In recent years, major hacking events from the heartbleed vulnerability in 2014, to the WannaCry ransomware attack earlier this year have highlighted the need for better cybersecurity. More than previous events, however, the recent Equifax data breach illustrates the extent of this problem, and the threat it represents to businesses all over the world.
It’s common knowledge that business owners need to cultivate a good relationship with their bank if they hope to succeed in the long term. What many entrepreneurs aren’t aware of, and need to know, is that they might well need another financial relationship to secure their competitive edge. In cash flow situations that banks aren’t ideally equipped to handle for their clients, they’ll often refer business owners to an alternative financial institution, like Fifo Capital.
Cash flow problems are by far the most common cause of small business failure. Avoiding and managing those issues is one of the most important responsibilities that entrepreneurs have, and the one that they’re often most poorly prepared to deal with. Careful accounting and strategic financial planning are critical to any business’ survival, but there are issues that even this won’t help to address.
Though the 2008 global financial crisis didn’t drive Australia into recession, the evolution of banking practices since then have affected how banks interact with their small business clients. Most notably, large financial institutions have competed with each other to integrate technology that increasingly automates and streamlines their services. In many cases, this has meant expanding the capabilities of online banking to better serve small business customers. While many of these changes have had positive effects for small business, they’ve also left some notable gaps.
Businesses need financing for a wide variety of reasons, whether it’s to upgrade equipment, acquire stock, increase their production capacities, or to expand into a new location. Without third party financial support, growth can quickly become next to impossible. Unfortunately, getting access to those funds isn’t as simple as showing up and asking for them.
The capacity for growth that a business has is traditionally limited by the amount of investment it can apply to that purpose. Franchising is a great way to get around this issue quickly by harnessing the capital and labour of franchisees on behalf of your brand. The franchisee invests the capital for the new franchise, while also accepting most of the risk associated with that investment. Financially, this makes growth a significantly lower-risk endeavour for the franchisor than it might otherwise be. Despite that, however, businesses can’t afford to let their franchises fail.
When Brian Chesky agreed to rent out a few air mattresses in his apartment in 2007 to help make ends meet, he and his roommate, Joe Gebbia, figured they might be onto something. Not even in their wildest dreams, though, did they expect to be launching a $30 billion dollar enterprise. Now worth over $3.8 billion dollars, it’s difficult to picture the CEO of Airbnb as a young industrial designer looking for side-hustles to come up with rent money. Ultimately, however, it was exactly that situation that inspired the idea behind Airbnb, and that continues to drive the success of the business today.
Every business owner dreams of a time when they’ll finally be able to focus all their efforts on their customers and on growing their business. However, something always seems to get in the way. Equipment breaks down, suppliers go under, sales drop unexpectedly, and invoices don’t get paid on time. These interrupt your business’ cash flow, and can quickly lead to other, even more serious problems. Before you know it, a financial problem can lead to personnel disruptions, a decline in product quality, client retention issues, and eventually bankruptcy.
2017 is turning out to be an important year for SMEs in Australia. The financial pressures that small businesses have been operating under for the past decades are finally easing, and doing so in more ways than one. The Australian Small Business and Family Enterprise Ombudsman’s (ASBFEO) payment times inquiry found that Australian small businesses have suffered significantly from chronically late payments from much larger clients. The contract terms that businesses often had to deal with to manage these cash flow interruptions have, in some cases, made their lives even more difficult.
New business owners are often shocked by the amount of time and effort they’re forced to spend on managing their finances. Billing clients, chasing down payments, covering expenses, tracking all of these transactions, and planning for the future is not an easy task. Worse, many entrepreneurs are forced to spend their time not only handling this but also overseeing employees, developing growth and marketing strategies, and often lending a hand in production as well. This can make it incredibly difficult to keep cash flow stable, and to stay on top of payment collection from late clients.