5 minute read
Managing your overheads
• MAA81 Work Safely at Heights:
Albany, Esperance, Jerramungup,
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www.southregionaltafe.wa.edu.au/ short-courses
Additional training is also available at Muresk Institute (www2.dtwd.wa.gov. au/mureskinstitute/about-us) and 2 Work in Oz (http://2workinoz.com.au/). For more information visit the Jobs and Skills WA website at
www.jobsandskills.wa.gov.au
Federal The Federal Government is supporting employers through a boost to the apprenticeships age subsidy (www.employment.gov.au/boostingapprenticeship-commencements) to encourage employers to take on new apprentices and trainees. The Federal Government also has an incentive for older Australians to reskill, however this has been running for several years and is not a response to the Pandemic, but is available: (https://skillscheck.com.au/). JobTrainer is a partnership between the Federal Government and state and territory governments to establish a new $1 billion Fund. The Federal Government is providing $500 million in 2020–21 and this is being matched by contributions from state and territory governments. Job seekers and young people, including school leavers, can now take advantage of subsidised training to learn skills for jobs in demand. JobTrainer funding is available for accredited diplomas, certificates or short courses, based on a list agreed between the National Skills Commission and the state and territory governments. State and territory governments are responsible for determining which qualifications and short courses to prioritise from the agreed list, with focus on training in areas of anticipated employment growth.
when payments are late
BY SMALL BUSINESS DEVELOPMENT CORPORATION
During and following the COVID-19 emergency period, some growers have noticed that their business customers are slower to pay and in some cases, seem to be deliberately prolonging payments to help control their own cash flow. However, even when invoices go unpaid, you still have costs to meet in your business.
Managing the impact of slow payments on your ability to meet your business overheads is essential to protect the health of your finances and make your business viable over the long-term.
3 REVIEW every invoice before payment and ask whether you really need to keep incurring the expense.
What are business overheads?
Business overheads are expenses incurred to support your business that are not directly related to a specific product or service. Some examples are wages for staff, rent on premises, insurances and utility costs. These business overheads are referred to as fixed costs as the cost remains relatively constant, regardless of the fluctuations in sales volumes.
It’s very useful to understand the total of these fixed costs on a weekly, monthly and annual basis. It’s also good to understand that reducing your overheads without compromising your operations, can result in a more profitable business.
Steps to managing overheads
STEP 1: Review all expenses Zero based budgeting is a repeatable approach that means you review every expense regularly to assess whether the continued cost is necessary. It is very useful for ongoing cost management in your business. Review every invoice before payment and ask whether you really need to keep incurring the expense. Some items you may be able to dispense with include subscriptions, memberships, cloud storage beyond actual requirements, supplementary insurances that are no longer relevant and so on. Before continuing to pay, confirm whether the continued expense is still required, as circumstances do change. If you no longer need the good or service being supplied, make the necessary arrangements to stop payment and communicate this decision to the supplier.
STEP 2: Compare costs If the expense is justified, shop around for alternative suppliers and assess whether you can obtain better value for money. It’s easy to get caught by the ‘lazy tax’ — the phenomenon of being complacent about checking alternatives or negotiating for a better deal from your long-term supplier and therefore paying a higher price than you need to. Consider approaching your current supplier with evidence of comparative quotes, to see if they can improve their offer. An example of this is in gas supply, where a number of new entrants to the WA market are making price matching common for all suppliers. Once you have determined the best supplier for your situation, review their terms and conditions and explore options with them for extended terms of payment and discounts where applicable.
3 REDUCING your overheads without compromising your operations, can result in a more profitable business.
STEP 3: Recalculate minimum The higher the gross profit margin, the revenue Now that you have reassessed your better, as your business keeps more from each dollar of sales. costs, review the total overheads STEP 7: Remove or control bad your business needs to meet on a monthly basis and the minimum revenue required. debtors Prepare a ‘black list’ of debtors who have overdue invoices. Place a hold If the delayed payments from debtors on delivering further orders until the will continue to cause financial stress backlog of delayed payments from them after your aggressive cost reduction is recovered. If certain customers have campaign, complete the following steps: a history of not paying, or there are STEP 4: Start supplier negotiation warning signs that they are experiencing financial difficulties, put them onto a Negotiate with your suppliers about cash on delivery basis. You or your whether extended terms can be staff should follow up regularly offered until your finances when payments are late. are back on track. In some cases, they may be willing to grant softer conditions, such as delayed payments, if approached the right way. This can reduce your monthly overheads Consider approaching your current supplier with evidence of comparativequotes. Be careful about extending credit — it is useful to buy a credit history report to assess your customer’s likelihood of falling into financial difficulty. while you are experiencing a By following these steps, you reduction in available cash. will have completed a health STEP 5: Overhaul your terms check of your overheads and have improved your internal cost efficiency. Review your own terms and conditions Even when you are struggling with or terms of trade. Do they need to be late payments from your debtors, this tightened further to shorten the cash process will increase your eventual cash cycle and collect sales revenues more position and ultimately your profits. quickly? Don’t forget to have a lawyer review these to make sure they are MORE INFORMATION watertight. The Small Business Development STEP 6: Check your profit margins Corporation and its Business Local providers in regional WA offer advisory Review the gross profit margins on services and financial management your sales mix to evaluate whether it’s workshops to help you run your business. time to increase prices and improve Visit smallbusiness.wa.gov.au or call your margins. Your gross profit is your 133 140 for more information. revenue, minus the cost of goods sold (COGS) and is an indicator of efficiency.
