific requirements for trade description compliance and product labelling on the ABF website.

Importing costs

Once you’ve covered all the key documentation requirements, it’s time to check some of the costs involved in importing goods from China.

Transport costs

You’ll need to factor in the following transport costs:

Shipping: in general, shipping by sea is more economical than by air. While some shipping costs have reduced since 2021, the Australian Financial Review (AFR) recently reported that, “the cost of shipping freight to Australia remains near record highs.”

To estimate your costs, online freight marketplace Freightos has a helpful guide on current shipping costs from China to Australia.

Insurance: according to Freightos, “insurance costs are typically around 0.3%-0.5% of your Commercial Invoice Value, which is the amount you paid for the goods.”
Storage charges: generally, storing your goods at the arrival airport or wharf is free for around three days. From there, it gets expensive, so try to avoid this wherever possible.

You may also need to pay a detention fee if you don’t return an empty shipping container within around seven days. According to International Cargo Express, “you can expect charges of $150-300 per container per day.”

Other handling charges: the AFR recently reported that ports and logistics operators have been charging additional ‘COVID levies’ on top of ‘congestion and port access fees imposed by stevedores’. These COVID levies are meant to cover the costs of having healthy staff work overtime to clear shipping container backlogs caused by the pandemic

Customs duties and ChAFTA

While ChAFTA eliminated some customs duties (tariffs) on products when it took effect, others are still being reduced over time. The easiest way to check the applicable import tax on goods from China is through the FTA portal website.

To access preferential tariff rates under ChAFTA, goods must ‘originate’ from either China or Australia. To prove your goods’ origin country, you’ll need either a:

certificate of origin, or
declaration of origin.

Find more information on how to comply with specific requirements in the Department of Foreign Affairs and Trade’s Guide to using ChAFTA to export or import.

Clearance and permit fees

If you need an import permit, the lodgement fee is $120. The assessment fee can then vary between $60 and $480, depending on the category of your goods.

Biosecurity management fees

If DAWE needs to inspect your goods for biosecurity and quarantining purposes, additional fees will apply.

Generally, they charge these in 15-minute increments. DAWE recommends providing all the required documents with your goods to reduce the likelihood of needing an inspection.

Import processing charges

The ABF also applies an import processing charge that varies depending on:

the value of your goods
whether you submit paperwork electronically or use hardcopies

Goods and Services Tax (GST)

Irrespective of whether you’re registered for GST or not, GST is payable on most imported goods. That said, there are some exemptions that you can check on the ABF website.

The GST rate for imports is 10% of the value of the ‘taxable importation’, which is the total of:

the customs value (CV) of the imported goods
any duty payable
the amount paid or payable to transport the goods to Australia and insure the goods for that transport (T&I)
any Wine Equalisation Tax (WET) payable, if applicable

Generally, the free on board (FOB) value of the goods is taken to be the customs value. FOB is, “the value of the goods excluding overseas transport and insurance”. However, certain charges can be excluded or included in the CV.

Detailed information on how the ABF calculates customs value is available on their website.

It’s also important to note that customs value is expressed in Australian dollars, “at the rate of exchange prevailing on the day of export of the goods (not on the day the goods arrive in Australia).”

Finally, GST credits and deferrals may apply in some circumstances.

The Australian Taxation Office website has more details.

Dumping and countervailing duties

If you import goods into Australia at a lower price than is charged in the manufacturing country, you may have to pay dumping and countervailing duties. You can check the Anti-Dumping Commission’s Dumping Commodity Register to check whether your goods are subject to the anti-dumping measures and any applicable rates.

Customs brokerage fees

A licensed customs broker can navigate the complexities of clearing customs on your behalf. However, brokerage fees vary between agents, so it’s worth getting quotes from different providers.

Container yard importing from China to Australia — The Australia-India trade agreement will also allow around 96% of Indian imports to enter Australia duty-free

Australia’s latest major trading partner, India

While our country’s trade with China heads into unknown territory, it’s important to be aware that Australia also signed a free trade agreement with India in April 2022. The historic Australia-India Economic Cooperation and Trade Agreement will help:

make Australian exports to India cheaper, and
create new import opportunities for Australian businesses

According to the Department of Foreign Affairs and Trade (DFAT), the agreement will immediately eliminate tariffs on over 85% of Australian goods exported to India. Then, over the next 10 years, this figure will rise to 90% of tariffs. DFAT estimates that this will be “commercially significant for up to $14.8 billion worth of Australian merchandise trade destined for the Indian market each year.”

In return, the Australia-India trade agreement will also allow around 96% of Indian imports to enter Australia duty-free.

As background, India is one of the world’s largest democracies whilst also being one of the fastest-growing major economies. National GDP in India is projected to grow at 9% in both 2021-22 and 2022-23, and 7.1% in 2023-24. Additionally, India was Australia’s:

seventh-largest trading partner in 2020, with two-way trade valued at $24.3 billion, and
sixth-largest goods and services export market, valued at $16.9 billion.

The latest advancement in Australia-India trade relations will support the Government’s goal of lifting India into our top three export markets by 2035. It will also make India the third-largest Asian destination for outward Australian investment.

How Octet makes importing smoother, simpler and more secure

The unpredictability of recent years has curbed international travel while creating shipping delays, lengthier quarantine times and delayed payments. As a result, many importers have experienced significant cash flow pressures and greater risks in supply chain management.

Here’s how Octet can help.

Smoother cash flow curves

Octet’s Trade Finance facility can help to smooth out the cash flow curves in your business. It gives your business the power to bridge cash flow gaps by providing:

a convenient revolving line of credit, with up to 60 days’ interest-free and up to 120 day repayment terms
security-free funding and payment options – with funds based on the strength of your business’s balance sheet, so there is no need for personal or director security
increased purchasing power to fund your business growth
the ability to pay international suppliers instantly while enjoying flexible repayment terms
a way to take advantage of any early settlement discounts your supplier may offer, saving you money on imported goods

Superior supply chain management

While importing and exporting always carry an element of risk, the right financial management and tools can help your business increase security and trust with international suppliers.

One such tool is Octet’s Supply Chain Platform. It verifies and manages approvals for all transactions for suppliers and importers using the platform.

As a buyer, this means you get peace of mind that we’ve taken responsibility for onboarding and verifying every supplier. We have a team on the ground in Shanghai that can:

meet with your suppliers
do background checks
verify that they have all the relevant trade documentation

What’s more, our Supply Chain Management tool is multilingual, so you and your supplier can each interact in your preferred languages.

Woman using touch screen to research if you have to pay import tax from china — The unpredictability of recent years has curbed international travel while creating shipping delays, lengthier quarantine times and delayed payments

Powering international trade and global business

Get in touch today to discover how we can help power your business by making the importing process smoother, simpler and more secure.

How to create a more sustainable, ethical supply chain

Posted on March 23, 2022May 20, 2024 by Duncan Khoury

Sustainable, ethical business supply chains are no longer a ‘nice-to-have’ in today’s modern economy. Instead, they’re now a ‘must-have’, as shown by a recent European Commission proposal to change EU laws to crack down harder on companies with unethical supply chains.

The EU draft law would require any companies operating in the region to do due diligence on their suppliers concerning any human rights abuses or environmental breaches. Non-compliance could mean fines and compensation claims, even for companies based outside the EU.

These draft laws align with a developing global and local focus on more ethical and sustainable supply chains. In a growing trend over recent decades, consumers, investors, international bodies and governments alike have demanded that companies do more to:

protect human rights
ensure worker welfare and safety
reduce environmental impacts
improve environmental credentials by increasing energy savings and shifting to renewable energy

Given all the complex variables at play, you may be wondering how your business’ supply chain can be improved. The good news is that with the right strategies, it’s possible to make your supply chain more sustainable while still generating healthy financial returns.

Here’s what you need to know.

Why improving supply chain sustainability matters

The importance of environmental, social and governance (ESG) standards (also known as corporate social responsibility or CSR) in supply chains is forecast to continue growing.

A 2021 survey of 2,400 global supply chain professionals and leaders found that:

47% of companies had received pressure to improve their supply chain sustainability
there was widespread agreement among survey respondents that interest in sustainable supply chains would continue to increase

And with increasing scrutiny, improving supply chain sustainability matters even more for these five key reasons.

Tightening regulations

In recent years, the Australian Government has introduced waves of regulations to improve supply chain sustainability. For example, the Modern Slavery Act 2018 introduced mandatory reporting on modern slavery risks in the supply chain for larger companies. It also required them to report on any preventative actions they’d taken.

And, as mentioned earlier, ethical supply chain regulations aren’t limited to Australia. Companies that fail to comply with certain regulations in the markets in which they do business can face fines, lawsuits and even prison time for executives.

Reputational risk

In addition to any financial penalties they incur, unethical supply chains can create significant reputational damage for your brand. Remember, for example:

the horsemeat saga of 2013
the tragic loss of life in the Rana Plaza factory collapse. While no Australian companies were directly linked to that factory, local brands such as Just Jeans and Myer received negative press about not signing an accord on fire and building safety in Bangladesh
When Rip Curl sold clothes made by workers enduring ‘slave-like’ conditions in North Korea, despite labels saying ‘Made in China’

More recently, fashion retailer, Boohoo came to the world’s attention. Allegations of unethical factory working conditions wiped £1 billion off Boohoo’s value overnight.

And the reputational damage lingers today.

Investor relations and competitive advantage

Recent research from Boston Consulting Group (BCG) indicates that companies could, “enhance their investment attractiveness, and – in turn – total shareholder returns, by embracing greener operations”.

The researchers found that consumer packaged goods companies with reputations as ESG leaders had, “an 11% valuation premium over their competitors”.

What’s more, companies with lower carbon emissions in the chemical and steel sectors had valuation premiums of 14% and 12% respectively.

Consumer confidence

A growing number of consumers are choosing to buy from companies whose social and environmental values align with theirs. For example, a 2021 Gartner report identified that 54% of customers would only do business with companies that practised environmental and social sustainability.

Additionally, a 2020 IBM research study of more than 18,980 consumers worldwide found that:

57% were, “willing to change their purchasing habits to help reduce negative environmental impact”
71% indicated that supply chain traceability was, “very important,” and that they were, “willing to pay a premium for brands that provide it”.

Employee attraction and retention

According to a BCG study, brands that invest in sustainable supply chains tend to find it easier to attract and retain talent. That study revealed that 58% of employees consider sustainability when making employment decisions.

How to improve sustainability in your supply chain

The experts working on MIT’s Sustainable Supply Chains initiative recommend taking five steps to implement greener, more ethical supply chain management practices in your business. These steps focus on improving traceability, and really emphasise the importance of supply chain analysis.

Do a risk assessment and set goals

The first step is to take stock of where your company’s supply chain is now in terms of sustainability. This also helps to identify key risk areas such as:

regulatory requirements
potential supply chain disruptions
supplier liabilities

It’s important to work out what your key stakeholder interests are, and select matching supply chain improvement goals that can create business value.

At this stage in the process, it can be helpful to develop or review your supplier code of conduct practices.

Map out your supply chain

Create a visual representation of your supply chain that shows where your suppliers are, and how goods flow between them. This step aims to identify any information gaps you may not be aware of.

The MIT experts give the example of apparel and footwear group, VF Corporation’s online traceability tool for their Vans Checkerboard Slip-on shoe. It helps to see an actual supply chain map in action for your own visualisation efforts.

Track and assess every component

Actively trace your products through the supply chain to confirm each component’s source of origin and then assess every supplier against your supplier code of conduct practices.

Of course, it’s easier said than done if your supply chain involves multiple supplier tiers across hundreds of locations. This is where technology can really shine.

To improve the traceability of the supply chain, organisations are turning to blockchain technology. For example, the Australian wool industry uses blockchain to verify claims about origin and sustainability. It means that retailers and consumers have a credible way of knowing the garments they are about to buy are actually made from Australian wool.

Work together with your suppliers

Now that you know what needs to happen, engage your suppliers to address any problem areas. This step involves significant collaboration, monitoring and support to make change happen.

Promote your revamped supply chain practices

Once you’re satisfied with the improvements you’ve made, it could be time to go public via paid and organic advertising channels with your new, improved sustainable supply chain. This may have some financial benefits for your company by helping to increase consumer and investor confidence in your brand.

For example, a current food and beverage industry trend involves the health-conscious consumer segment driving increased growth. In response, industry players might adopt sustainable manufacturing practices, and publicise their actions to effectively capture this growth.

Create a more sustainable supply chain with Octet

As we’ve discovered, some of the critical components of sustainable supply chain management involve traceability and the relationship your company has with its suppliers.

Our Supply Chain Management Platform and innovative Trade Finance solution can help with improving your supply chain sustainability in four key ways.

Track each critical step of the supply chain process, from procurement to payment, order to cash. Our platform stores and validates all of the important documents that are required at each stage, giving you and your supplier full transactional visibility.
Reduce misunderstandings. The platform has some multilingual capabilities so you can communicate in your preferred language, while your supplier uses their preferred language too.
Make strategic purchases from your suppliers at the right time. Our Trade Finance facility gives you access to a convenient, revolving line of credit to pay suppliers in over 65 countries. You can accelerate business growth and strengthen relationships with local and international suppliers – without the cash flow challenges, whilst taking advantage of in-built competitive FX rates.
Work with the best suppliers. The best suppliers for your business don’t always offer the best payment terms. The good news is that our Trade Finance line of credit means we pay your suppliers immediately, while you pay us back over time. Take advantage of any available early payment discounts, whilst receiving your goods quicker than the competition.

Powering sustainable supply chains

Get in touch today to discover how we can help power your supply chain visibility and sustainability, in addition to accelerating your supplier payments.

The global supply chain squeeze: What your business can do to prepare

Posted on September 16, 2021May 20, 2024 by Duncan Khoury

The pandemic has disrupted almost every aspect of global supply chains. A combination of record consumer demand, unexpected bottlenecks in supply and delays in shipping from China has created a perfect storm. Facing major delays and increasing costs, businesses in almost every industry are feeling the impact. And with Christmas fast approaching, the situation is predicted to become even more challenging.

So let’s explore the global supply chain squeeze, what this means for the economy and what you can do to help your business navigate the disruption.

Increased demand creates increased pressure

Over the past 18 months, the world has been in various stages of lockdown with Australia continuing to ride out these phases of the pandemic. While this has been catastrophic for some industries, others have thrived and people who are still employed have money to spare. Dollars usually reserved for big-ticket items like holidays appear to have been redirected online. As a result, eCommerce spending in categories such as ‘home & garden’ and ‘beauty & health’ have experienced record sales.

This has placed increased pressure on global supply chains that are feeling the squeeze from all areas on the supply side. This includes:

Unscheduled and/or sudden closures of manufacturing and distribution facilities, often with no clear time frame for re-opening.
Bottlenecks at borders as a result of new protocols, additional border controls and documentation requirements.
Reduced capacity due to sick or isolating workers who have been exposed to COVID-19.
Limited air freight options because of significantly reduced commercial flights in and out of countries.
Over-reliance on shipping channels, resulting in 90 per cent of the global fleet of freighters currently being in use.

Supply chain impacts

This increased demand plus supply chain constraints have created a perfect import-export storm around the world. Flow on effects have impacted almost every industry including building materials, foodstuffs, furniture, replacement parts and more. In an increasingly interconnected world that is dependent upon global supply chains, it means unexpected events can yield serious consequences.

Impacts on retailers

In response to these changes, major retailers are moving away from just-in-time delivery models and are instead ordering stock 8-12 months in advance. This has resulted in an automatic increase in their inventory holding costs. To add to this, shipping container space is at a premium, costing up to four times as much as it did just a year ago.

The impact of low supply chain diversity has also come to light during the pandemic. Due to an overreliance on China for importers and exporters, some retailers are looking for other supply chain solutions in countries such as India and Vietnam.

Impacts on consumers

Consumers who were used to fast, reliable delivery will need to re-adjust their expectations. Shipping delays in all sectors are becoming business as usual, with major retailers suggesting consumers start their Christmas shopping months in advance.

Impacts on the economy

The economic impact of the pandemic on global supply chains also has far-reaching implications for our domestic economy. The situation has exposed the vulnerabilities of the pre-pandemic model, placing complex challenges upon all players in the economy.

While international trade had started to decline in recent years, the pandemic has certainly accelerated this trend. This means manufacturers will be facing greater political and competitive pressures to increase production at home to help reduce the reliance on international suppliers. However, at the same time, consumers are likely to still want the same competitive prices they’re used to. Businesses will be left with the challenge of maintaining a competitive edge while balancing the cost of goods, price points and delivery costs.

With the expectation that COVID-19 is here to stay, global supply chain issues are likely to continue as the virus becomes endemic and the world adapts to living with it. For businesses that rely heavily on global supply chains, management will need to review their export-import logistics management.

Prepare your business for post-pandemic supply chains

For proactive businesses looking to prepare their business for the unexpected, it helps to draw from the lessons learned in 2020. Businesses that were able to get their supply chain moving – and fast – were more able to absorb pandemic shocks. There’s no question that getting organised now can help in the future.

Review your existing model

Now is an ideal time to take a holistic view of your entire value chain and conduct a supply chain analysis. By identifying issues and moving fast, you can help mitigate some of the pandemic impacts. Questions to consider include:

What part can be sourced or managed locally? If choosing local, how can you work with suppliers to help reduce costs?
How can you negotiate better terms and agreements with global supply chain partners?
What are the tax and risk implications of these decisions?
Do you have the right insurance and financial protection in place to help respond to unexpected events?

Plan ahead

Since the pandemic began, business continuity has never been more in the spotlight. Exploring ‘what-if’ scenarios can help build robust continuity plans that will help your business survive during disruption. It can also reveal operational areas that require new processes and inspire ideas for more immediate workarounds.

Another important aspect of planning ahead is to determine the minimum viable level of sales you need to ride out any disruption. Once you have this calculated, ensure your cash flow is under control so it can cover your short-term needs.

Prepare finances

Unreliable timelines, new suppliers and currency fluctuations can place significant financial strain on your business. Building a financial buffer and adopting the right tools can help your business adapt quickly to whatever challenge may lie ahead.

Our financial tips include:

Ensure that you have flexible finance options in place. Import-export trade finance solutions can help you negotiate better terms, take advantage of discounts and build stronger relationships with your suppliers. In an environment where suppliers have the balance of power, this can be especially useful.
Consider reducing the administrative burden of working with multiple suppliers by using financial software to automate your processes.
Verify any new suppliers and provide a secure transaction environment to keep payments safe.

Improve visibility

A recent survey of over 200 supply-chain senior-level executives in the US revealed that supply chain visibility is now their number one priority. Recognising that visibility is the key to identifying issues and making strategic value chain decisions, businesses are increasingly turning to digital transformation to help.

This can improve visibility across two major areas:

The physical supply chain

Advances in AI and IoT technology can transform the way you track the movement of goods. This might include sensors tracking goods in shipment, warehouse robotics, driverless transportation and more.

Supply chain management

Automation across planning, procurement, manufacturing, finance and logistics can be improved with the help of supply chain solutions providers. With the right supply chain technology solution, you can gain better insights across the supply chain.

Building resilience

There’s no doubt that the impact of the pandemic will continue to create a ripple effect on supply chains around the world. This places significant challenges on businesses, but also opportunities to better manage their value chain. Proactive businesses that take considered action fast will be better positioned to survive through ongoing supply chain challenges.

Interested in learning more about how our trade finance solutions can help your import and export operation? Get in touch today to discover what options might best suit your business.

Leading through crisis: how to survive and thrive

Posted on August 4, 2021May 20, 2024 by Duncan Khoury

Disruption from the pandemic is very far from being over. The ongoing crisis continues to have enormous domestic and international impacts, with governments, businesses and people all needing to constantly change the way they live and work.

For business leaders, the unpredictability of our world creates new challenges – challenges we may have never faced before. In uncertain times like this, leadership requires a considered approach. It’s important to adopt a long-term view, be resilient, and quickly adapt.

In this article, we consider the key changes at play, and what you can do to lead your business through times of crisis.

The foundation for leading through uncertainty

While COVID-19 has been a key driver of workplace change in the past 18 months, it’s critical for business leaders to harness a proactive approach and lead the change. This means not only reacting to sudden, unexpected changes, but also taking a longer-term view by pre-empting change.

Adopting a proactive approach can create a more resilient business that not only responds better to change, but also takes advantage of opportunities that arise along the way.

To adopt a proactive approach and successfully manage change, it’s important to keep across developments in areas like:

technological advancements
government announcements
regulatory changes
trends in international markets
workplace and employment trends
competitor movements

Trending right now: 3 workplace trends to watch

Since the start of the pandemic, workplaces across almost every sector have experienced rapid change. Some of these changes were accelerated by COVID-19, while others are new trends that have emerged as a result.

Here are some of the key changes taking place across the country:

1. Adopting flexible, hybrid workplaces

One of the most transformational shifts we’ve seen is the changing attitudes to employees working from home. Some forward-thinking corporations and consulting firms had already embraced flexible work arrangements. However, the majority of businesses around the country were still very much entrenched in traditional work structures. The pandemic has seen businesses of all sizes forced to adapt, with employees required to work from home, and work in new ways.

This has created a huge shift in the way we work and live. Giants like Atlassian, Twitter and Citibank had already embraced permanent hybrid work practices, prompting employees from cities to move and design a new life in regional Australia. As a result, house prices have skyrocketed, rental vacancies are at historic lows, and demographics are changing fast.

Back in the office, leadership teams are faced with new challenges like managing the communication, culture and productivity of a workforce that is largely remote. Some of the ways you can overcome these challenges include:

Diarising check-ins – even just 15mins in the diary, once a day, gives you the chance to drive the culture and communicate with your team.
Leverage technology – set up channels in chat software, such as Slack or Microsoft Teams, for work tasks as well as celebrations and chit chat.
Schedule in fun – consider a team lunch break or a team building activity via video conference.

2. Embracing diversity and inclusion

Diversity and inclusion are crucial to running a business, particularly with ongoing environmental, social and government (ESG) initiatives. With customers and investors demanding socially responsible business practices, diversity and inclusion are vital.

In fact, a survey of human resource leaders across the US, UK and Australia revealed that diversity and inclusion are at the top of the priority list. Actions you can take as a leader include:

ensuring diversity and inclusion are embedded throughout recruitment, retention and promotion policies
establishing formal policies and aligned KPIs to drive inclusive behaviour
creating mandatory diversity and inclusion metrics when going out for tender
developing viable incentives for employees to live these values outside of the workplace

3. Managing mental health

The spotlight on mental health and wellbeing has never been stronger.

Thanks to the pandemic, feelings of fear and anxiety around financial security, unemployment and health are abundant. At the same time, access to buffers like social engagement, physical exercise and routine have been limited. There’s no doubt that life under restrictions has taken a toll, with some parts of our population more vulnerable than others.

Managing the mental health and wellbeing of your workforce is a crucial part of leading through a crisis. You can do this by:

Building social connections online. Make time for non-work conversations. Allocate one-on-one time to check in. Create chat groups or virtual communities where people can connect. Encourage safe connection for employees who may live in the same area.
Communicating clearly. Keep staff informed. Use plain English and factual statements to avoid any misunderstandings. Make the main communication channels clear. Invite feedback.
Establishing expectations. Provide clarity on how performance will be measured. Account for the blending of work and home. Encourage employees to set and communicate their boundaries and work routines.

Top 4 tips: how to lead during a crisis

Leading through ambiguity is never easy. Now that we’ve explored emerging trends, here are our top tips for leaders:

1. Keep informed with research

When leading through uncertain periods, it’s vital to keep across the latest developments that impact your business. In times of crisis, it’s common for biased or incorrect information to spread – so it’s important to find credible, reliable and trustworthy sources.

2.Tap into your networks

Turning to your network can be one of the best ways to get across the latest trends, challenges and opportunities. Consider peers, industry contacts and regulators as valuable connections to nurture.

3. Provide additional support

Management teams need to provide the tools for employees to adapt, while considering employees who may be less-equipped to deal with change. This might involve providing technical support, such as new software, or emotional support, such as running health and wellbeing webinars.

4. Be financially prepared

To help your business adapt to change, you’ll need reliable sources of working capital. This will help to fund your current growth plans, as well as any unexpected expenses that may arise from potential disruption.

Finance options like trade finance, debtor finance or supply chain finance can give you cost-effective, flexible access to cash flow, and help to support your business during change.

The only constant is change

If there’s one key lesson we can take from the past 18 months, it’s that change is the only constant.

It’s true: we are in a unique period of change. But nothing ever stays the same. Being prepared for ongoing change is vital for any effective leader.

Be proactive, and pre-emptive, so that no matter what life throws your way, you and your business are prepared.

Looking for flexible finance to support your business and prepare for change? At Octet, we can help. Reach out today to find out more.

How to effectively manage business growth in 2021

Posted on August 4, 2021May 20, 2024 by Duncan Khoury

Managing business growth is a careful balancing act.

Grow too fast and you risk things falling apart, potentially sabotaging your success. Grow too slow and you risk getting left behind, as your competitors take over.

This has been an ongoing challenge for many industries since the start of the pandemic. While some industries have struggled, others like healthcare, eCommerce and technology have boomed. Sudden increases in supply and demand have accelerated growth and created new challenges for management.

The key to successfully managing growth is to find the right business growth strategy to match the challenges your business is experiencing. With the right strategy, you can expand at an appropriate pace, and build sustainable growth to meet increasing demand.

The five stages of business growth

The first step to managing growth is to identify what growth stage your business is currently in. While every business follows a different trajectory, the same stages of growth can be generally identified across all industries. Each stage comes with a unique set of challenges that can drive your strategy.

Here are five widely recognised stages of business growth:

1. Launch

Every business starts with bringing a product or service to life. There’s a lot to consider, including how to fund your business, reach your customers and build brand awareness.

Main challenge: securing initial funding and delivering your product or service to target customers.

2. Survival

After surviving the launch stage, the business has shown potential. Now, the focus is to make the business sustainable and viable. Organising resources and refining your pricing model are also important.

Main challenge: managing cash flow and generating profit.

3. Success

This is where a business thrives and profits grow. Business owners can either maintain a healthy business and stabilise, or push for growth.

Main challenge: deciding how to capitalise on success by either stabilising the business or preparing for growth, which may involve seeking additional sources of working capital.

4. Expansion

At this stage, the business experiences rapid growth, with a focus on scaling. As the business becomes more complex, it is increasingly important to effectively delegate, refine processes, add product or service lines and restructure finances.

Main challenge: how to grow rapidly, often across numerous channels, and how to effectively finance that growth.

5. Maturity

By now, the business is well-established in the marketplace, and growth has stabilised. The focus is to consolidate the gains produced by rapid growth, while balancing scale with innovations.

Main challenge: control and consolidate financial gains brought about by rapid growth.

Four business growth strategies

After identifying what stage your business is in, and what key challenges it faces, it’s time to develop a detailed growth strategy to expand your business. This might include:

1. Market penetration

This focuses on increasing your market share for an existing product or service. An example of this strategy may be a new fitness watch brand needing to take market share away from incumbent brands such as Fitbit and Apple Watch.
To do this they can:

implement new advertising campaigns to effectively introduce their brand to the market and differentiate their product
offer product bundles to encourage new customer purchases and increase existing customer loyalty
run promotional offers to drive new sales.

2. Market development

Market development involves taking an existing product or service and offering it to a new segment of the market. This strategy can work well for service-based businesses who have a high-tier offering, but want to broaden their reach. In this instance, these businesses can create a ‘lite’ version of their offering at a reduced cost. This then opens them up to a whole new segment. Some other examples of this strategy in play include:

targeting a new geographical market with an existing product or service
cross-selling in collaboration with another brand
expanding into new sales channels, often using technology to your advantage.

3. Product development

Expanding product lines within existing markets is one of the best ways to grow your business. It also opens the potential for cross-selling and increased revenue. A classic example of this would be the Apple suite of products. They began selling computers and then went on to develop new and innovative products as the market and technology evolved. Product development might also include:

providing complementary add-on features or services to existing products
tweaking existing offerings to provide more features or value
using customer feedback to guide the direction of which new products you invest in.

4. Diversification

Diversification is where you create new products for new markets. It can introduce additional revenue streams and spread risk across your business. While this is the highest risk of all these strategies, it can also deliver the potential for the highest returns. You can diversify:

vertically into your supply chain – either upstream, such as a mining company expanding into processing and developing their own raw materials; or downstream, such as an online streaming service moving into developing its own content.
horizontally to offer complementary products to customers – such as a hamper gift eCommerce retailer expanding into offering corporate gifts or catering.

You can also use existing expertise to break into new markets that have synergies with your existing business.

Three necessities for growth

Whatever growth stage your business faces, there are a few things you’ll always need:

Finances
Even when business is going well, growth activities often require additional finance. Having access to flexible finance options can fund strategy and fuel growth.
Technology
Technology will inevitably play an important role in growth. It can streamline processes, improve customer experience and manage increased demand as you grow.
Expertise
Consider the skills your business needs for success. Recruiting subject matter experts in areas such as marketing, product development and business improvement can help you quickly set up and get on the right track.

Getting prepared

Are you ready to grow? It’s time to get planning.

Need additional funds to support that growth? Check out our innovative finance solutions and get in touch today.

The 5 step health check every business needs to increase profits this financial year

Posted on July 1, 2021May 20, 2024 by Duncan Khoury

Grow your sales and profits with these top business health checks

There’s no doubt that both 2020 and 2021 have been unusual years for businesses.

Remote or hybrid working, supply chain challenges and periodic lockdowns have brought constant change. Businesses have felt the financial impact across different sectors, with over 370,000 still receiving JobKeeper payments a year into the pandemic (or until the very end of the scheme), just doing what they needed to survive.

But with vaccine rollouts underway worldwide, the outlook is somewhat improving. That means now is the perfect time to run a complete business health check and find ways to increase profit margins, reduce costs and prepare for the years ahead.

Here are our top five recommendations to help you maximise the profit in your business.

1. Review and reduce expenses

As a big part of the profitability equation, expenses should be the first area you review when you’re looking to increase your profit margin. They’re a known quantity, and reducing expenses usually involves less effort than generating more sales. Plus, you’ll often see the impact of lowering them almost immediately.

Here are three recommendations to get you started.

Assess inventory management

Holding too much stock is expensive. It can tie up valuable working capital while running the risk of oversupply – in turn, creating hard-to-shift items. ‘Just In Time’ inventory management is an effective method which involves getting stock in only when you need it and keeping stock levels to a minimum, which can free up cash ready to invest back into the business.

Review direct costs

Direct costs are any expenses that directly relate to creating a product or service, such as wages, materials and supplies. Reviewing suppliers and contracts is a key tactic here, with savings opportunities to be found in negotiating better payment terms.

Decrease overheads

Indirect costs apply to multiple business activities, and may include items such as rent, insurance or advertising. Negotiating better rates or shopping around for alternative providers can lead to significant savings, as can negotiating better rates for leases on premises or equipment.

2. Assess the profitability of your product or service lines

The natural next step after reviewing expenses is to look at increasing sales. But before you do this, we recommend doing a deep dive into your product or service lines to determine which ones are worth focusing on.

To do this for each line, you’ll need to calculate:

The cost of production: consider all elements, including materials, utilities, wages and packaging.
The cost of selling: consider elements, such as shipping, advertising and customer service costs.

Once you have a clear picture of the cost of each product or service, you can then explore ways to boost sales for those with the best profit margins. This is the time to get creative: the various options available to boost sales include cross-sell initiatives, additional staff training or new marketing campaigns via efficient and trackable digital and brand-response channels.

Meanwhile, it might be time to review the positioning of lower-profit-margin products in your overall offering, to determine if there are any opportunities to rationalise them.

3. Explore new customer segments

If you have an established product or service, it can be difficult to find new opportunities within the same target customer base. In these cases, one of the best strategies to grow sales and profits is to simply target new customer segments.

When identifying new segments, consider customers with needs that closely align with your product or service. Do those needs make them a natural fit and therefore a warm audience that could bring a new source of revenue to your business? What are the research-led insights that you can draw upon to target these different customer segments?

Methods for targeting new customer segments include:

Cross-selling to your broader customer base: your existing customer database can hold a wealth of information to help you identify cross-sell opportunities. Not only will selling to existing customers be easier than selling to brand new ones due to their predisposition to your brand, but it will also sustainably increase their customer lifetime value.
Partnering with other businesses: working with businesses that sell different (yet often complimentary) products or services to the same segment can provide a clear path to increasing profits in a company. The right co-branding partnership can expose you to a whole new audience, while also providing real value to your customers.
Expand to new channels: new technology and marketing-led channels offer diverse opportunities to reach your target audience. We saw just how valuable this approach was in 2020, with many businesses that moved to predominantly online-selling seeing sales soar.

4. Audit the productivity of your staff and systems

Increased productivity across your business means you can get more output from the same resources. It’s one of the most effective strategies to increase profitability and have a direct impact on your bottom line.

The best productivity impacts can be made in two areas: employees and processes.

Employees

Numerous studies have highlighted the link between employee engagement, productivity and increased profitability. Engaged employees are happier, perform better and are more likely to go the extra mile and elevate the performance of those around them.

Consider providing a balanced mix of incentives, training and benefits as part of your overall employee culture (or people plan) to create a more engaged and profitable workforce.

Processes

Processes across your business constantly change and evolve. And as they do, so do the opportunities for streamlining. Reducing double-handling, minimising repetitive tasks and automating worthwhile processes can all help to reduce the time spent on non-value-add tasks.

This is time that your employees can better spend on high-value, revenue-generating work that helps to maximise your profits.

5. Get working capital working for your business

One of the strongest markers of both a healthy balance sheet and a healthy business is your working capital position.

A sign of good business management, a healthy working capital position will leave you with enough cash flow to cover your short-term expenses. It will strike the right balance between growth, profitability and liquidity. Working capital can also be a cost-effective way to fund business activity such as purchasing more stock or ramping up staff headcount to take on a new project.

One of the most common cash flow issues is having money unnecessarily tied up in the supply chain. At best, this restricts your company’s ability to quickly act on any opportunities and can limit your growth. At worst, inadequate cash flow can impact your credit rating and the viability of your business.

You can do several things to get cash flowing and improve your working capital position, including:

Offer early payment discounts
Negotiate shorter payment cycles
Investigate invoice financing to unlock cash tied up in your receivables
Consolidate supply chain management and payments within one system

Take time to take stock

Many companies have been doing business reactively over the past 18 months. However, the new financial year reminds us that it’s more important than ever to check our progress along the way.

For longer-term success, proactive business profitability health checks can go a long way towards growing sales and maximising profits.

If you’re looking for finance to power your business growth, reach out to us today.

Can business automation boost your competitive advantage?

Posted on June 28, 2021May 20, 2024 by Duncan Khoury

The push for automation is accelerating across every industry sector. From customer interactions and product delivery to managing employees, workflow automation is changing the way we do business. It’s creating new standards and expectations while also playing a key role in driving change.

We take a look at how implementing business automation tools across your organisation can pave the way for greater productivity, efficiency and ultimately help to grow your business.

What is automation?

Automation means applying technology, programs, robotics or processes to achieve outcomes with minimal human input. Companies use business automation to replace manual tasks or processes with the goal of gaining efficiencies, reducing costs and increasing productivity.

And while business automation is a continually evolving challenge for any organisation, it can bring significant benefits and competitive advantage.

The advantages of automation in your business

Automating business processes and workflows can bring wide-ranging benefits to your business.

Streamlining communication

Automation can facilitate timely information sharing across an organisation. This can help staff to make more informed decisions, produce higher quality work and generally create better business outcomes. Information sharing can also help to build trust between employees and employers, whilst creating an environment that encourages feedback, creativity and performance. A good example of this are business communication applications, which are widely used for internal chat, calls or videos to allow teams to engage at any time (often recording interactions for later reflection also).

Increasing accountability and transparency

Clear, consistent and repeatable processes are one of the biggest drawcards of automation. Businesses can allocate tasks to specific roles, making lines of responsibility clear, while recording and tracing every touchpoint.

Minimising manual processes

Replacing or minimising repetitive processes can bring a host of benefits to a business. Automation helps to reduce the costly errors, double-handling and re-work that often comes with manual processes. In doing so, it saves time, improves accuracy and increases efficiency.

Enhancing customer service

Automation is behind almost every improvement in customer service. AI-driven chatbots, automated self-service, and personalisation are just some of the trends in delivering stand-out customer experience. Executed well, these can all help businesses to better serve their customers, while saving time and operating costs.

Adding strategic value

One of the biggest benefits of automation lies in freeing up time spent on manual, time-consuming tasks that generally add little value. Employees can instead focus on areas where they can apply their skills, knowledge and insights to create more valuable business outcomes.

Automation across support functions

Traditionally, automation focused on either the product line or service delivery process, but one of the biggest trends is the rise of automation across support functions. From HR to finance and marketing, automating the way you run your business can add value in areas you may not have previously considered.

HR training and recruiting

The pace of change has skyrocketed since the pandemic, as HR departments moved quickly to manage remote hiring, virtual leadership and hybrid workplaces.

Automation has played a crucial part in this adaptation. From hiring to employee onboarding to leave management and staff training, manual and repetitive tasks now have the ability to (at least in part) be automated. This has given HR departments time to focus on valuable activities such as attracting talent, building succession pipelines and holistic training programs.

Sales and marketing

There’s no doubt that technology has also transformed marketing. It’s opened up new ways to reach customers – but also, from a business process perspective, it’s created countless opportunities for automation.

Marketing automation via platforms such as Microsoft Dynamics, Salesforce and Marketo have changed the way we approach both sales and marketing. Automation allows businesses to share data across departments, with information from marketing technology and channels such as chatbots, emails, search engines and websites feeding directly into CRMs and better informing user and client decision-making.

This helps to create detailed customer journey maps, more tailored content and communications and effective alignment between sales and marketing.

Finance

The merger of technology and finance continues to grow rapidly, with the relatively new Fintech sector experiencing rapid growth across the world. As such, finance functions themselves are becoming increasingly automated and sophisticated, with integrations now covering all aspects of the financial supply chain.

Solutions such as our supply chain management tool help you to track, validate and authorise supply chain transactions via a single platform. It provides a central repository for your local and global trade documentation and communication, has multilingual functionality and allows you to check the status of a transaction in real-time.

It’s just one example of business finance automation that can help you to speed up processes, improve supplier relationships and create more time for strategic planning.

The key to future-proofing your business

As your business evolves and grows, so too does the way you manage it. Automation can be a powerful tool to support this change and help your business to adapt, so you can wow your customers and stay ahead of the competition.

Interested in learning more about how automation can transform your supply chain? Explore the benefits of our supply chain management tool or get in touch to discuss how we can help to power your business’ cash flow.

The art of disruption: driving innovation in healthcare

Posted on May 28, 2021May 20, 2024 by Duncan Khoury

Disruption lies at the heart of any innovation.

Take companies like Facebook, Amazon, Apple and Netflix. They all began with someone changing the way they think and challenging the status quo. By looking at things from a different perspective and removing limits to their thinking, their founders have done more than just disrupted entire industries.

They’ve actively created new ones.

So when it comes to healthcare, what is disruptive innovation and why does it matter? And how, exactly, do you start to disrupt the status quo and make innovation happen?

Here are our recommendations.

What is disruptive innovation?

“If you want something new, you have to stop doing something old.” – Peter F. Drucker

First coined by Harvard Business School Professor Clayton Christensen, the term ‘disruptive innovation’ means a change that transforms an existing product, service or process.

This change starts with the way we think. It requires breaking through our existing limits on ideas. And, as a result, it can transform the way we live, the way we work, or both.

Disruption: essential to survival

Not every organisation can – or wants to – be the next Google or Uber. So is disruption necessary? Or is it a practice best left to start-ups?

When it comes to healthcare, we see disruptive innovation as essential. Scientific advances, technological improvements and shifting patient demographics create an environment of constant change. Without disruption, healthcare systems and organisations not only get left behind, but community health and wellbeing also potentially suffers.

The COVID-19 pandemic highlighted the importance of disruptive innovation. As the pandemic spread, healthcare systems globally scrambled to manage patient care, implement contact tracing and attempt to limit the spread.

Countries with the resources to prioritise and quickly embrace digital healthcare advances could better track developments and manage impacts. Meanwhile, other – less fortunate – nations struggled, with serious consequences.

When is the right time for disruptive innovation?

For healthcare organisations looking to innovate, identifying the right time can be a challenge. Should they carefully plan and consider innovation? Or should they take a leap of faith and just act before the opportunity escapes?

The right time for your organisation will depend on the type of change you want to make, and what’s driving it. Here are a few scenarios that are ripe for disruptive innovation:

During a crisis: over the past year, the COVID-19 pandemic has presented unique opportunities for healthcare organisations to introduce new practices and adapt to changing circumstances.
An imbalance in the industry: a limited number of key players in a sector can lead to innovation being stifled. Larger organisations tend to continue with proven practices, often facing little to no competition, which gives organisations with new ideas an opportunity to create change.
Out-of-date technology: sectors that use old technology are particularly ripe for disruption. Old processes can create roadblocks for both staff and customers, creating a need for new products or services and the appetite to embrace them.
Patients are ready: if there’s a gap between what patients need (or are demanding, according to your research) and what you offer, they’ll likely embrace innovations quickly.

Examples of disruptive innovation in healthcare

For many healthcare systems around the world, COVID-19 brought about much-needed disruption. Digital health developments accelerated at an unprecedented speed, with necessity making certain advancements a priority. Some examples include:

Automation in COVID-19 antibody testing: the UK’s NHS has been trialling bots to manage testing employees for COVID-19 antibodies. The automated process covers three stages – submitting the request, patient input and sending results. This ‘light-touch’ system reduces risks to staff while allowing them to focus on delivering great healthcare.

Home monitoring applications: patient self-assessment and self-care have become a key part of healthcare innovation since widespread smartphone adoption created easy internet access. In France, the app Covidom helps patients to manage their mild to moderate COVID-19 symptoms at home. The app allows a regional control centre to monitor and analyse all results, ensuring patients at home can be hospitalised or have an ambulance called if necessary.
Wearable technology: in Shanghai, healthcare organisations used Internet of Things (IoT) technology to help alleviate resourcing pressures. They connected Bluetooth sensors to a multi-patient management system to provide real-time temperature data. This enabled staff to respond rapidly and appropriately to changes while reducing the risk of healthcare worker infections.

Learn more about some of the key challenges the industry met in 2020, in our healthcare finance issues article.

Creating the right environment for disruption

Behind any disruptive innovation lies an organisational culture that encourages employees to challenge the status quo. If you’re on the path to being a disruptive innovator, here are four things you’ll need to consider in your business model.

1. Encourage risk-taking

Healthy risk-taking is fundamental to creating disruptive innovation. Building risk into core values, rewarding risk-taking and leading by example all encourage employees to think outside the box and test new ideas.

2. Make mistakes OK

Changing the way employees think about mistakes can change the way they work. Making mistakes and learning from them is a part of any innovation, so an environment where employees feel safe to make mistakes is crucial.

3. Break through barriers

Innovation can be stifled by red tape and inflexible rules. Creating a space where unnecessary hierarchies, approvals or rules don’t constrain people can encourage creativity and help new ideas come to life.

4. Tap into different ways of thinking

Innovation can lie buried within your organisation in less vocal, less visible employees who hesitate to share their ideas. Consider different ways to elicit employee participation that cater for different personalities and perspectives.

All disruptive innovation starts with change

Being truly innovative and adapting to the evolving world we live and work in starts with being open to change. Changing the way you think and challenging the status quo can unlock new doors and opportunities.

However, disruptive innovation also requires resourcing, so if you’re looking for flexible healthcare funding for your disruptive idea why not talk with one of our supply chain finance specialists today?

Consult an expert

Importing and exporting – how over-reliance on China is our biggest challenge

Posted on May 14, 2021May 20, 2024 by Duncan Khoury

Octet’s Senior Working Capital Specialist, Joe Donnachie sat down to chat to us about Australia’s current importing and exporting challenges, and the key risks associated with foreign trade.

When it comes to current risks in international trade facing Australian import and export companies, few are bigger than our general overreliance on a single country – China – as our primary supply chain source.

Leading up to 2020, it made at least some sense for the majority of Australian importers to use China as their sole source for importing goods. However, we’re now rapidly learning that there are several risks associated with ‘putting all our eggs in one basket’.

These risks range from foreign exchange fluctuations to delays, and from freight costs to the inability to travel to build relationships or even vet suppliers.

A 2020 study by UK think tank, the Henry Jackson Society examined the dependency of US, the UK, Canada, Australia and New Zealand on imports from China. It looked at 5,914 categories of goods imported and found that Australia was strategically dependent on China for 595 of the categories, more than any of the other countries.

Below are some of the most common impacts these trade over-reliance issues can have.

Foreign exchange fluctuations

The past 18 months have seen foreign exchange fluctuations of up to 30%. Companies that predominantly trade in USD saw the market drop down to 55c in March 2020, and then go back up to over 70c.

Swings of this magnitude make it essential to manage exchange rate fluctuation risk appropriately. Failing to do so will significantly cut into an organisation’s bottom line.

The cost of freight

Some customers have reported freight cost increases of up to 400% since March 2020. Two factors have influenced this jump: the domestic stay-at-home economy, plus increasing trade tensions and tariffs.

Firstly, in the COVID-related stay-at-home economy, many Australians are now in a better financial position than they were last year. Between JobKeeper, early superannuation withdrawals and rent delays, a significant number of Aussies have access to extra cash.

Add to that the general lack of holidaying, and the result is an increase in major home-related expenditure – often for bulky items like furniture, white goods and DIY construction materials. This has led to a huge demand for imports into Australia, and the containers are piling up.

On top of this, trade tensions are rising with the country we’ve been over-relying on as an import source – China. This has led to the financial issue of huge tariffs on certain Australian exports, and the logistical issue of containers stacking up on our shores. Shipping delays and increased costs have both become a problem, resulting in greater risk within international trade than in previous years.

To mitigate this risk, we’re seeing many Australian businesses switching to domestic suppliers. This means they no longer need to factor in exchange rate fluctuations, plus they gain a level of reliability that offshore businesses can’t provide.

Domestic suppliers are usually more expensive, yes, but many businesses are happy to pay a premium for greater reliability in the current climate.

Lack of visibility due to closed borders

Once upon a time, when businesses were dealing with overseas suppliers, the first step would be to fly to the relevant country and visit the factory in person. This helped to build more concrete relationships, and also ensured that the products or materials met the necessary quality standards.

With borders being closed, business travel simply hasn’t been possible for the past year; and less transparency has often meant a lower level of trust in the importing and exporting world, and greater general risk in international trade.

Overdemand and raw materials shortages

Another huge issue is the overdemand for certain types of products, such as PPE and construction materials. Meanwhile, the entire country is experiencing a lack of certain raw materials, thanks, in part, to global shutdowns. Polymeric diphenylmethane diisocyanate (PMDI) which is used in the production of adhesives and foams, as well as other organic chemicals, are in short supply.

This means that suppliers – both within Australia and overseas – are finding it difficult to meet consumer demand. And in turn, this has created supply chain issues for many Australian companies, even larger ones that normally command great purchasing power.

Australian import and export businesses can navigate these challenges

To manage your risk in international trade, it’s important to pay attention to your overall supply chain. Things have changed over the past year. Previously, bigger suppliers (and buyers) would dictate terms, but that’s just not the way things work in this uncertain period.

Instead, the dynamic has now shifted to focus on building good business relationships, including intelligent, mutually beneficial, trading terms.

Supporting the supply chain

Imagine a company, STAR HARDWARE AUSTRALIA, is struggling due to local lockdowns slowing Australian cabinetmaking. If they try to push out their supplier’s payment terms to benefit their own business, the supplier might end up simply falling over. Net result: the company just lost a source for their product.

So, instead of trying to bully their supply chain for better terms, STAR HARDWARE would be better off searching for ways to proactively and sustainably support them.

One way to do this is by using Octet’s Trade Finance facility to take advantage of any supplier early payment discounts that can be negotiated. This benefits both parties:

The supplier gets funds quickly, so they can continue to meet all of their day-to-day costs.
The buyer has access to the capital for quick payment, guaranteeing their stock. And often, the early settlement discount is enough to zero out the cost of the Octet facility.

Increasing visibility and transparency

Octet’s Supply Chain Platform can also help to increase security and trust in an environment that prohibits meeting suppliers face-to-face.

As a buyer, using the platform gives you peace of mind that we’ve taken responsibility for onboarding and verifying every supplier. You might be stuck in Australia, but we have a team on the ground in Shanghai that can head out, meet with your suppliers and do background checks. Our team ensures that each supplier has all the relevant trade documentation.

And because the platform is multilingual, it facilitates clear communication with your suppliers once they’re verified. Plus, we also digitise the letter of credit process before any transaction can occur, meaning that all transactions are verified and approved by both parties right throughout the process.

Meanwhile, your supplier knows that our Supply Chain Platform guarantees their payment. Again, this creates a secure and efficient trading environment for both parties.

Solidify your supply chain

In a volatile global trading environment, managing your import and export risk starts with being financially prepared. Taking measures to support your supply chain and secure sustainable working capital solutions can protect you from both supply shortages and fraud.

Get in touch to discuss how our solutions can help your growing business.

Disclaimer: The following comments are only our views and should not be construed as advice. You should act using your own information and judgment. Although information has been obtained from and is based upon multiple sources the author believes to be reliable, we do not guarantee its accuracy and it may be incomplete or condensed. All opinions and estimates constitute the author’s own judgment as at the date of publication and are subject to change without notice.

How to build a resilient business

Posted on April 12, 2021May 20, 2024 by Duncan Khoury

Is your business resilient? Just over 12 months ago, many business leaders would have confidently answered ‘yes’.

But now, over a year on from the beginning of the COVID-19 pandemic, something’s becoming increasingly apparent. Business resilience plans that failed to look at survival and recovery as a long-game aren’t providing the level of resilience needed.

Global pandemic or not, most business resilience frameworks weren’t developed with a disruption of this magnitude in mind. So what have we learned about business resilience in the past year? In short: that not all interruptions are short-lived. Some are marathons of epic proportions, but it’s possible to get through them.

And many organisations are not only surviving, but actually thriving in these uncertain times.

What makes a resilient business?

Simply put, resilience is the ability to absorb and weather storms, big and small.

Resilience in business is defined as being in a strong enough position to both thrive in stressful (or lower business/consumer confidence) environments and recover from any hits from said environments. It’s doing accurate risk management and planning, and then being able to put those plans into action quickly.

Most of the work should actually happen in the preparatory stage around risk management.

Types of obstacles to prepare for

There are two broad types of obstacles that can cause the kind of business stress that requires resilience: indirect and direct.

Indirect obstacles are stressors that occur outside your company’s general control, like:

natural disasters
terrorism
economic downturn
pandemics or other public health crises
government and other policy changes.

Direct obstacles are stressors that affect your business from within, such as:

employee theft/fraud
vandalism
cultural issues
lack of skilled employees
damage to commercial buildings (flooding, fire etc.)
supply issues
mismanagement.

To build an effective business resilience strategy, it’s important to take into account both indirect and direct risks. You also need to develop contingency plans that your company can easily and effectively implement.

But how exactly do you develop that business resilience framework?

What should you include in a business resilience framework?

Plan, respond, recover

When you’re looking at business interruption management, the first step is to identify what potential interruptions might exist, either internal or external. As we’ve recently learned, some things (like global pandemics) can fall into both categories. Internally, absenteeism can increase or your offices could be closed down. And externally, economic downturns, supply chain issues and changing government policy can all play a part. It’s important to be prepared for a range of circumstances.

When you collate your list of potential risks, make sure to consult people at every level of your organisation, from upper management to deskless employees. Their individual knowledge and experience will shine a broader light on the possible issues that may arise.

Once you’ve identified a range of possible risks, likely or unlikely, it’s time to develop a plan to deal with each if they eventuate. This plan needs to address both response and recovery.

Most importantly, though, business interruption modelling clearly needs to happen before the interruption event. If you’re prepared, you can quickly action your business continuity plan when the event happens. After that, it’s as simple as managing the risk that you have planned for.

Essential elements of a business resilience strategy

Although there are several variables, most business risks will fall into one of five categories.

1. Brand and reputation risk

This is a risk that every business, big or small, faces. From advertising backlash to product or service failure, there’s always a risk that the brand and reputation you’ve worked so hard to develop will be challenged.

Plan – Make sure your processes minimise the possibility of offending or disappointing customers. This could be as simple as putting a quality control strategy in place. Be aware that social media will probably play a part in both the issue and its solution. Then make sure your business has the expertise to cope on all platforms, from social media to customer-facing interactions.

Respond – Sometimes, things will slip through the cracks. When they do, ensure that a single department or person is responsible for quickly implementing your established plan.

Recover – This can range from sincere and timely apologies to announcements that move the narrative forward. Ensure your plan can recover your brand’s reputation with integrity and meaningful action.

2. Security risk

Any resilient business will be aware of risks to their security, from shoplifting to online hacking. In the constantly evolving digital world, it’s not just your own business that’s at risk. A security breach can also expose your customers’ sensitive data, so it’s incredibly important to stay on top of this area. This is essential to protect yourself and your customers not just from the initial risk, but also from any financial or legal liabilities that can eventuate.

Plan – As always, prevention is key to minimising security risks. Consider a security audit that looks into all areas of your business. A great way to avoid cyber security risks is to place an extra layer between you and your suppliers.

An advanced supply chain finance platform such as Octet can help to ensure that all suppliers (particularly international ones) go through a proven verification process. It’s also important to have adequate insurance and enough funds to be able to continue with business if something goes wrong.

Respond – In case prevention fails, quickly action your established plan. This could include any relevant cyber insurance, external consultation or quick access to additional funds via Trade Finance or Supply Chain Accelerate to continue paying your suppliers.

Recover – Rapidly enacting your plan, continuing with business as usual and making sure to be transparent where necessary with any impacted customers are the keys to a quick recovery.

“Having extra physical and digital security will always be important, but it’s even more so in the current turbulent environment. As with anything, when you’re flailing through hectic times, balls can be dropped. But when your suppliers have all been verified and you can track, validate and authorise your supply chain transactions at every step – which is the case when your business uses Octet, you have much more certainty.” – Duncan Khoury, Octet.

3. Compliance risk

For businesses of all sizes, meeting the expectations of laws, ethics and regulations of both their industry and jurisdiction can be a bit of a minefield. Each different industry has an abundance of laws and regulations that need to be followed, ranging from data protection to occupational health and safety. Failure to comply can have expensive and reputation-related consequences.

Plan – It’s important to be aware of regulations and remain in touch with the regulatory bodies that monitor and enforce compliance in your industry. Make sure someone in your business is up-to-date on ever-changing legislation and obligations, and that their workload doesn’t stop them from staying on top of this.

Respond – If something does go wrong, seek assistance from consultants, insurance providers and your legal team. If you already have a department or consultant who is briefed on the possible compliance-related issues – and aware of the established plan – then acting quickly will be easier. And like anything, this can be a costly exercise, so having the cash flow ready to ensure you can call in the experts is essential. Non-compliance often carries fines and penalties.

Recover – Having a dedicated team or person to take the lead should ensure you can swiftly action your established plan, while the rest of the team can remain focused on continuing to trade.

4. Financial and Economic Risk

These sorts of risks are often caused by any of the internal issues we mentioned above. But external factors such as economic downturn or COVID-19 can also have an impact. The cost of a decline in productivity, inflated supply prices and increased PPE needs during this pandemic have severely affected many businesses.

Plan – To ensure your company is resilient against financial risk, strong and diversified cash flow is key – and not just for a short period of time. As we’ve learned, resilience is a long game. You need to ensure that you can continue to both support your existing liabilities and gear up for sales opportunities when they arrive.

Ready to respond – When you’ve prepared for financial or economic risk, your ability to react well and continue with business depends on the cash flow available to you. This may either come from an emergency fund or a line of credit such as Debtor Finance. Having a range of facilities available before something goes wrong allows you to respond as quickly as you need to.

Recover – A period of downturn can often affect supply chains. The companies that are recovering the fastest from the impacts of COVID-19 are the ones that geared up well in advance. And this was only possible if their cash flow position afforded them the opportunity to do so.

5. Operational Risk

Regardless of size – whether you’re talking about an office or a manufacturing plant – every business has operational risks that can jeopardise business continuity.

Plan – As always, prevention is the first step. Ensure your plan addresses all possible issues, from trip hazards to clear signage, to adequate PPE and natural disaster plans. Staff training should also be a focus area for prevention, so ensure you train your employees to avoid mistakes that can cost time and money.

Respond – When something does go wrong, your back-up plan should ensure it minimally affects operations. Public Liability and other insurance is also key here, in terms of responding to income loss, legal costs, product wastage and property damage.

Recover – As always, your company’s ability to recover is based on its ability to continue trading through adverse times. This means having a combination of diversified income streams, strong cash flow and skilled people power to get you through to brighter periods.

Regardless of risk type, communication is key

Finally, one of the most important parts of developing and implementing any business resilience framework is ensuring everyone involved understands the processes. Training your staff and giving them access to the information and people needed to enact the plan will mean your business can better weather any storm that may arise.

Interested in exploring your options and improving your cash flow position? Take a closer look at our market-leading working capital solutions and get in touch to discuss.

How to prevent procurement fraud

Posted on April 12, 2021May 20, 2024 by Duncan Khoury

Although preventing procurement fraud is difficult, it’s by no means impossible. A company can take a variety of preventative measures to protect against procurement scams, some of which are surprisingly simple to implement. They range from making sure there are multiple eyes on procurement processes to creating a transparent culture around your company’s procurement in general.

But before we talk in depth about identification and prevention, let’s go back to the basics.

What is procurement fraud?

Simply put, procurement fraud refers to any financial or other dishonesty in the procurement process of a company. Sometimes this may be for an individual’s personal gain. Other times, it’s to create a balance sheet loss. And in rare cases, it’s part of a more extensive scam or web of corruption.

Types of procurement fraud

There are many types of procurement fraud and scams. The specific possibilities are endless, but most schemes can generally be broken down into these categories.

bribes and kickbacks
bid manipulation
variation abuse
billing fraud or false invoicing
undisclosed interests
personal procurement abuse.

What are the signs of procurement fraud?

There are many red flags for procurement scams – however, there’s no one sign to look out for, as there are so many types of fraud.

Billing fraud and false invoicing, in particular, can be very hard to spot without a complete audit.

That said, one thing that all business owners can look out for is employee indifference. Although this can be highly subjective, when the person responsible for procurement seems cagey, overly protective or nonplussed about a supply or distribution chain they manage, you may want to dig around.

For example, imagine that someone raises an issue about a company you’re supplying to, sudden price decreases or significant invoice variations. If your procurement manager seems uncharacteristically nonchalant about any of these, that could be a huge red flag.

That’s because, in fraud situations, the procurement manager is commonly the person who stands to profit most from these types of purchasing manipulations. This could be because they’re accepting bribes or kickbacks, or because they have a personal, undisclosed interest in the procurement scam.

Other signals to look out for are constant variations in invoices or generalised expenditure and decreased quality control of purchased materials.

How to prevent procurement fraud

There are a few ways to prevent procurement fraud. The simplest is to make sure that several people or departments are involved in the sales and procurement process. Although it does occasionally still happen, a scheme that involves a large number of employees working together is rare.

Most commonly, however, fraud is an opportunistic crime. That means removing the opportunity is key.

Consider introducing an additional approval process for orders over a certain amount, or assigning someone to identify and regulate the vulnerable steps in your processes.
Encourage a culture of transparency by implementing formalised procedures and processes that ensure a range of eyes view and approve all deals and transactions.
Question price increases and formalise a process to ensure any changes are examined, logged and accepted by more than one party or team.
Educate your staff to recognise the signs of procurement fraud, both internal and external. And introduce an official process to deal with concerns or complaints in this area.

Use a payment platform that has supplier verification built-in. Our Supply Chain Platform keeps track of all of your payments and documentation material in one place. It also ensures that any company you send money to – or receive money from, is vetted, and this significantly improves your supply chain visibility.

Considering a supply chain platform?

When you use the Octet Supply Chain Platform, you’ll benefit from the transparency of a standard and secure payment process. One that both reduces the initial opportunity for all types of fraud, and increases visibility around any payments your company makes.

Plus, the Octet Platform offers a clearly articulated supply chain process: a seven-step system that ensures invoicing, authorisation and payment all happen quickly and safely. And most importantly, it keeps everything fully transparent at every step of the process.

Even if procurement fraud isn’t a current concern for your business (maybe due to organisation size or other factors) there can still be great benefits to be found in both automation and increased transparency of your supply chain finance and payments.

Talk to us today

JobKeeper: the positives, the negatives and the future without it

Posted on February 9, 2021May 20, 2024 by Duncan Khoury

Throughout 2020, the JobKeeper payment scheme was a lifeline for many businesses and individuals alike. The Government designed it to help businesses that were negatively impacted by COVID-19, and introduced it during March 2020 to help prevent business closures and job losses. The scheme has been extended a few times since then, and despite murmurs around a more ‘targeted’ state and industry type extension, the official scheduled JobKeeper end date is 28 March 2021.

We talk to Brett Isenberg, Octet’s Chief Commercial Officer, about JobKeeper, its impact on the Australian economy, and what the future might look like without it.

JobKeeper: a lifeline

Q: What were the positives of having the JobKeeper payment scheme? Did it do what it was meant to?

Brett:

There’s no doubt that JobKeeper was a required measure. When the scheme was introduced back in March, COVID-19 had already begun to seriously affect healthcare systems and lives around the world, and there was real concern that the same thing would happen here.

Our government moved quickly, both with lockdowns and financial support to help businesses with the inevitable economic downturn.

From that angle, JobKeeper has been a big win. For businesses that couldn’t sell (or had limited capacity to), JobKeeper provided vital cash flow to cover operational costs. It also helped businesses to retain employees and ride out the lockdown periods.

Without measures such as JobKeeper and tax relief, we’d be looking at a very different economy today. These measures have provided businesses with much-needed cash flow, helped to keep consumer spending alive, and – to date – helped us to avoid serious economic fallout.

A year of mixed fortunes

Q: It sounds like JobKeeper was a big win for businesses and employees alike. But what were the downsides? And what could have been done better?

Brett:

To understand the flipside of JobKeeper, we need to consider what’s happened in our economy since March 20.

What we’ve seen is a real dichotomy of fortunes, with results that vary according to industry and state. Until very recently, Western Australia has remained virtually untouched by COVID-19, while Victoria has experienced some of the strongest restrictions in the world. Each state has run at a different pace, which essentially means that we now have six or seven different economies running in the one country.

On top of that, we’ve seen huge variations across different industries. Tourism and hospitality have taken massive hits, while eCommerce has absolutely boomed, especially across certain categories.

I think the biggest problem with JobKeeper is the fact that it’s been a blanket solution to deal with a host of different problems. Broad initial eligibility rules meant that businesses who were still doing well could adjust their results and continue to receive payments. This, in turn, has meant that some businesses have ended up in a stronger position than they were in before the pandemic, with extra cash flow and less business stress. Some businesses are now even (considering) returning a portion of their JobKeeper subsidies due to their stronger than anticipated financial position.

Meanwhile, investor confidence has soared, with an unprecedented stock market boom from the end of March. Consumer confidence has also continued as eCommerce saw its biggest growth in history.

While this all sounds positive on the surface, it points to real concerns about what happens when JobKeeper ends. The blanket approach has helped to mask any potential issues, such as ‘zombie companies’ which include businesses that use the payments to simply keep afloat without adapting to change.

Overall, I don’t believe we’ll see the true economic impact of COVID-19 for another 12-24 months.

I think a more considered approach, with regular and specific monitoring by industry and state, would have helped to create a more stable outcome.

A future without JobKeeper

Q: Do you think it’s a good time to end JobKeeper? Are Australian businesses ready for it?

Brett:

Australian businesses need to be ready. They’ve had a good 8-9 months to consider their position and plan for what lies ahead. While many businesses have no doubt done this, others have used this time to hibernate or have been reluctant to change. These are the businesses that will struggle and may contribute to bigger economic problems down the track.

Because of this, I think it is a good time to end JobKeeper in its current format. The idea is to help keep the economy moving and keep small-to-medium-sized businesses – the lifeblood of our economy – flowing.

I believe a more targeted approach will help to do exactly that.

Q: What can businesses do to help them prepare for a future without JobKeeper?

Brett:

Businesses need to plan for what will happen when their cash safety nets are removed. How will they cover costs? How will they adjust their operations? How will they continue to grow revenue?

Knowing when cash is coming in and going out, and having the right tools to deal with fluctuating sales, cover procurement and capture opportunities are all key. Getting the right working capital in place lets businesses capture the opportunities that have come out of the pandemic.

Changes such as remote working and direct selling online have transformed the way many businesses operate. It’s the perfect time to consider what has worked well, what you want to continue doing, and how you can create opportunities to reduce ongoing costs and increase sales.

With flexible finance options, you can take advantage of this time to gain a powerful competitive advantage.

Preparing your business

With the end of JobKeeper payments imminent, now is the time to take control and prepare for a future without it. If you’re looking to secure your working capital position, take a look at our trade finance solutions and talk to us if you’d like to know more.

The future of retail: how 2020 shaped the path ahead

Posted on December 18, 2020May 20, 2024 by Duncan Khoury

The online retail revolution is here.

Thanks to COVID-19, 2020 saw transformation in the retail industry go into overdrive – with this fully expected to continue through 2021 and beyond. Social distancing, restrictions and lockdowns have meant that more people are shopping online than ever before – and it shows. Online sales are at record highs with no signs of slowing down, and retailers are scrambling to meet demand while navigating the challenges of doing business online.

The challenge for retailers is how to capitalise on these opportunities. With access to the right retail finance products, businesses can capture once-in-a-lifetime opportunities and set themselves up for a strong, profitable future.

In this article, we look at how the eCommerce landscape has changed, which categories have been the biggest winners and what this means for your retail business.

Online sales soar

2020 was the year no-one saw coming.

Governments closed borders, imposed lockdowns and put restrictions in place. These changes hit the retail industry hard, forcing many businesses to shut down. Other ‘essential’ retailers faced strict store occupancy limits and reduced foot traffic.

Understandably, traditional retail rapidly declined as consumers were forced to find new ways to shop.

While eCommerce was on the rise well before COVID-19, its growth trajectory skyrocketed during 2020. In February, online sales made up 6.6% of retail and wholesale trade. That figure then nearly doubled to 11.1% in April. With the percentage of online sales remaining elevated ever since, it’s clear that consumer behaviour has changed.

Here are some of the drivers behind this change.

More people at home

With official advice to socially distance, work from home where possible and avoid non-essential travel, most of us spent a lot of the year at home. This meant that more of us also spent more time online than ever before.

Embracing online buying

Traditional retailer closures forced previously reluctant consumers to shop online. They also introduced more people to the benefits of online ordering, and saw previously lagging online categories – such as fresh food – grow, as buyers were encouraged to reduce their in-store visits.

Unpredictable lockdowns

We saw varying levels of lockdowns across the country, with metro-Melbourne, Victoria and Adelaide all experiencing multiple phases. These meant online shopping represented a reliable, consistent source of goods for many Australians.

Shift in spending

With Australians spending less on eating out and traveling in 2020, people switched their attention to online shopping. The demand for home-based products soared, and for those who weren’t impacted financially by COVID-19, spending continued.

So what does this mean for 2021 and beyond? For retailers who’ve embraced online business, sales and revenues have soared. Australia Post has brought their eCommerce growth projections significantly forward, with 5 years of projected growth occurring in 6 months.

In short, consumers have embraced digital faster than expected, and everything suggests the trend is here to stay.

The eCommerce winners

Life with COVID-19 has not only changed the way consumers shop, but also what they look to buy. And when it comes to eCommerce, the year has seen some clear category winners. With more people staying home and facing spare time on their hands, it’s no surprise that these categories have come out ahead:

Home and garden – Australians turned to growing their own food, renovating and decorating in a year that had them spending more time at home than ever.
Health and beauty – Gyms and beauty salons had to close during long periods of lockdown this year, forcing consumers to look for alternatives. Bikes around Australia sold out by June, sales of fitness apps grew and at-home beauty treatments quickly became the norm.
Food and liquor – Pre-pandemic, consumers were slow to embrace buying fresh food online. This trend has now reversed, with total supermarket sales up 6.3% from a year earlier.
Hobbies and recreational goods – products in this category sold out fast as COVID-19 first hit.
Media – as Australians turned to more books, music and TV, they also turned to their phones. Social media use grew by 30% to help people stay connected with family and friends, and shop online.

For eCommerce category winners, 2020 was the perfect opportunity to build market share, and those who moved fast have made impressive gains. As we kick-off 2021, the question is, “What will online shopping look like in the future?”

The eCommerce legacy of COVID-19

The shift to online shopping began well before the pandemic, but COVID-19 has cemented its growth. As a result, the retail industry is in the middle of its biggest shake-up to date, with the pandemic’s legacy likely to forever change the shape of the industry.

New-look traditional retailers

For traditional retailers who relied on foot traffic, the year highlighted the importance of embracing eCommerce and significantly changing their business model. Moving to build an online presence helped businesses find customers beyond their geographic proximity, expanding their earning potential and diversifying their risk.

In fact, an online presence is no longer an option – it’s a necessity for most. Now’s the time to look at different eCommerce models and evaluate which would work best for your product or service.

More competition

The transition of more retailers to online business and the growth in drop-shipping popularity means businesses face more competition than ever before. With so much noise online, investing in new product and service ideas and innovation will become crucial to stay ahead of your competitors.

Growing online

Businesses with an established online presence are in the very fortunate position of taking advantage of growth opportunities. By capturing opportunities now while your competitors work to catch up, you can secure market share and brand equity that helps to set your business up for long-term success.

How to manage your cash flow and win in online retail

One of the key challenges facing online retailers today is finding the right funding to help them adapt and grow. Traditional financiers are tightening their lending criteria thanks to COVID-19 and other economic factors. This means it’s becoming more vital to increase cash flow and working capital in your retail business to fund those activities.

We have a range of flexible finance products that help retailers to tap into the power of your working capital and take advantage of the online revolution. Our most popular cash flow solutions include:

Trade Finance: increase your purchasing power by providing your business with a convenient revolving line of credit to use when and how you need.
Supply Chain Accelerate: a unique solution that links buyers, suppliers and financiers to lower costs and improve efficiency.
OctetPay: secure better foreign exchange rates and pay your international suppliers via a dedicated payments platform.

Will you be part of the online revolution?

The retail industry has been undergoing an online revolution for some time, and COVID-19 has significantly accelerated this change. Whether you’re in a traditional retail business or already online, it’s time to look at the eCommerce landscape and decide where you want to fit in.

Our flexible retail finance solutions can give you the power to grow and scale your business.

Analysis: How can the labour hire industry adapt to the new world of work?

Posted on December 5, 2020May 20, 2024 by Duncan Khoury

2020 has redefined the world of work.

Workforces have seen a rapid rise in remote working and flexible work arrangements. Where work-from-home hasn’t been possible, new procedures and practices have been necessary to create COVID Safe workplaces. Job security is now a key concern, with fluctuations in demand leaving no industry untouched.

Workforce planning has become more important than ever, with the labour hire industry feeling this strain more than others.

In this article, we’ll take a closer look at the challenges and financial impacts faced by the labour hire industry in 2020, and explore how the industry can prepare for the future world of work.

The labour hire industry in Australia

So, what exactly is the labour hire industry and what role does it play in our economy?

Labour hire refers to the practice of one company contracting out workers to another company. The labour hire company sources and qualifies the workers, and enters an agreement with another company to supply these workers to them for a period of time. Labour hire companies supply workers across almost every industry.

The labour hire industry has grown significantly in Australia over the past three decades. In fact, it now makes up a significant portion of the workforce in a number of industries – such as construction, hospitality, mining and manufacturing.

This widespread adoption of contract workers brings the challenge of managing employee rights, commercial considerations, and the changing demands of our economy.

A changing landscape

2020 was a particularly challenging year for the labour hire industry, as the COVID-19 pandemic swept the globe and related response measures came into place. Some industries shut down all together, some saw spikes in demand, while others experienced ongoing fluctuations as a result of changing restrictions. Add to that new virus-related OH&S considerations, and it was a year of mixed fortunes and challenges for labour hire businesses across the sector.

Here are some of the changes and their impacts:

Unexpected decline – For companies experiencing a significant decrease in worker demand, an unforeseen drop in revenue put a strain on finances and raised questions about their future viability. No matter what their prior plans had been, the focus switched to simply what they could do in order to continue operating through the pandemic, and come out the other side as strong as possible.
Rapid expansion – Conversely, some labour hire companies found themselves struggling to manage fast growing demand. Their attention turned to ramping up recruitment, sourcing new workers, and securing fast funding to capitalise on new opportunities.
New conditions – For labour hire workers in industries with continued demand, new virus-related OH&S factors came into play. While they could still work, there was now a difficult balance between wanting to stay safe, and employment that came with no job security or sick leave.

While 2020 introduced these significant changes, it’s likely their impact will continue into the future. With the pandemic still running its course and further fluctuations in demand expected, labour hire companies therefore need to continue to adapt the way they do business so as to better meet the challenges ahead.

Addressing workforce challenges

The future of the workforce and the way we work will continue to challenge the labour hire industry. There will be practices that are no longer relevant in the future and need to be let go, as well as adjustments necessary to meet the new way of doing business. Without a clear plan in place to address these new challenges, the ramifications for labour hire companies can be significant.

There are also ongoing commissions in place conducting annual investigations into the industry. The findings consistently focus on the fair treatment of workers and adherence to their rights, maintaining OH&S levels and monitoring compliance to regulations. Payment orders and penalties are in place for companies who are found to be non-compliant.

The risk for labour hire companies doesn’t end with a fine though. If sufficient OH&S measures are found lacking, company and shareholder value can come under threat and access to external capital can be made difficult. As such, a focus on managing human and labour rights with commercial considerations is imperative.

Looking ahead: the labour hire industry of the future

Now that we’re nearing the end of the year, the spotlight has turned to the future. How has 2020 changed the labour hire industry and what does this mean for labour hire providers?

Securing stability during downturns

2020 has highlighted the impact of demand fluctuations, and the importance of having strategies in place to ride them out. It is now a critical consideration to prepare for future downturns. With flexible finance solutions, such as debtor financing, in place, labour hire companies can access fast cash flow to help meet commitments until demand turns around. With cashflow playing such an important role in ongoing financial viability, flexible financing will be key to riding out future downturns.

Capturing new opportunities

For some industries, demand for workers will continue to grow for the foreseeable future. And while some labour hire businesses may find themselves in this enviable position, it doesn’t come without its challenges. Access to flexible finance is one of the biggest issues facing companies with fast-growing demand. Sourcing new labour takes time and resources that are often stretched in periods of growth. We offer a range of Labour Hire Financing Solutions that may be suitable in helping quickly source funding for growth.

New levels of compliance

As the labour hire sector continues to come under scrutiny from government regulators, so does the need for labour hire companies to mitigate their risk. Without it, the financial penalties can be significant and the reputational risk long-lasting. While commissions haven’t as yet publicly announced any of the breaches they’ve uncovered, this may change in future.

Being prepared

Changes in demand can, and do, happen – and the impacts can be substantial. With an ongoing pandemic and associated economic uncertainty, being prepared is key. Labour hire finance solutions can help you prepare for shifts in demand, free up capital to support growth, and mitigate risk.

Take a look at our flexible Labour Hire Finance Solutions and get in touch to discuss.

How to manage demand spikes in healthcare

Posted on December 5, 2020May 20, 2024 by Duncan Khoury

2020 has been a challenging year for organisations in the healthcare industry. Caught by surprise by the pandemic, and sudden spikes in demand, pharmaceutical, biotechnology, equipment, distribution, facilities and managed health care organisations around the world had to quickly adapt. This led to rapid adoption of new protocols and collaboration across the sector.

With the healthcare industry playing a fundamental role in our collective physical, mental, and economic health, it’s important for the sector to be as secure and stable as possible.

In this article we review the challenges the industry met in 2020, the healthcare finance issues that arose in the face of fluctuating demand, and how we can future-proof the industry.

A system tested to its limits

COVID-19 is the first truly global pandemic since the Spanish Flu. While some international healthcare systems have been pushed beyond their limits, Australia managed to limit the impact thanks to a prudent public health response. Precautionary measures and advanced tracking helped contain further case spikes. But containing COVID wasn’t the healthcare systems’ only challenge. Supply shortages of PPE equipment, a growing demand for telehealth, and the required creation of new COVID health clinics were just some of the additional obstacles.

The Australian healthcare sector rose to the occasion, and the industry looks very different today, than it did a year ago.

Innovation and fast evolution however have a financial impact. The need to balance social influences with healthcare finance outcomes has become more challenging than ever.

Planning beyond a one-off event

While some view COVID-19 as an isolated event, history suggests otherwise. Infectious diseases have always been a part of our world, and pandemics of different sizes have occurred throughout millenia. Future pandemics are therefore likely.

When these pandemics do arrive they’re also likely to present more of a challenge. With our global population growing, cities becoming more densely populated, urbanisation increasing, and the ease and accessibility of global travel expanding, viruses will be able to spread faster and easier.

With pandemics predicted to come more frequently, the pressure increases on the healthcare industry. As with most sectors, its ability to manage it will likely hinge on its financial strength.

The biggest financial challenges in healthcare

A healthcare organisation requires constant balance – optimal patient care must be continually weighed against ongoing financial viability.

Without ongoing financial viability, the system collapses.

Here are some of the financial challenges that were highlighted during 2020:

Declining revenues – The cancellation and delay of patient visits and non-essential procedures saw revenues take a hit in some cases.
Increased costs – Spikes in demand increased immediate costs, while new protocols added to the expense of both supplies and labour.
Narrowing margins – Reduced revenue and higher costs impacted the profitability of many companies in the industry.
Funding challenges – Traditional lenders reviewed and tightened their policies as a result of future uncertainty.
Cash-flow pressures – Large, unplanned, but necessary one-off investments placed significant pressure on finances and working capital, with cash-flow becoming tight.

How to strengthen healthcare finance

To better alleviate these financial challenges in years to come, there are a number of solutions healthcare providers can explore.

1) Growing supplier lists

A key challenge in a pandemic is the ability to source the right supplies when needed. Securing a range of suppliers, both locally and internationally, spreads risk and reduces disruption. By building a group of reliable, trusted suppliers, and being able to pay them quickly and efficiently, the healthcare industry can better manage unexpected spikes in future demand.

2) Negotiating better payment terms

Negotiating better payment terms can bring a host of financial benefits. Securing early payment discounts can lead to cost savings, improve cash flow, and build stronger stakeholder relationships to help see businesses through tough times. By bringing the different parties together (buyer, seller, and financier), healthcare providers can also create more transparency and control over their supply chain.

3) Creating ongoing working capital

By securing sustainable access to working capital and flexible cash flow solutions, it’s possible to establish a buffer against unexpected future events. With cash reliably available when needed, healthcare providers will have increased purchasing power, be better able to meet demand, and have removed the strain on their cash flow.

Preparing for the future

There is no doubt that 2020 has been a tough year for the healthcare industry.

As for the future, it remains uncertain. Being financially prepared, however, does help. By taking measures to protect your supply chain and secure sustainable working capital solutions, you can ensure your organisation will be ready to respond no matter the change in circumstances.

To learn more, take a closer look at our healthcare finance solutions or contact us to discuss.

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