10
SMART
CASH FLOW
MOVES
HELPING YOU
BANK WITH
CONFIDENCE
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To all our customers
The global financial crisis is hitting the headlines and many of you, our customers,
have shared your concerns with us. We’d like to take the opportunity to reassure
all our customers that we are a strong, secure bank. At Westpac you can save and
invest with confidence – knowing that your money is safe and we are well positioned
to meet the challenges of the current global environment.
We are a strong bank
It is in times like these that you need a secure bank to protect your interests and
give you sound advice. Westpac is one of only 20 banks in the world with a secure
AA credit rating and we’re performing well with earnings growing in 2008.
You can save and invest with confidence
Our focus on Australia and our disciplined approach to managing risk means that
we have no direct exposure to US subprime mortgages. When many financial
institutions around the world were investing in exotic securities, including
subprime mortgages, we chose not to.
Australia’s banking system is strong
In the current environment it is good to be part of an economy that is in good
shape. We have a strong banking system with all of our major banks rated AA.
The economy has also been well supported by our proactive government and
regulatory bodies – who have been ahead of the game and acted when needed.
This includes the significant reduction in interest rates early this month and
the Australian Government announcing that it would guarantee all retail and
business deposits with Australian banks for the next three years.
You can trust our experience
Westpac is Australia’s first bank and first company. We’ve seen difficult times
before, so you can trust our experience to navigate safely through these times.
We’ve helped millions of customers in the last 191 years by advising, reassuring
and managing their business responsibly. We’ve been here through wars,
recessions, droughts – helping generations of customers achieve their financial
goals in good and bad times.
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We are here to help
Westpac has almost 30,000 people dedicated to giving you support and advice
for your business and personal financial needs. In every Westpac branch and
business banking centre across Australia, there are highly experienced people
you can talk to about how we can help you save and invest with confidence.
That’s what we’re here for.
Thank you for your continuing support.
Gail Kelly, CEO Westpac
October 2008
LOOK OUT FOR THESE EASY-READ FEATURES
HOT TIP
TAKE NOTE
To talk to Westpac, call 132 772
or visit westpac.com.au/business
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Contents
1
2
3
4
5
6
7
8
9
10
What should be my business’ top priority now?
SMART CASH FLOW MOVE: Think cash flow, cash flow, cash flow.
5
How can I get my debtors to pay quicker?
SMART CASH FLOW MOVE: Revamp your receivables strategy.
6
At times like these, should I be cutting costs?
SMART CASH FLOW MOVE: Understand your costs and control them.
8
How could I get a better deal on all my business banking?
SMART CASH FLOW MOVE: Consider banking in one place and negotiating.
9
What’s the right borrowing strategy now?
SMART CASH FLOW MOVE: Get the right loan type for the right purpose.
11
How can I stimulate sales with consumer confidence falling?
SMART CASH FLOW MOVE: Keep communicating your business’ point
of difference.
13
What can I do to protect against losing business?
SMART CASH FLOW MOVE: Delight all your profitable customers.
14
Who should I turn to for help in these times?
SMART CASH FLOW MOVE: Get as much advice from experts as you can.
15
How can I free up extra time to focus on my business challenges?
SMART CASH FLOW MOVE: Work smarter, not harder.
16
How do I reduce the impact of an unexpected event?
SMART CASH FLOW MOVE: Review your business insurance.
17
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What should be my business’
top priority now?
1
SMART CASH FLOW MOVE:
Think cash flow, cash flow,
cash flow.
There is a well-known business phrase – ‘Cash is King’ – and if one piece of advice stands
above all others to position your business strongly to weather the current economic climate,
it’s this: be cash flow obsessed.
Cash flow is the very life-blood of any business, and as soon as grim economic forecasts
begin to hit the radar of industry, it can be the first thing to come to a screeching halt. Many
businesses with healthy profits have still gone under due to lack of cash. Cash flow is, in fact,
the single most important factor in determining whether your business succeeds or fails.
Therefore, as your number one defence strategy in the current market, your business should
focus on plans for cash flow – acting early, before cash flow pressure that could harm your
ability to do business, sets in.
The smart money?
■
Make cash flow your business’ number one priority.
■
Develop a cash flow budget that records the amount of money that flows in and out
of your business, so you can forecast the availability of cash for given timeframes.
■
Understand the difference between the role of cash flow (covers your business’ day-to-day
expenses) and profits (used to pay back debt and support long-term growth).
Westpac’s BusinessIQ is the place to find a number of free resources that can assist
with many aspects of your cash flow. Visit westpac.com.au/businessIQ to:
■
■
■
take advantage of free cash flow planning tools and articles
download free advice guides
find out about Westpac’s specialised cash flow workshops.
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How can I get my debtors
to pay quicker?
2
SMART CASH FLOW MOVE:
Revamp your receivables strategy.
When areas of industry collapse or falter, a horrible but real possibility looms – that sales
in your ledger may not turn into cash as soon as you’d hoped, or if you’re unlucky, at all.
People you do business with may fall on hard times – or some may go out of business
altogether, taking the cash you’re owed with them.
It illuminates how essential it is – downturn or no downturn – to have a prudent, methodical
and diligent receivables strategy, that ensures every cent of what your business is owed
comes in, and comes in on time. Effective debt collection reduces the length of your working
capital cycle, which in turn reduces your reliance on credit funds or your business overdraft,
meaning your business runs at optimum financial efficiency.
The Working Capital Cycle
The smart money?
■
Revamp and improve your business
receivables strategy to get cash in on time.
(See page 7 for tips.)
■
Understand your working capital cycle and
the impact it has on your business.
■
Managing the cycle more efficiently may
generate more cash for your business.
The Westpac Cash Flow Team is dedicated to, and specialises in one thing:
improving cash flow for businesses. To see how they can put your business
in a stronger cash flow position, call 1300 368 098.
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Quick tips for getting paid quickly.
■
■
■
■
■
■
■
■
■
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Get invoices out fast – don’t let a backlog form, the sooner they’re out, the
sooner they’re due.
Think of it as ‘your money’, not theirs – this will give you added confidence and
impetus when chasing your debtors.
Ensure that customers understand your payment terms by including clear
markings on your invoices.
Build a relationship with the person who signs the cheques – call them regularly,
thank them for payments received, follow up to chase outstanding payments.
Offer incentives for early or cash payment and clearly communicate these
to your customers – and where possible, seek payment up front.
You may want to consider charging interest on overdue payments. Make sure
your customers clearly understand these charges.
Adopt a methodical and reliable system for credit control and never let it slide,
e.g. phone calls, statements, reminder copies of invoices.
Offer a variety of payment options such as credit card and electronic payments
to increase the speed with which funds reach your account.
For international customers, account for differences in the business culture that
could lead to longer payment terms than those commonly adopted in Australia.
If customers have a payment problem, suggest an initial deposit with ongoing
instalments to gradually clear the bill. (Ensure that the agreed schedule is
adhered to and that you charge an appropriate interest rate. Your lawyer should
be able to assist you with this).
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At times like these, should
I be cutting costs?
3
SMART CASH FLOW MOVE:
Understand your costs
and control them.
Before cutting costs, first and foremost, it’s important to understand them. In times of
economic crisis, businesses need to be highly strategic. Having your facts straight on costs
is the ammunition you need in order to develop a smart attack on the challenges of the time.
You should be asking yourself questions like:
■
Do I know the true cost and profitability of everything we do? Our services? Our products?
Our customers?
■
What are our margins – do we have room to cut costs?
■
Can we afford to add extra services, or will this compromise our ability to provide others?
■
Who on the team is spending what on business expenses? Can these expenses be reduced?
The smart money?
■
Understand your business costs before making any moves to cut them.
■
Choose whether your strategy will be to fight to hold your margins, or to increase market
share – in a recession it can be dangerous to expect to do both.
■
Don’t overload your business with non-producing assets – focus on assets that increase revenue.
■
See if you can negotiate longer credit terms and volume discounts with suppliers.
■
Control your staff’s expense levels and monitor their spending regularly.
Westpac’s BusinessChoice Credit Cards could save you time monitoring and
controlling costs with a credit card that’s purely for business. You’ll be able to:
■
■
■
■
have up to 10 cards for different staff members
set individual credit limits for each card
see each cardholder’s activity summarised on one consolidated statement
have fast access to statements online for easy spend monitoring through
Westpac Business Online1.
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How could I get a better
deal on my business banking?
4
SMART CASH FLOW MOVE:
Consider banking in one place
and negotiating.
How many financial institutions does your business have accounts with now? If it’s more
than one, you could be missing out on getting a better deal for your business banking – by
underestimating what a full financial relationship is worth to your bank and what they can
offer you in return for it.
Furthermore, when the chips are down in business, it’s handy to have a bank that’s more
than a fair weather friend – and you’ll probably find that your commitment is rewarded with
commitment in return if you’ve agreed to bring all of your banking business to one institution.
On a practical level, it also means that your business banker can get a clearer picture of your
business, engage with it more proactively and offer more valuable support.
The smart money?
■
Commit all your banking to a strong, reputable provider who can offer you benefits for
doing so.
■
Be prepared to give them your working capital and loan requirements – this is valuable
business to them and may strengthen your negotiating power for good banking deals.
■
Ask your institution to take an integrated look at your banking, seeking benefits in return
for your complete banking business.
You can bank confidently with Westpac knowing we’re:
■
■
one of only 20 banks in the world with the Standard & Poor’s AA rating
Australia’s first bank with 191 years’ experience, through downturns and booms.
Talk to us about the benefits of a full, integrated suite of Business Banking
products with Westpac – call 132 772.
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Banking in one place
■
■
■
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BENEFITS
Stronger negotiating power.
Potentially lower fees.
Single view of all accounts online.
Transfers could be instant.
Self
Super
Credit
Card
Term
Deposit
Business
Loan
Short-term
Savings
Account
Transaction
Account
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What’s the right borrowing
strategy now?
5
SMART CASH FLOW MOVE:
Get the right loan type for the
right purpose.
Almost every business uses some form of borrowing – even if it’s just a credit card for
covering everyday business expenses. And just as the rest of your business strategies need
to be ever more prudent in these times, so will your borrowing strategy.
It’s important to remember to get the right loan for the right borrowing purpose. By doing
this you can ensure your interest costs don’t blow out unnecessarily, and that each of your
lending facilities functions best for the need – for example a credit card for paying for taxis,
a revolving overdraft facility to cushion cash flow, and a business loan for purchasing highervalue assets.
The smart money?
■
Review your lending to ensure you’ve got the right loan for the right purpose and see if you
can save your business interest. (Use the loan-matching table on page 12 for guidance.)
■
Remember the long-term lending golden rule: ‘Match the life of the loan to the life of
the asset’. (It isn’t smart financial management to still be paying for an asset once it is no
longer contributing to your business.)
Your Westpac Business Banker can structure the most suitable lending
package from our wide range of borrowing products. For more information
call 132 772.
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You could save interest with the right loan for the right purpose.
Finance
Features
Right purpose
Overdraft
- Easy access to funds to cover day-to-day
expenses.
- Linked to a transaction account.
- Competitive interest rate.
- Only pay interest on the funds used.
- Access funds through branches, ATMs,
phone and internet banking.
- Security may be required.
- Ensures payments are honoured
if your account gets overdrawn.
Credit card
- Usually higher interest rate than overdraft,
but with greater payment flexibility.
- Some providers offer link to rewards
programs so you can earn flights and other
rewards for your business spending.
- A line of credit to cover business
expenses conveniently and instantly
where credit cards are accepted, as
well as over the phone or online.
- Suitable for smaller cash shortages.
Trade
finance
- Can obtain pre-shipment finance for up to
30 days or post-shipping finance for up to
180 days.
- Attractive interest rate.
- A short-term finance facility with
in-built flexibility for the needs of
importers and exporters.
- Provides a useful cash management
tool.
Invoice
finance
- Purchases acceptable trade debts and
provides funding of up to 80% of approved
invoices.
- Remaining 20% paid to business on
payment by the debtor.
- Provides cash flow within 24 hours.
- Generally debtors are unaware of financier
involvement as all invoice accounting
functions are retained by the business.
- Finance for businesses with a
substantial debtors ledger that
need to free up cash flow fast.
Short-term:
Long-term:
Business
loan
- Competitive interest rate, on fixed amount - Flexible finance for worthwhile
business purposes.
borrowed.
- Flexible redraw and repayment options may
be available.
- Rates can be fixed or variable.
Lease
finance
- Doesn’t tie up large amounts of capital.
- Payments are normally tax deductible
(check with your accountant) and may be
structured to meet business requirements
(monthly, quarterly, annually or seasonal).
- Enables the funding of eligible plant
equipment or vehicles that are
income producing.
Equipment
finance
- Purchase equipment over time without
tying up large amounts of capital.
- Often no extra security is needed.
- Flexible repayments.
- Avoid tying up large amounts of
capital by purchasing equipment
over time.
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How can I stimulate
sales with consumer
confidence falling?
6
SMART CASH FLOW MOVE:
Keep communicating your
business’ point of difference.
We’re in tough times, which means your business may face a period when sales are
increasingly harder to secure. It’s a time when survival is ever more dependent on your ability
to have a point of difference – either something you do best, or something you offer that
others can’t – and to communicate it.
Now may well be the time to allocate more resources to your marketing efforts, to fortify
against losing business to hungry competitors. It could also position you to seize any
opportunities that may rise up through the gloom. Your competitors could suddenly be
flailing; the economic conditions could be creating new demands. By ensuring you put your
best foot forward to market, you position your business with the best possible chance to
achieve the strongest possible sales through these times.
Be mindful, however, that it’s easy to waste money on advertising; be sure to test marketing
strategies first before allocating large chunks of budget to them, so you can determine which
methods best deliver on your objectives before rolling them out.
The smart money?
■
Never stop promoting your business.
■
Stand for something, stick to it and communicate it.
■
Avoid talking of doom and gloom in your advertising, take a business as usual approach
and be positive.
■
Test the effectiveness of different marketing tactics before committing large chunks of
budget to a particular approach. Test until you find the method that delivers the best return
on investment then roll it out!
■
Take advantage of any free marketing tips or advice you can access from reputable sources.
■
Use word of mouth – it’s free and highly credible.
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What can I do to protect
against losing business?
7
SMART CASH FLOW MOVE:
Delight all your profitable customers.
If there’s a group of people with more power than anyone to help your business weather
the current climate, it’s your customers. They’re the ones who choose when to buy from
you, when to pay the bills, what to say about your business to others – they’re holding
some powerful cards. In economies where consumer confidence is low, customers also find
themselves suddenly in demand and may be approached by competitors scrambling to
attract their business.
The message is simple: If you want to hold your best customers in times of gloom, you’d
better treat them to exceptional customer service. Word of mouth is the most effective form
of advertising – and it comes free when your exemplary service approach means you’ve got
consistently happy customers.
The first step is to know what your customers are thinking about you, so you can identify
those who may be considering looking elsewhere. You can then start looking at customer
service strategies that make your best customers feel special – even if the downturn means
they’re temporarily not doing as much business with you.
The smart money?
■
Make customer service a priority – ensure all customer-facing staff are trained in
effective customer service techniques. (There’s a lot of free and valuable customer
service thinking online.)
■
Do a customer satisfaction survey to identify any customers who could be happier –
remember it’s 10 times harder to win a new customer than to deal with the problems
of an existing one.
■
Offer your best customers loyalty ‘extras’ – anything from lengthening their payment
terms (assuming it doesn’t stretch your cash flow) to simply picking up the phone and
staying in touch.
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Who should I turn to for
help in these times?
8
SMART CASH FLOW MOVE:
Get as much advice from experts
as you can.
While the current economic environment is full of challenges, there is one thing that’s on your
side: everyone’s mobilised to the cause.
When politicians are using the term ‘crisis’ to describe the conditions, you can be sure that
many of society’s major institutions, government bodies and other key organisations will be
acting to offer support to the business community – in organised ways that you’d be smart
to take advantage of.
Be as proactive and energetic as you can in seeking advice from experts who can keep you
in touch with the latest economic indicators and thinking, so that your business stays on
the pulse through these times and beyond.
The smart money?
■
Develop and leverage your relationships with knowledgeable experts – like your banker,
your lawyer, your financial planner and your accountant.
■
Read the trade press regularly, speak to industry bodies and take advantage of any other
resources to keep your business competitive.
The Westpac Cash Flow Team is there for every business in these times, with
advice on the latest cash flow strategies. To discuss your business cash flow,
call 1300 368 098.
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How can I free up extra
time to focus on my
business challenges?
9
SMART CASH FLOW MOVE:
Work smarter, not harder.
In times of economic change, it’s key that you approach your business challenges with a clear
head – and create the necessary time to focus on your strategy for weathering the conditions.
At the same time, however, you may be feeling pressure to work harder to counter the effects
of the downturn, which could leave you feeling somewhat stretched.
A golden rule in such circumstances is ‘Work smarter not harder.’ There are so many
time-saving technologies and products available to businesses now, and it’s a great time
to take stock of your business software, systems and processes to ensure you’re making
the most of them.
The smart money?
■
Ask your bank and your accountant about these time-saving products and services:
– Merchant service solutions to improve your cash flow.
– Super tools – to speed up your staff super administrative duties.
– Payroll services – for fast, online payments to your staff.
– Transaction and savings accounts – that let you maximise the interest you earn and
minimise fees, effortlessly.
Westpac has a full range of products designed to maximise your business
efficiency and free up your time. To see how these products could help you,
call 132 772 or visit westpac.com.au/business
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How do I reduce the impact
of an unexpected event?
10
SMART CASH FLOW MOVE:
Review your business insurance.
Unexpected events, fires, floods, robberies – they’re the last thing a business needs at any
juncture, let alone during periods of economic turmoil. And in a second they can undo even
the most diligent and thorough cash flow planning and financial management.
Your business’ best defence against such an eventuality is having the right insurance, and
ensuring you have adequate cover to prevent what’s known as a cash flow ‘hole’. A ‘hole’ can
occur when an unexpected event prevents you from maintaining your usual cash flow levels
and your insurance doesn’t cover it, leaving your business exposed.
These days, there is a wide range of business insurance products available to cover almost every
situation – with a selection of the right policies you will be able to achieve total peace of mind.
The smart money?
■
Make sure you consider all the different insurance options available. Some examples
to consider include:
– Business Asset – cover for replacing core business assets fast so you can get up and
running after a mishap sooner.
– Business Interruption – covers disruption to your trading, providing income to keep
your business running (e.g. paying staff, loans and so forth) if an event prevents you
from doing business.
– Income protection – covers you personally so that your family receives an income if
you’re ever unable to work due to sickness or injury – generally at a rate of around
75% of your usual income.
– Key person protection, debt protection and equity protection are all important forms
of cover that can minimise impacts on your business cash flow.
To discuss your insurance needs, speak to your Westpac Business Banker or
call 132 772 to organise a meeting with a Westpac Business Planner.
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Things you should know Information current as at 5 February 2009. This information has been prepared
without taking into account your objectives, financial situation or needs. Because of this you should,
before acting on this information, consider the appropriateness, having regard to your objectives,
financial situation and needs. Westpac is not aware of each individual’s particular circumstances and
therefore cannot provide any taxation advice in relation to any product. Nothing in this document
should be construed as a statement of the taxation consequences or taxation treatment of any aspect
of any product. Westpac Financial Planners are not qualified to give tax advice. Your individual situation
may differ and you should seek independent professional tax advice on any taxation matters. Westpac
Financial Planners are representatives of Westpac Banking Corporation (AFSL No. 233714).
Westpac products: Fees and charges apply. Terms and conditions available on request. These may be varied,
or new terms and conditions introduced in the future. All applications for credit and leasing are subject to
Westpac’s normal lending criteria. 1. You may need to register for online banking if you have not already
done so and should review the relevant Product Disclosure Statement (PDS) for the online banking facility
you choose to use. Westpac Banking Corporation (ABN 33 007 457 141) is the issuer of Westpac Online and
Business Online. You can obtain a copy of the PDS by calling 132 032, visiting westpac.com.au or visiting
any of our branches. Business insurance products are issued by CGU Insurance Limited ABN 27 004 478 371
and income protection insurance is issued by Westpac Life Insurance Services Limited ABN 31 003 149 157
(WLIS). These insurance products are distributed by Westpac Banking Corporation ABN 33 007 457 141
(the Bank). The insurance products are not investments in or deposits with the Bank. No Westpac Group
company (other than the Bank as policy distributor or WLIS as the issuer) has any liability in connection
with policies issued by the insurance companies referred to. The Bank does not guarantee payments under
the insurance policies. The insurance policies are subject to conditions, limits and exclusions on cover,
which are explained in the relevant Product Disclosure Statement (PDS) and policy wording. You should
consider the PDS before making any decision in relation to the insurance. If you have a complaint, please
contact us by telephone: 1300 130 467 or mail: GPO Box 5265, Sydney NSW 2001. If you are still not
satisfied, you may refer your complaint to the Banking and Financial Services Ombudsman by telephone:
1300 780 808 or mail: GPO Box 3, Melbourne VIC 3001.
© 2009 Westpac Banking Corporation, ABN 33 007 457 141.
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IF YOU’RE WORRIED ABOUT
YOUR CASH FLOW, HERE’S
SOME RELIEF.
Are you:
■ Concerned about what you’ve been hearing about the global financial crisis?
■ Starting to feel that your money may not be safe anywhere, even at the bank?
■ Wondering what your business can do to fortify your cash flow?
■ Keen to make the smart moves that will allow you to profit through these times?
■ Looking for a financial institution that can offer you outstanding stability?
If the answer to any of these questions is ‘yes’, this booklet could have the answers
you need. It provides 10 smart cash flow moves that will equip you to continue to bank
confidently, and to be in a strong position to weather these uncertain times.
© 2009 Westpac Banking Corporation ABN 33 007 457 141.
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