19 Dec Managing interest rate rises

By Horace Hung  

As interest rates and prices continue to rise, there are some actions you can take to help your business ride out these challenges. 

On December 6, 2022, the Reserve Bank of Australia raised the cash rate by another 0.25%, taking it to 3.1%. With inflation expected to continue to increase, many financial commentators believe this increase is unlikely to be the last.  

Some points to consider: 

Adequate cash flow 

We often hear the expression “cash is king!” and currently, it rings true. An adequate cash flow buffer will help protect your business from moderation of consumer demand and rises in expenses, giving you time to adjust your operations. Think about borrowings – are they suitable for your circumstances? 

Review your pricing 

Are there opportunities to increase your prices to maintain your gross profit margin? With rising costs across many industries, customers may be more willing to accept price rises compared to when there was low inflation. It may also be wise to review the margins on individual product or service lines to ensure that profitable ones are not masking the loss-making ones. 

Focus on your core activities 

Clients sometimes spend considerable time undertaking non-core activities in their business when focussing on core activities would be more productive. Non-core activities may include bookkeeping, BAS preparation and company secretarial work. EQ8 can provide you with services that allow you to dedicate your time to your specialties. 

For example, as part of our virtual CFO (VCFO) offering, EQ8 Solutions can assist your business with cash flow forecasts and budget preparations.  

The information above is general in nature only and does not take into account your particular circumstances.