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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.

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 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.

Easing restrictions: 6 simple tips to help your business bounce back

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

COVID-19 affected many industries and sectors throughout 2020. Shut-downs, temporary closures and reduced business operations have marked a year with ongoing uncertainty. And while the impacts have varied from industry to industry, and state to state, some were hit harder than others.

As we head into 2021 however, there’s optimism in the air. We’re forging a path forward to a new business as usual.

But what does this look like for your business? And how can you make it easier on yourself to refocus on the future?

Here are some tips to help your business bounce back.

Tip 1 – Reassess your market

Before you rush back to ‘business as usual’, review and reevaluate your market. COVID-19 restrictions and lockdowns have changed consumer behaviour, and you may need to adjust your operations to meet new trends and demands. This could mean:

adjusting product offerings
targeting new customer segments
embracing digital sales channels
revising your marketing strategy

By embracing innovation around your products and services, and applying previous learnings, you can create a stronger foundation for future growth.

Tip 2 – Connect with your customers

Once you know what your business may look like, connect with your client base. If emerging from lockdown has changed how you operate, your customers need to know. By taking control of the narrative and keeping them informed, you become a trusted, reliable business partner in a constantly changing environment.

Tip 3 – Prepare your workforce

Workforce planning has taken on new meaning now that flexible working has become firmly embedded across many sectors. While this delivers many positives, it also presents new challenges. Dedicated in-person team days, rotating rosters and clear procedures around flexible working technology are just a few of the things to consider when managing your workforce.

Tip 4 – Review your workplace

With health and safety a top priority, and thanks to new rules around physical distancing, you may need to reconfigure your office layout to:

Create sufficient distance between workstations.
Meet current people-per-square-metre ratios.
Manage the safe flow of people in and out of the workplace.
Adhere to new face mask regulations where required.
Establish strict cleaning and sanitation procedures.

Tip 5 – Rebuild supplier relationships

The ability to once again meet with suppliers in person opens the door to re-connect and build on existing relationships. While many industries have embraced remote working, video conference fatigue is real and there’s a growing appetite for in-person connection. By taking a proactive approach you can build some valuable goodwill, help ensure stability, and potentially secure more favourable pricing.

Tip 6 – Boost your cash flow

Emerging from lockdown requires change, and the key to making this happen is a strong cash flow position. Efficient cash flow will help you get operations back up and running to meet your renewed demands, connect with clients, and cover the costs associated with re-engaging your workforce and adhering to the new rules.

For some businesses, the challenge comes with an added – and often welcome – layer of complexity. Thanks to shifts in consumer behaviour, such as the surge in eCommerce or move toward takeaway dining – there are new opportunities to grow, and a cash flow boost is the ideal way to rise to meet them.

If you’re in a position to grow in this new business landscape, now is the perfect time to look into the different options available to help power your business:

Trade Finance – Get access to a convenient, revolving line of credit to pay local and international suppliers, whilst having up to 120 days (60 of which are interest free) to repay your financier.
Debtor Finance – Tap into the power of your receivables and access up to 85% of the funds locked up in your invoices.
Supply Chain Accelerate – Unlike anything otherwise available to medium-large Australian businesses, this solution settles 100% of your invoices upfront and gives you 120 days to re-pay.

Now is the time to get back into business and lay the foundations for your future. A meaningful cash flow boost will not only help your emergence from lockdown, but also allow you to take advantage of any opportunities that come your way.

Take a look at our flexible Trade Finance Solutions, and get in touch to discuss the best fit for your business.

Payment Times Reporting Scheme – what you need to know

Posted on November 3, 2020May 20, 2024 by Duncan Khoury

The Australian Senate passed the Payment Times Reporting Bill 2020 in September 2020, and it will take effect on 01 January 2021.

What is the Payment Times Reporting Scheme?

One of the major impacts of the pandemic for small businesses has been the increase in late payments. According to Creditwatch, the average late payment is now made 11 days beyond the due date, impacting cash flow for Australian businesses across most industries.

Late payments have significant consequences for small and medium businesses in particular, restricting both cash flow and the business’s ability to survive, invest and grow. The Payment Times Reporting Scheme addresses this issue to improve payment timeframes for smaller businesses.

The bill seeks to create transparency around when large organisations pay their smaller business suppliers. Under the legislation, they’ll need to report every 6 months and make their reports public. The government expects this transparency to motivate large organisations to pay their suppliers on time.

What does the legislation require?

For larger businesses, the legislation goes beyond reporting obligations. It also provides clear guidelines on what it considers ‘large’ or ‘small’ for these regulations.

Australian businesses whose annual turnover is $100M+ will need to pay suppliers whose turnover is less than $10M within 30 days of their initial invoice.

Currently, companies that fail to pay small businesses within 30 days don’t face any penalties for it. The new legislation introduces penalties that include ‘naming and shaming’ and fines for companies that don’t report. The scheme will be administered by the Payment Times Reporting Regulator, who will publish the names of offending companies in a report called the Payment Times Reports Register.

What does the Scheme mean for your business?

The effect of the Payment Times Reporting Scheme on your business depends largely on your turnover.

If your organisation has a turnover of more than $100M, now’s the time to get a plan in place. You’ll need to assess your working capital gap and identify any extra liquidity you’ll require to comply with the new legislation. And because traditional funding is likely to remain tight for the foreseeable future, you may need to consider alternative funding sources.

If you’re a smaller business with $10M or less turnover, the changes are nothing but positive. You can expect payment within 30 days of your initial invoice, and you’ll benefit from any increase in your cash flow.

How can Octet help?

If your medium to large business needs financing to meet the new regulations, we can help. Our Trade Finance solution lets you settle your supplier invoices upfront, then repay the cost at a later date. Plus, our solution does more than just help you to meet legislative requirements. You’ll also benefit from:

keeping your balance sheet in check
improving relationships with suppliers by paying them earlier
being able to access alternative funding in addition to any regular bank funding

Want to know more?

If you need financing to help you comply with the upcoming regulatory changes, get in touch. We can talk through your needs and tailor a solution that works best for your business structure and supply chain.

Talk to us today.

Pandemic Business Continuity Planning: A how-to guide

Posted on September 8, 2020May 20, 2024 by Duncan Khoury

The events of 2020 have dramatically shone a light on the importance of business continuity planning. And, with a crisis as significant and unprecedented as this, specifically looking at pandemic contingency planning is a must.

The swift arrival of COVID-19 meant many businesses scrambled just to keep operating. They may have had business continuity plans in place for a hypothetical crisis – however, the reality of enacting those plans in true crisis management mode, while addressing ever shifting workplace and societal requirements and planning for future changes, has been a challenge.

If you’re still in this position right now, we hope this article can make a difference.

What is a business continuity plan?

Put simply, a business continuity plan is an actionable plan to help your business prevent, prepare for, respond to and recover from a crisis – pandemic or otherwise.

Why do you need a business continuity plan?

It’s important your business plans for crises at any time – effective planning could be the difference between your business failing, remaining stable, or potentially even thriving in these adverse conditions.

An effective business continuity plan should minimise your risk to:

operations
staff
assets
cash flow

Your actions and preparedness should focus on ensuring everyone knows what’s expected of them and what to actually do. An effective plan could help save the livelihoods of many people. And during a pandemic, it may also save lives.

Should our business have a pandemic-specific continuity plan?

Yes – it’s the smart thing to do. Preparedness for a range of crises is important, but given the COVID-19 pandemic is the biggest issue many of us have faced in our lifetimes; companies who have been able to quickly activate a pandemic-specific contingency plan have enjoyed a distinct advantage – even if that’s just the benefit of their teams feeling more confident about what’s going on by knowing they’re able to work from home and/or understanding what’s expected of them as things change.

If your business isn’t in that position – we’ll show you how to put a business contingency plan in place for the pandemic from here on in.

What you need to consider when developing a pandemic plan

Firstly, any workplace pandemic preparedness plan that’s implemented needs to have allowances for constant testing and revision. The process should ideally be a collaborative cycle with all the relevant parties (across public and private sectors – such as governments and councils, building management and waste providers) informing the planning.

Your pandemic planning checklist should address:

risk management
business impact analysis
incident response planning
disruption minimisation
recovery planning

Here are some specific pandemic contingency plan considerations.

Employee and customer safety

The priority in any workplace needs to be employee and customer safety. Social distancing and isolating are the most effective measures. So, your pandemic contingency plan must incorporate the ability for the whole team to work remotely if required. Additionally, you must consider how the team may be able to work on reduced schedules, stagger start times and postpone non-essential travel and meetings.

If a completely remote workplace isn’t a possibility, there are necessary precautions that will help you provide a safer environment.

Seek advice from the Australian Government Department of Health

Follow the recommendations on health.gov.au for up-to-date pandemic advice.

Keep up to date with your state government’s current restrictions

Each state has different restrictions, and they are continually changing. Make sure the guidelines you are following are current. Google your state’s healthy authority (such as NSW Health) and ‘COVID-19 restrictions’ to find the most current guidelines.

Assign a planning coordinator (or team)

A clear directive as to who within the company is responsible for creating a COVID-safe workplace is imperative. The role(s) should cover policy creation, review and implementation. Assign adequate resources to ensure your team can achieve their goals effectively.

Create a hygiene policy

Effectively create, educate on and facilitate a COVID safe hygiene policy. Increasing cleaning practices and providing preventative supplies such as hand sanitiser and PPE are just the first steps. Safe Work Australia has all of the relevant information available.

Minimise exposure

Providing adequate space for social distancing, avoiding unnecessary gatherings and staggering team start times should all be considered. Consider implementing an ‘a’ team, ‘b’ team model to minimise disruption in the case of possible exposure and the necessary self-isolation which follows.

Identify cultural, environmental and disability implications

When implementing a changed workplace, consider the implications for immune-compromised, disabled, or at-risk staff members. Unfortunately, not everyone is ‘safer at home’. Additionally, there may be discrepancies in areas such as home internet access. So be prepared to make additional options available for staff who need them.

Implement a contact tracing framework

Introduce a procedure to facilitate active contact tracing for anyone who enters your workplace. You can find guidance for collecting personal information for contact tracing here.

Trade stability

Identify and address supply chain issues

Many companies are currently experiencing major supply chain issues (both globally and locally), so identifying supply chain improvement initiatives – with a focus on back-up options should be a priority.

Plan for worker absenteeism

The increased restrictions and focus on personal vigilance means that even if your employees remain COVID free, the necessity to isolate for any flu-like symptom or contact tracing can impact their ability to work. This is why any business continuity plan for a pandemic should always consider increased worker absenteeism.
For employees with children, the (necessarily) strict precautions schools and daycare providers are taking means there will be disruptions that will most definitely affect their absentee rate.

Increase your cash flow to plan for disruptions in revenue

Of the 8,000+ companies that declared insolvency in 2018/19, more than half reported inadequate cash flow as the reason. Factoring solutions could be a good way to have a backup finance plan in place when planning for business continuity. You may also want to consider Trade Finance or Debtor Finance as part of your overall pandemic contingency plan to ensure cash flow blips with both procurement and receivables can be ridden out. Find out more about how Trade Finance works here.

Increase communication

Keep staff, partners, customers and stakeholders updated on your corporate pandemic plan via email, press and social media if appropriate. Make sure the tone of those communications is confident, honest and sensitive to the current climate. Celebrating certain business wins should be either avoided altogether or approached with heightened sensitivity.

Plan ahead. Be prepared. Stay well.

We hope these tips can help your business negotiate the unique position that 2020 has thrust us all into. Keep positive, stay vigilant – and most of all, keep yourselves, your employees and customers safe.

2020’s must-know business cash flow management tips

Posted on June 23, 2020May 20, 2024 by Duncan Khoury

You’re probably sick of the phrase “in these uncertain times.” But unfortunately it sums up the current situation well. Times are uncertain, and what worked well for your business in 2019 may not right now.

Because of this, most things you’ve learnt about managing cash flow probably now seem out-of-date. Cash flow management is all about accurately predicting what will happen in the short term, based on what has happened in the past. The problem is that in a COVID-19-dominated world, past trends aren’t necessarily a great predictor of what will happen in the next six months.

So what can you do? Let’s examine a few top tips, including factoring solutions, creating a short-term cash runway, and increasing communication both internally and externally.

Get your business cash flow back on track

You need to understand how to manage business cash flow at any time. Failing to do so can put your business under severe strain. For example, of the 8,000+ companies that declared insolvency in 2018/19, more than half – 51% – reported inadequate cash flow as the reason.

But, particularly with the way COVID-19 has disrupted business supply chains across the world, getting a handle on your cash flow is essential.

Here are six must-do actions to help get your business back on track right now.

1. Create a short-term cash flow runway

As we mentioned above, cash flow forecasting is about predicting what’s coming down the line – usually in the next 12-18 months. But with so much uncertainty and the rapid pace of change, there’s little point in creating a longer-term cash flow projection.

Yes, it’s still important to have a general long-term plan. But right now, focus on creating a rolling three-month forecast, also known as a ‘short-term cash flow runway’. This is the only way to truly understand your cash flow while everything’s so uncertain.

A short-term rolling forecast will help to keep you agile, enabling you to respond to changes as they happen. As a result, you’ll be able to better focus your attention on your present situation.

As part of the process of creating this forecast, review your current cash position with your finance team. Make sure you understand exactly what your outgoings will be for the next three months. Freeze any non-essential expenses – whether they’re capital expenses or not. If necessary, speak to your suppliers to see if you can change your existing payment arrangements.

This should then help to free up cash flow to ride out the next period.

2. Get everyone in the room

Whether it’s in a virtual or physical room, gather your finance, sales/marketing and operations teams together weekly. Everyone needs to work with each other closely – there’s no place for information silos in this environment.

You’ll need to make decisions with input from all parties. For example:

your sales and marketing team will need to feed back customer sentiment insights, sales data and acquisition pipeline expectations. Digital and other measurable channels are also great sources of timely market demand and search information
your operations team will need to take that feedback into account with their production planning
your finance team needs to support both parties by running more scenario models and walking your sales and operations decision-makers through their projections.

Cash flow responsibility can’t sit solely with the finance team anymore. Everyone needs to play their part, but your finance team can help by:

making their reports and models easy to understand
translating the details for decision-makers whose eyes often glaze over when they see pages of numbers.

3. Ramp up communication across your whole supply chain

We’re all in this together, which means your suppliers and buyers are probably struggling to keep up with all these changes too. So talk to them. Find out what position they’re in. This can then help you to forecast your own cash flow.

You may discover opportunities for customers to pay you earlier in return for a discount. Alternatively, you may discover you can shorten your credit terms due to increased demand for your product. You may even be able to:

negotiate deferred payments for stock you haven’t yet received
build flexibility into your supplier contracts
rewrite your terms and conditions to formalise more favourable payment terms to move into the future in a stronger position.

Improving your supply chain and building a better relationship with your suppliers will also help you on the road to recovery. A ‘business-as-usual’ market simply won’t resume overnight, and demand and supply will swing back and forth before they find their new normal.

That means you’ll need to keep having these conversations.

4. Challenge the status quo

This is the perfect time to reassess how you do business to improve your cash flow – both for now, and in the future. For example:

Do you need to keep so much stock-on-hand?
Can you change your payment terms?
In your discussions between sales, operations and finance, can you uncover a new standard that you can move toward?

Perhaps your business could benefit from smaller, more frequent orders, or from negotiating extended payment terms with suppliers.

Having these conversations to challenge the status quo has never been more vital. The decisions you make won’t just help you in the short-term. They’ll also position your business for a stronger future. For example, reducing your order size may save you significant warehouse and storage costs going forward.

5. Identify alternative sales channels

While you’re challenging the status quo, explore new ways to sell your products. If your physical stores have had to close, what steps can you take to ensure that more of your sales are made online? If your regular customer base is experiencing a significant downturn, how can you find new sales opportunities?

Even after the market has substantially recovered, techniques that worked before won’t necessarily work in the future. This even extends to how we work, as this article from Forbes discusses. New ways of doing business now may continue to help you bring in income in the future. For example, many restaurants and cafes that started to offer takeaway or home-delivery services during lockdown may continue doing so even after customers return to dining in.

Be proactive and find your diversified place in the post-COVID-19 world to keep that cash flow coming in. You need to be aware that some of these new channels may be winners, while others may be losers. Either way, you need to put on your entrepreneurial hat and be flexible enough to experiment.

6. Speed up your access to cash

Fast access to your accounts receivables can make a big difference to your business success. What if you got paid as soon as you sent an invoice? Or even an average of 10 days earlier than you get paid now? How could that change your cash flow position? Now there’s a conversation to have with your finance team!

As one example, a factoring solution like Octet’s Debtor Finance can improve your cash flow by funding your accounts receivable within 24 hours.

What is factoring? Also known as invoice discounting, it effectively means your customers pay you within 24 hours – on time, every time. You can then use that money to:

pay your bills
buy supplies or equipment
even grow your business via talent, technology or competitor acquisition (if your management team agrees that it’s a smart move right now).

Even just automating your invoicing process to send reminders as soon as invoices are overdue can have a huge impact on how quickly you receive your money. That means you can get on with growing your business without stressing about your finances.

Take control of your cash flow in 2020

Understanding your cash flow in detail is the key to weathering the current economic crisis.

That means:

focusing on the next three month period
communicating clearly, both internally and externally
identifying new ways of doing business
increasing how quickly you get your money with working capital solutions.

Together, these tips will help your business to sail through the storm with minimal disruption.

Interested in how working capital solutions can help you take control of your cash flow?

Talk to us today.

Analysis: Transportation Industry Financial Ratios and Trends 2020

Posted on April 14, 2020May 20, 2024 by Duncan Khoury

While Australia is under varying levels of lockdown nationwide, the transportation industry continues to play a vital role in our economy. Supply chain logistics are the backbone of our whole community – a fact that’s starkly illustrated in the current environment.

But does that mean transport companies are automatically profitable?

To be successful, all businesses within the transportation industry need to analyse and understand their financial statistics and ratios, including:

gross and net profitability
turnover ratio
return on investment (ROI).

They also need sufficient working capital to weather the periods between supplier payments.

So what’s the most effective way to get a handle on those key metrics, and ensure good levels of working capital? Let’s take a deeper look at the transportation industry and its unique characteristics and challenges.

The importance of road freight: Australian transport industry statistics

Just how important is the transport industry to the Australian economy right now?

Back in November 2017, the transport, postal and warehousing industry accounted for 5% of total Australian employment. Within that figure, the road freight sub-industry accounted for the majority of workers.

That number was projected to grow to 7% over the next five years, based on the conditions of the time.

Meanwhile, a 2017 Australian Industry Standards study showed 84,635 businesses in the Transport and Logistics Industry, with a combined revenue of $96.65bn.

And by 2019, the road freight sub-industry accounted for 48,399 businesses, ranging from single truck operators through to large multinational companies. This $47bn market employs approximately 142,808 people.

In other words, road transport is a vital part of the Australian economy, even under normal circumstances. The staples of life, such as food and beverages, will always need to be transported – now, more than ever.

And particularly here in Australia, with our geographical challenges and lack of viable alternatives, road freight will continue to be a critical industry.

Transport industry financial considerations

The transportation industry covers both long-haul road freight, such as between capital cities and regional areas, and ‘last-mile delivery’ options like couriers.

The long-haul sector involves fewer vehicles, less labour and bigger loads than last-mile delivery. However, the key challenges for businesses in both sectors are similar:

understanding their existing key financial metrics
identifying how to improve those numbers to become more profitable.

Below are three of the key factors to consider as you examine the numbers for your transportation business.

Financial ratios

Financial ratios are a valuable tool to help you compare your business with either the overall transport industry, or specific goals you might have established. They’re also useful for identifying business trends and assessing your business’s overall financial strength.

Performance benchmarks from the ATO road freight figures provide a good reference point to compare your business against the transportation industry as a whole.

Key benchmark range	Annual turnover range
Key benchmark range	$50,000-$200,000	$200,001-$600,000	More than $600,000
Total expenses/turnover	54%-72%	68%-82%	83%-92%
Average total expenses	63%	75%	88%
Non-capital purchases/total sales	37%-54%	44%-59%	50%-64%
Labour/turnover	23%-37%	17%-29%	23%-34%
Motor vehicle expenses/turnover	13%-26%	9%-28%	4%-24%

Break-even costs

Smart operators know their costs, and always make sure their trucks are making money while on the road. It’s not enough to take on any backload job – you need to ensure that every contract you accept will work out to be profitable.

To assess whether a given contract will be profitable or not, one of the most important metrics you need to identify is the job’s break-even cost. Understanding this will then help you to estimate exactly what you should be charging per kilometre.

When you calculate your break-even cost for a particular job, factor in costs such as:

truck financing
maintenance
consumables (e.g. fuel and tyres)
labour

Ideally, an external accountant or trusted advisor who understands the business will regularly update and analyse these costs across the wider business for you. They’ll help you to understand your current profit margin, and the factors that influence it. Once you know that, you’ll have a better idea of what you need to change to improve that margin.

It’s true that the current climate means transportation companies benefit from:

more deliveries to people in isolation
increased online shopping
extra distribution runs

However, many businesses in the industry need access to extra cash flow to take advantage of those growth opportunities.

Octet’s Transport Industry solutions: the power to keep moving

The transport industry is generally undercapitalised, and the current climate will only add yet more strain to the sector. The good news is that Octet provides working capital solutions for the transport industry to keep businesses on the move.

Octet’s primary solution to relieve cash flow strain is our Debtor Finance facility. Debtor finance lets you fund your business using your largest asset – your accounts receivables.

In the transport industry, invoice payment terms are often stretched out to 30 days – or in extreme cases, up to 75 days. That’s a long time to wait for a payment you need to cover your everyday costs, and can make your business feel seriously stretched.

Our Debtor Finance helps by financing up to 85% of the value of your unpaid invoices within 24 hours.

Let’s say you have an invoice worth $100,000. With Debtor Finance, we make up to $85,000 of that available to you within a day, so you have the cash to run your business. Then, when your buyer pays their invoice, we give you the remaining balance, minus a fee.

We calculate the amount available in our funding facility across your entire receivables ledger, up to your approved limit. That means you constantly have money to draw on. This helps to smooth out your available cash flow across the normal ups and downs of trading.

Other advantages of our Debtor Finance solution include:

It’s an unsecured funding facility: this means we don’t need your personal assets as security.
The funding limit grows with your business: the larger your invoices, the more funding you can generally access.
It’s flexible: you can either use it as your main funding source, or as a top-up.

Our Debtor Finance suits transport businesses that range from newer companies to those that are well-established. Ideally, we like to see a turnover of at least AUD 1 million, with 1-2 years of business experience (that said, if you’re turning over AUD 500,000 or more, let’s have a chat – we may be able to help).

You can also use Debtor Finance as part of a combined solution with our Supply Chain Accelerate or Trade Finance facilities.

Power your growing business with Octet’s finance options

Debtor finance is just one way you can give your transport business a working capital boost, but we also offer other finance solutions that may suit your operation.

Talk to us to find the best option to power your business growth.

Trouble brewing for SMEs in Australia – what can you do?

Posted on May 29, 2019May 20, 2024 by Duncan Khoury

Australia is known for its laid-back culture. The mantra of “no worries mate” follows us everywhere – from weekend visits to the beach with family, to the café on the way to work and even into the office. In some ways this mindset can be a useful tool in business. It helps us maintain a level head, which can lead to healthy decision making and give Aussies an advantage in contexts such as negotiations.

However, just as there are scenarios in which our relaxed attitude can serve us well, there are also those where it could be doing us harm. In fact, Australian SMEs may be on the verge of experiencing some painful ramifications of carrying our laid-back culture into business circles.

A Misguided Trend

Along with being easy-going, Australians have a fixation on running their businesses through their property wherever possible. It’s not uncommon for businesses to fund against the sole security of a home and mortgage, a norm for the past 30 years.

Gaining finance from the banks in this way has the appeal of being a low-cost option. Getting major personal assets to work for them may also seem like an easy way for business owners to manage their finances, by receiving all funding through one channel.

However, this myopic approach can actually make things much more complicated, risky and costly in the long run. What happens, for example, if markets change or even the economy as a whole? We’ve seen it happen before, with disastrous consequences for businesses the world over. We were lucky in Australia then, more or less dodging the proverbial bullet. But what if there was still one in the chamber? A laid-back attitude isn’t going to be much help then, with “no worries” replaced by panic.

The Danger of Complacency

In 2008, America dropped their interest rate to zero following the stock market crash. The result for Australia was that interest rates plunged dramatically, to around 3% from what had been hovering at the 18% mark in the 80s and 90s. This seemingly opportune situation fostered a free-for-all in terms of loaning and lending, and it’s remained like this for a decade.

Has the continual decrease of interest rates made us complacent in Australia? We might have missed the brunt of the global financial crisis, but we also missed the learning curve. What many don’t realise is that interest rates in the US are now rising again, potentially pulling our rates up with them in the mid-term. With the international community borrowing predominantly from the US, their economic standing directly affects the rest of the world. The gravity of healthy American interest rate growth is affecting our own rates in a way that many aren’t prepared for.

Whilst the Americans are preparing for a more positive period, we in Australia are entering a time of relative uncertainty. This is the first time in a long while where banks may have to start downgrading commercial and private assets. That puts us in a position similar to that of the US 10 years ago – and that’s not a great one to be in for Aussie business owners. Compounded by dropping property values nationwide, the pressure is on for banks; and that pressure will shift downwards, falling on the shoulders of SMEs.

To make matters more interesting, the recent implementation of APS120 requires banks to conform with Basel iii and iv and the findings of the recent Haynes Royal Commission. This means that banks now legally have to hold greater equity per dollar for every loan given to clients. These regulations are relevant across SME lines of credit and properties, substantially tightening the lending criteria of banks.

For those who are mixing professional with personal by receiving a large proportion of their business financing through property, the situation could be painful. Some banks have already begun asking such business owners for sudden revaluations of assets leveraged against loans. This can then lead to lenders demanding top-up investment from businesses or even pulling their funding altogether.

The Solution is Financial Syndication

The best way to avoid a blow from the banks is to minimise your point of risk. Financial syndication is a simple way to spread risk and reduce the potential anxiety involved in funding business. By diversifying their avenues for funding, sharp business owners remove the need for bank loans supported by assets as collateral. Simply put, financial syndication is where businesses receive finance from multiple, manageable sources.

With markets changing, now is the time to decrease your deposit-based finances and look at the full picture for your business. Ask yourself honestly: if a hard year was to arrive, how would you be able to cope? If your business was to take a major, unexpected hit, could you survive?

Take a moment to assess what other means of funding you can utilise to gain capital beyond what you already have in place – so you don’t place all your eggs in one basket. There are numerous ways to go about this. You could start leveraging your invoices through a debtor finance facility for example, or use stock as a resource to seek inventory finance.

Four more reasons to diversify your finance

Negotiation Flexibility – Gain more options for ways to pay, so you can be flexible in negotiating supplier discounts. Offering to increase an order size or make payments earlier can help you unlock opportunities and close deals.
Marginal Business – Have the power to buy more in the ramp up to key periods like Christmas in order to capitalise on increased sales.
Bridging cashflow – Cover your cashflow gap in slower periods between the rushes, such as a lull around end of year.
Acquisition Funding – Free up the financial capacity to buy a competitor or other assets to further your overarching business.

It’s time for Australian business owners to stop being complacent. It’s time to accept that running the business off a lazy balance sheet is a luxury we can no longer afford. Being proactive is the best way to avoid getting unnecessarily caught out in the future.

So, speak to your financial advisor about your options. Learn more about the current economic climate and predictive trends, considering how it will affect you and your company. By broadening your understanding of your business, your industry and the environment you’re subject to, you can protect yourself from anxiety further down the line.

Disclaimer:
These comments are the views and opinions of the author and should not be construed as advice. You should act using your own information and judgement.

Whilst material 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 judgement as of the date of the briefing and are subject to change without notice.

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