The “R” word has slowly been whispered, but in reality, there has been a discrepancy between busy and profitable. Why? Because while the demand for many businesses in WA has been rising the cost of supplies has also been increasing at the same time.
Unfortunately, customers are also starting to feel the effects of rising grocery/fuel prices and interest rates at some time and the word recession may actually have to be spoken out loud. (It still hasn’t been said as you are only reading this, just don’t read it out loud).
The problem is that here in Western Australia in particular (and across the country of Australia) due to the mining industry and shortage of workers, we are maintaining our current lifestyles but not our savings and with the volatility of the markets if we did have a reduction in demand for mining products, there is nothing in the savings accounts to buffer a sudden downturn.
Without discussing in-depth economic cycles, we have been in a summer/autumn season in Western Australia for many years now and thanks to the government we did not plough headlong into a winter season after COVID because they printed more money and gave grants to keep the businesses afloat and busy. However, the building industry is showing that due to labour shortages and increases in prices for supplies, if money is not managed well, there is no way of keeping winter at bay.
In summer economics, all is booming and wonderful and there is a lot of money to share with everyone, going into an autumn economy, we should be putting savings away, reducing debt and pruning expenses ready for a winter economy. But, business owners are so busy that they are not realising they are living off their savings already and it will only take one hit like COVID and it will all collapse.
Managing money is how we prepare for any season. With the Profit First system of allocating the income to different bank accounts and working with a Profit First Professional, a business owner will manage their money to prepare for the next economic season in their business. Regardless of the economics in Western Australia when a business owner implements the Profit First system their focus is on managing their income and finances by knowing what is coming in and closing the circle by managing how much goes out.
Part of managing your money is asking 3 questions:
1. What is the purpose of my business?
2. How much does my business need to pay me?
3. How much does it cost to run my business?
2 and 3 need to be answered to know if you can afford to achieve the purpose for which you are working – this is closing the circle. A Profit First Professional will help you answer these questions by preparing a money management plan and working with you to manage your business’ cash flow using the Profit First system, so you are prepared in season and out of season to achieve your business goals.
The importance of money management cannot be overstated. At Additional Business Concepts, we are dedicated to helping you navigate the complexities of money management with ease. Our expert services ensure that you can make informed financial decisions for a prosperous future. Contact us today to start your journey towards financial excellence.
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