"Is it time to tidy up the Balance Sheet?" Article by Steve Marsten

Recently I attended a presentation on the Australian Economy in 2015 and beyond. They painted a fairly benign future – not a lot of positives and plenty of negatives.   Interest rates will more likely go down over the next twelve months. The dollar should head down with it – that’s good for exporters and Australian Tourism.

The banks will have plenty of money to lend however they may not do too well. And the stock market should track quietly upwards – but nothing too spectacular.

The two major things I got from the presentation were that interest rates will reach their lowest point over the next twelve months, and the banks will have plenty of money to lend. So what does that mean for small and medium business? Hopefully the business owners who own businesses that are heavily leveraged and have large loans on their Balance Sheets – this is the year to consolidate debt and hit it hard. Time to clean up the Balance Sheet!

Reduce the stress of debt by getting a debt reduction plan in place. Identify which loan to focus on first. Improve the credit score of you and your business with your local bank so that when you are ready to go to the next step you have a track record of dealing with debt. Further, you remove decision making about your money away from your lenders and back to you.

This requires discipline and in recent years some businesses carelessly ran up debts while not focusing on the costs and the profitability of their sales and services to actually meet the repayments. This approach of course tends to end in tears.

Those businesses that have little or no debt – they may have a different question to deal with - Is it time for expansion or improving services or products with newer equipment? Is it time to take out a low interest loan and consider locking in the rate? Is the business profitable enough to handle new debt? And with the capital purchases, will there be greater profit as a result?

At Sothertons we assist businesses prepare debt reduction plans as well as Budgets and cashflows, and help them implement and monitor them to ensure their objectives are achieved.  Call 07 4972 1300.