Strategic alliance: the benefits of working together

Your business may compete head-to-head with a number of other companies, but this doesn't mean you have to treat ALL other businesses as if they are the competition. In fact, there are real benefits in creating strategic alliances with other like-minded organisations.

When you look at the wider marketplace, you'll see that there are businesses out there that may well compliment your offering. And by working together (rather than against each other) it's possible to become valued strategic partners, collaborating to serve your joint customers, improve brand awareness and, ultimately, expand your target market.

If this sounds like a positive strategy, now's the time to do your homework and start hunting down the best strategic partners for your business.

Working to serve a shared customer base

Strategic alliances are all about finding the common ground between you and your intended partner – and this means finding the best ways to combine your efforts. If you can share the same customer audience, and create a complementary way of meeting their needs, that creates a broader, more connected way of growing both companies.

Finding a company that's interested in forming a strategic alliance

  1. Find partners in complementary sectors – if you're an accounting firm, like us, it makes sense to partner with solicitors, lawyers and other professional services providers who can help your clients. If you're a maker of shoes it makes sense to partner with a clothing manufacturer that shares your same sense of style and purpose. The key here is to find a shared audience or customer need, and to create some real synergy between your two businesses.
  2. Take part in business networking and events – to get a wider understanding of your local, or industry specific, business network, it's worth taking part in plenty of online and offline business events. You'll meet new people, hear about new brands and will find it easier to find your ideal strategic partner. The wider your business network, the more choices you have for an alliance.
  3. Look at crossover between your target audiences – once you've found a potential strategic partner, it's important to take a detailed look at the crossover between your partner's audience and your audience. Do they shop through the same channels? Do they fit a certain age group or social demographic? Are these customers local, or are they part of a national or global online customer base? How large is their database?
  4. Cross-reference your customer databases – by sharing and comparing your client relationship management (CRM) data, you can cross-reference both sets of customer data and see where there's overlap, or where you may already share some of the same customers. The better you understand each other's customers, the more likely it is that you'll find some common ground for shared marketing and promotion.
  5. Run joint events and promotions – presenting joint webinars with your strategic partner, or running joint promotions. By finding a common theme, you bring both audiences together and reinforce the alliance between your two brands. You also reduce the expenditure by sharing the costs and reach a wider audience.
  6. Combine your R&D efforts – to move your alliance forward, you can also try combining your research and development (R&D) activity, to find new products, new services and new ways of keeping your joint customers happy. By sharing the time, costs and effort of developing new offerings, both companies will benefit – and you keep your businesses at the cutting edge of their respective sectors or specialisms.

Christmas Parties and Presents - and Tax!

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Christmas Parties and Presents - and Tax!

Christmas is a great time to acknowledge and reward your employees and other associates by celebrating and giving gifts. But don't get caught out by entertainment rules! Claiming entertainment and gifts as business expenses is not always straight-forward, as there are implications for GST, income tax and fringe benefits tax (FBT).

Is it Entertainment?

Entertainment is generally not a deductible business expense. Entertainment rules can be tricky, but in general, the more lavish the meal or event, the more costly, the later in the day and if alcohol is involved then it will generally be called entertainment.

Fringe benefits tax may apply to entertainment benefits provided to employees, and if an event or gift is considered to be entertainment then you cannot claim a business deduction or GST.

A Christmas party for employees, spouses, suppliers and customers may or may not be classed as entertainment. Check with us to see if any of the party costs can be claimed.

Keep it Free From FBT

  • If you give gifts to your employees keep them under $300 each. Benefits provided which have a value of less than $300 are exempt from FBT.
  • Give gifts to employees that they otherwise would have claimed as a tax deduction. For example, you could pay for a professional development course or give new tools.
  • Give gift cards or vouchers up to the value of $300. (Vouchers are not considered to be entertainment).
  • Avoid giving 'entertainment' gifts over $300, such as membership to clubs, tickets to events or travel.
  • Pay a Christmas bonus. Process through payroll like any other wage payment and withhold tax. Remember that superannuation applies to bonus wages.

Enjoy the Party

Talk to us when planning your Christmas gifts and events to check how much may be claimed as business expenses. Once you know the costs of throwing a party and giving gifts and bonuses, you can put your feet up and enjoy your own party!

How does an Accountant save you money

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How does an accountant save you money?

Turning a profit will be high on your list of goals as a business owner. And if you want to generate the best margins, that means keeping an eye on the money that's going out of the business, as well as what's coming in.

 

So, how can your accountant help with this?

 

The days where your accountant just did the bookkeeping, compiled your accounts and filed your tax return are well and truly over. Modern accounting firms are far more interested in helping you with your financial performance, your business strategy and offering flexible value-add services that put you in better control of your finances.

 

If you partner with the right accountant, we can actually save you money – in both the short, medium and long-term. And that's good news for the growth of your business.

 

Key ways your accountant can enhance your financial health

 

The less expenditure you have as a company, the bigger your profit margin. It sounds incredibly simple, doesn't it? - The smaller your costs, the larger your profit. But if you're not fully in control of your financial management, it's very difficult to know WHERE you're spending money, and WHY you're not achieving your profit targets.

 

This is where working with a finance professional adds a huge amount of value. Your accountant helps put you back in the driving seat of your finances – and that's never been more needed than in the current economic climate.

 

So, what specific things can your accountant do and what will the impact be on the future of your business?

 

  1. Tax advice and planning – tax costs can be one of your biggest outgoings as a business, so we'll focus on getting your tax planning under control, applying for all the relevant tax incentives and ensuring you minimise the taxes on your profits. By paying only what you're legally required to pay – and making use of any reliefs – we can significantly cut your tax spend in the business.
  2. Cashflow management and advice – 'Cash is King' may be a cliche, but it's true. Unless you can balance the cash inflows and outflows from your business, you'll never have the liquid cash to pay your bills, cover your payroll costs or cover your operational expenses. We'll show you where money is going out, and coming in, so you achieve the ideal positive cashflow position.
  3. Cost control and spend management – to improve your cashflow, you need to reduce your cash outflows. An important way to do this is to focus on cost control and spend management, reducing your expenditure, removing unnecessary costs and negotiating better deals with your suppliers. The more you cut costs back, the better your cashflow will be and the easier it will be to thrive, grow and become more profitable.
  4. Forecasting and financial modelling – when we understand the key financial drivers in your business, we can build you a full financial model. This allows us to change the variables, run different scenarios and forecast the various future paths of your business. Being able to project these numbers forward gives you a clearer view of the path ahead – and that's invaluable in the challenging economic times that we all face at present.
  5. Better management reporting and information – your decision-making stands or falls on the information you have available to you. We provide detailed management accounts, breakdowns of key metrics and forecasts of your cashflow, spending, aged debt and revenue – all of which helps you to save money, make sound decisions and keep the revenues flowing into your business.

 

Talk to us about cutting costs and boosting profit

 

Rather than running your business on a wing and prayer, by working with an accountant you get a clear picture on your business financials. We'll help you cut unnecessary costs, optimise the most profitable parts of the business and increase your overall return on investment.

 

Let's talk about how we can work together to support your ongoing business profitability.

 

To arrange a no obligation meeting to discuss your circumstances please click here or visit our website at www.clarkemcewan.com.au

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Why you need to take a break from your business

Running your own business takes up most of your time, as an owner – and finding a window in your diary to take a break can be tricky.

 

But having a proper holiday away from the stresses and worries of the business can be incredibly beneficial – helping you to come back refreshed, rejuvenated and full of renewed vigour for your business idea and the future of your company.

 

Time to destress and relax

 

58% of entrepreneurs have suffered some form of mental health issue, according to research carried out by NatWest Bank. 41% had suffered from stress, 21% from anxiety and 19% from depression, underlining the intense pressure that some business owners, directors and entrepreneurs find themselves under.

 

Maintaining a positive work/life balance isn't always easy, but regular breaks and holidays can play an important part in reducing stress. Rather than working so hard that you burn out, a break serves to let off steam and reduce the build-up of pressure.

 

To get the most from your work/life balance:

 

  • Schedule breaks and days off in your diary – by scheduling time off in your calendar, you make it clear to your workforce and executive team that this time is 'out of bounds' for meetings and work-related tasks, allowing you space to breathe.
  • Get away to a different location – a change of scenery is a good idea, whether it's a staycation or a trip to somewhere more international and exotic. A new environment can help you to detach from your work brain and actually learn to relax.
  • Don't take your work laptop – leave your computer at home and make sure that your phone is only there for emergency calls and truly urgent emails. Don't spend the holiday checking your inbox or micromanaging your team from overseas.
  • Take time to think and cogitate – this is the perfect time to let your creative mind come into play and mull over bigger plans, new ideas and ask yourself what you really want from your business, your life and your work/life balance.
  • Make sure to rest! – above all else, make sure to turn off and get some much-needed rest. A tired, fatigued and stressed boss is not the best person to have at the helm of a company, so use your long weekend, or holiday to truly rest, relax and recuperate. You'll feel the benefits once you're back at your desk.

 

Talk to us about ways to destress your business

 

If you're feeling under pressure and stressed, it's important to look at ways of making your life easier as a business owner. We can help you reduce your financial workload, create a more efficient business model and plan out key dates to take holidays throughout the year. 

 

Our Virtual CFO services may be just the solution you are looking for.

 

For a confidential discussion on how we can help please contact us via our website for a no obligation initial discussions here http://www.clarkemcewan.com.au/contact_us/request_an_appointment 

#VirtualCFO #CFOservices #onlineaccounting #Xero #MYOB #SageOne 

Building a Better Business


















 Building a Better Business in 10 Steps

You're in business, congratulations, that takes courage and commitment.

 

It's not easy, and at times you might question why you're even doing it, particularly after the impact Covid-19 and the associated lockdowns had on business.

 

But you're here because you had a vision. You decided being in business was a better way to achieve that vision than working for someone else. And, you're right; you just have to work on it.

 

It's likely that you're an expert at what you do… maybe you're a mechanic and know the inside of a car engine like the back of your hand. Or, maybe you're a fashion retailer who can style anyone. This doesn't mean you're an expert at running your business though. It's hard taking time out of working in your business to work on it. But doing this is essential for its success.

 

There's no magical overnight solution to building a more successful business. It's about taking small steps every day to get a bit better than the day before.

 

So, what should you do to build yourself a more successful business? We've broken it down into 10 essential steps:

 

  1. Get clear on exactly what it is that you want.

     

  2. Be open to change and new learning.

     

  3. Define where you are now (warts and all).

     

  4. Make a plan.

     

  5. Get your organisational structure right.

     

  6. Be a better leader.

     

  7. Be held accountable by someone independent.

     

  8. Build strong networks.

     

  9. Monitor your progress.

     

  10. Keep your well of happiness full.

     

 

These are the 10 most important things you should be working on to ensure you achieve your goals. Small, incremental changes can have a massive effect on your success.

 

We're here to help you, every step of the way. Get in touch!

 

You can book an appointment with us via our website or by contacting our offices via email or phone

 

"Success isn't overnight. It's when every day you get a little better than the day before. It all adds up." - Dwayne 'The Rock' Johnson



Surround yourself with champions

It's human nature to be influenced by the people in your inner circle. In fact, the odds of being successful are a lot higher if you're surrounding yourself with people who are also successful.

In a business context, consider very carefully the people and friends you associate with. Who plays a role in influencing your life? Who are your role models, mentors, and supporters?

"You're the average of the five people you spend most of your time with".

It really pays to think about who your top five are.

These people play a part in determining how you think, how you act, and ultimately how successful you will become.

As entrepreneurs, you're responsible for yourself. Being around the right people can help success come more naturally to you, instead of being around those who exhibit certain behaviours that hold you back. Keep an eye out for people who have the following traits:

1. People with an unbeatable work ethic

Perhaps this is you! People with the best work ethic will motivate and inspire you. True passion and commitment will breed a successful business.

2. Positive attitudes

If you are working with people who only see the negative or the problem, it will bring you down. It can get very tiring being around people who don't have a winning attitude.

People who are constantly pesimistic are in every business, so they can be hard to avoid, but you can balance the impact they have on you by finding positive people who look for opportunities and will take you higher.

3. Curious people

These people have an insatiable curiosity for business and life. They're the ones who are always asking 'why' or 'how' and genuinely keen to know more. These people will push you to be better thinkers, to ask better questions and ultimately to demand better results.

Take some time to think about your top five people in your life, or set up a regular catch up with people who help you and your business grow – it might be a monthly breakfast. It will be a positive experience for all members. If you're not surrounding yourself with champions, start thinking about how you could be.

How healthy is your working capital



How healthy is your working capital?

We all know that cash is king when it comes to business success, but what exactly is 'working capital' and how does this financial metric help measure the health of your business?

Working capital is made up of the cash and assets that are available in the business to fund your operations and keep you trading. It's worked out by taking your current assets (the things you own) away from your current liabilities (the things you owe to other people).

So, why is working capital such a critical metric?

Having the liquid capital needed to trade

It's possible for your business to be busy, successful and profitable, but for your cash position to still be in poor health – and that can have a serious impact.

If you can't readily convert your assets into liquid cash, it's a struggle to meet your cashflow goals, pay your bills and fund your day-to-day operations. But with the optimum level of working capital, you strengthen your balance sheet and put the company in a solid financial position.

To achieve this healthy level of working capital you'll need to:

  • Proactively manage your cashflow – cashflow feeds your working capital by pumping liquid cash into the company and keeping the balance between assets and liabilities in a strong position. But to achieve this, it's vital to achieve a positive cashflow position, where your cash inflows are greater than your cash outflows. This means getting paid on time, lowering your outgoings and keeping a close eye on your ongoing cash position.
  • Monitor and forecast your financial position – running regular financial reports helps you stay in control of your finances. With careful monitoring and forecasting of your cash position, you can ensure you don't end up in a negative cashflow position, without the requisite working capital to trade and fund the next stage in your business plan. Cloud accounting software and business intelligence apps have made it easier than ever to create up-to-date, real-time reports and run dashboards that show your key metrics.
  • Use additional finance when required – if working capital is looking thin on the ground, then additional funding may be needed to bolster your balance sheet. Short-term finance options (such as overdraft extensions or invoice finance) and longer-term business loans can be needed to keep working capital on an equilibrium.

Talk to us about optimising your working capital

Working closely with your accountant is vital if you want to promote the ideal level of working capital in the business. We can help manage your cashflow, monitor your financial metrics and provide access to additional finance and funding when your capital needs a boost.

Get in touch to start maximising your working capital.



In a decision of the Administrative Appeals Tribunal, a taxpayer, Mr Bell, was a denied a deduction for $21,565.73 of work-related vehicle expenses for the 2016 income year. Mr Bell was a construction worker who predominantly worked on a construction site in an eastern suburb of Melbourne and lived approximately 100 kilometres away from that worksite.

Mr Bell owned a ute that had a load carrying capacity of more than one tonne – so it fell outside the definition of a 'car' for the purposes of the ITAA 1997.

Mr Bell claimed a total deduction for $24,865.73 for motor vehicle expenses and received an allowance under his Enterprise Bargaining Agreement. This allowance did not vary with the amount of travel undertaken and totalled $15,221 for the year.

Mr Bell contended that he was required to use his vehicle to transport heavy/bulky goods (tools) between his home and his workplace and to collect supplies and equipment from hardware stores while travelling between his workplace and his home.

Ordinarily, travel from home-to-work (and back again) is considered non-deductible. However, if an employee is required to carry heavy/bulky equipment for which there are no secure storage facilities at work, the travel between home and work with the heavy/bulky equipment can be considered deductible. Unfortunately for Mr Bell, evidence before the Tribunal indicated that there were safe and secure storage facilities for his tools (the bulky/heavy equipment) at the worksite.

Accordingly, Mr Bell was unable to rely upon the 'bulky goods' exception to re-characterise home-to-work travel as being a deductible work expense.

Instead, it retained its ordinary private and non-deductible status. Mr Bell was unsuccessful in advancing the argument that he was entitled to a deduction in relation to the motor vehicle expenses because he was in receipt of an allowance. However, Mr Bell was able to convince the ATO that he had undertaken at least some work-related travel using his vehicle. The ATO allowed Mr Bell a deduction under the 'cents per kilometre method' up to the maximum dollar amount for 5,000 kilometres for the 2016 income year of $3,300.

Editor: This decision provides a timely reminder that simply carrying bulky equipment between home and work will not make these trips deductible, where there is a secure place for the equipment to be stored at the employee's worksite. The decision also highlights the fallacy of assuming that being in receipt of an allowance somehow entitles the taxpayer to an offsetting deduction.

The taxpayer was technically 'lucky' that he was allowed the 'cents per kilometre method' deduction for work-related travel, given that his motor vehicle fell outside the definition of a 'car'. This is because the cents per kilometre method only applies to 'cars', so it could be said that the ATO was generous to the taxpayer in these circumstances.  

This short video explains some of the points illustrated above.

Please contact our office if you have any queries as to the deductibility of work-related travel. 


Does Your Business Have a CRM Tool?








 





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Client relationship management (CRM) tools offer a fast and effective way to manage all of this customer information. A CRM solution provides one central hub for recording all your customer data. This data could be the basics of customer name, address and contact details, notes from meetings, records of sales activity or information on the customer's marketing preferences.

Having clean, up-to-date information and data about your customers is a vital part of running your business. But recording, tracking and accessing this customer information can be tricky if you don't have the right tools to get the job done.

So, how does having a CRM tool help you do business? Let's take a look...

A centralised hub for managing your customer relationships

Without a CRM system in the business, your sales and marketing team have to rely on manual, organic processes to manage the company's customer information. It's likely that you'll be relying on multiple spreadsheets, diary reminders and scribbled notes to manage your customer and prospect relationships. And in this day and age, that's just not an efficient or productive way to keep on top of your customer data.

With a CRM system in place, you can:

Record higher-quality customer data – rather than relying on multiple sources of data, a CRM system becomes the heart of your business information. You can ditch the spreadsheets and paperwork and put all your customer contact information, customer interactions and marketing preferences into one centralised source of truth.

Build on your customer relationships – it's much easier to take good care of your existing customers when you have access to their information at the press of a button. Your CRM tool will be able to display a breadcrumb trail that shows every customer interaction, campaign task and comment. So, you can quickly look back to see which products or services they've engaged with, when you last spoke, or what their preferences may be for sales, advertising and marketing purposes.

Improve your client reporting and segmentation – a CRM tool will help you to track, measure and analyse your historical client data. And because of this, it's far easier to run client reports, or to split your entire customer base into meaningful segments. You might track your clients by location, by revenue generated, by industry, or by any meaningful demographic that helps you manage and target each separate audience segment.

Achieve more detailed targeting of prospects – by using the tracking features in your CRM tool, it's possible to enter details of every interaction with a new prospect. This means you can then track the evolution of the relationship from cold to warm prospect, making business development easier and giving greater insights into how well your sales and marketing targeting is working.

Stay in control of your task management – remembering to act on your planned business development and sales tasks can be a challenge for a busy sales team. Your crm tool can show you which tasks are outstanding, which are completed and manage the work-in-progress position of each and every customer. It can also send you automated alerts such as a reminder to follow-up after you've sent a quote.

Meet your data protection requirements – a flexible CRM tool makes it easier to keep your customer data safe and secure (unlike traditional spreadsheets). Cloud-based CRM solutions give fast access to your data, while also having high levels of encryption in place. And you can ensure you're meeting your data protection and compliance needs by managing who you contact, how they can unsubscribe from marketing activity and what information you hold on individuals and companies.

Inform your planning and long-term strategy – a CRM tool will give you access to truly granular client data, and that's invaluable when scenario-planning and coming up with new strategies. Decisions can be made based on clear historical data, and with the right forecasting tools you can also project this data forward in time to help inform your campaign activity, business development and wider company strategy.

A simple CRM tool can make your business more efficient; give you better control over sales and help you to support existing customers.

Forecasting in a Pandemic

      
Now, more than ever, business operators should have a plan in place to manage during uncertain times. Even if your business is not directly impacted, it's likely your customers, your supply chain, and your workforce will be to some extent. 

So, how do you plan for uncertainty when every assumption is subject to change?

Understand where you stand now

Businesses fail (or fail to thrive) for a myriad of reasons, but the precursor is often a failure to understand what is occurring and what to monitor. Strategically, managers need to be on top of their numbers to identify and manage problems before they get out of hand. If you do not know what the key drivers of your business are - the things that make the difference between doing well and going under - then it's time to find out. 

Understanding your cost structure

Do you know what your real cost of doing business is? Your breakeven point is the level of sales activity where your business is neither making a profit or a loss. Calculate your breakeven point by dividing your fixed expenses by your gross profit margin. This figure represents the level of sales income you need to breakeven.  

Understanding your breakeven point is crucial particularly when supply chains are impacted.  

Not only will your breakeven point assist you to monitor business performance, it's critical when deciding whether or not to offer a discount. If your breakeven point is well below your current operating level then you have a good buffer in your profits to manage growth, invest in further capital opportunities, and to protect yourself against further downturns in operating performance. And before you say "I know that," ask yourself how many people actually put this theory into practice. Even some of the largest businesses have been caught out on this one and tie up valuable resources in unprofitable projects and products. 

Putting up your prices during down times is not an act of social betrayal. If your prices have increased you should flow these through unless you are comfortable making less for the same amount of effort, or you are in an industry that is so price sensitive you have no choice but to follow the lead of larger businesses. 

Discounting creates a leverage impact on profits. By discounting you are giving away some or all of your profits. The key is to understand the impact and just how far you can go. For example, a business with a 30% gross profit margin that offers a 25% discount (certainly nothing unusual about that in today's market) needs a 500% increase in sales volume just to maintain the same position – and, in almost all cases, that's just not going to happen. The result generally is that the business trades below its breakeven point and generates a loss. You can only do that for a limited amount of time (and some of your larger competitors might be engaging in a discounting war with you in an attempt to bury you once and for all). 

If your business needs cash and needs it quickly, discounting might be the only way to shift stock but understand the implications.

Plan, review and adjust

Your budget should be your best estimate of what is likely to occur based on current knowledge.  To manage change, you can scenario plan where your budget forms the baseline, but you also forecast best and worst case scenarios based on potential risks and their likelihood (for example, the impact of another lockdown). Or, the simplest method is to use your budget as a baseline and regularly review and adjust depending on current conditions.  

The greatest risk to your profit is unlikely to come from your cost structure. It is more likely to be revenue volatility. Keep your eye on your cost structure and make sensible cuts where appropriate. But, in your search for savings don't remove your essential revenue generating capacity that you need. 

A lack of profit will eventually erode your business, but not enough cash will kill it stone dead. Businesses will fail because they don't manage their cash position. Plan, track and measure your cashflow. This not only means closely monitoring your debtor collections and inventory but also running a rolling three month cashflow position. This should provide an early warning of brewing problems.  

Manage your debt levels carefully (your bank is likely to). While there is nothing wrong with debt, it is likely that the banks will be closely watching customer accounts. Where you have loan facilities in place make sure that you understand the loan terms and any debt covenants that you have entered into. These covenants could include regular reporting to the bank, debtor and working capital ratios, or debt to equity ratios. Where the banks may have been more relaxed about these in the past, this year will be different. If you believe that you need additional funding, talk to your bank early and don't wait until the last minute. You'll need to present your case on why you need it, how much, for how long and when it will be repaid. 

Cash flows, operating budgets, cost control and debt management all need to be part of your business management. The more in control you are the lower your risk position.

Understand the external environment

The COVID-19 pandemic has implications well beyond the economy; it has changed how business operates and how consumers act. While comparisons are made to the 2008 Global Financial Crisis and the recessions of the 1980s and 1990s, the reality is, we have no case study. There is no rule book for the post pandemic road to recovery as this is not an economic event. The pandemic pulls the economy up short curtailing both supply and demand; businesses are not operating at capacity and fewer people are working.  

The Federal Budget is released on 6 October and we're expecting to see the Government invest heavily in job creating projects. Many of these will be focussed on infrastructure. Each of these projects will have a flow through effect to the broader economy. We'll bring you our insights the day after the budget and you should loom to see if there are opportunities your business can capture. 

Understanding your supply chain is important. Risk manage and plan for changing conditions. For example, what is your business's ability to manage a surge in demand, do you have a small supply base and what would happen if your primary supplier went into bankruptcy, do you have a good flow of information across your supply chain or is there a lack of transparency and knowledge, do transport problems risk your ability to supply? Assess it, understand it, and manage the risks. 

When it comes to demand, there is no instant fix. The RBA suggests the decline in GDP in the first half of 2020 is around 7% and the contraction in hours worked around 10%. The economic impact of the restrictions in Melbourne extend well beyond Victoria and are impacting more generally on consumer sentiment. This week we expect Australia to have a formal "recession" label added to our economy, formalising what most business operators already know. 

But it is not all bad news with confidence lifting on early signs that revenue is no longer declining for the majority of Australian businesses. The latest ABS data on the impact of COVID-19 shows fewer businesses reported a decline in revenue in August (41%) compared to July (46%), and fewer still expect a decline in September (28%).   

However, 35% of businesses expect it to be "difficult or very difficult" to meet financial commitments over the next three months, with small and medium businesses almost twice as likely as large businesses to fall into this category. Understandably, the response to this question is heavily weighted towards those operating under Government required restrictions and lockdowns.  

The RBA is working with three scenarios for Australia's economic outlook: a baseline, upside and downside scenario. In the baseline scenario, conditions improve in the second half of 2020 and slowly improve over 2021 and 2022 but fall short of returning to pre COVID forecasts with Victoria's lockdown not materially extended and Australia's international borders remaining closed until mid 2021. The upside scenario saw no extension of the Melbourne lockdown, and further easing of Government restrictions nationally, which in turn bolster consumer confidence, encouraging spending and the reversal of GDP decline over 2020-21. The downside scenario envisages a global resurgence in infections with Australia facing periodic outbreaks and rolling lockdowns. The RBA notes that the downside scenario has a sharper fall than the increase of the upside scenario because of the damage to consumer confidence of further lockdowns. 

Business investment is also expected to be relatively flat with the ABS survey showing that 37% of those surveyed had no actual or planned expenditure. Of those that are spending, IT hardware and software, and equipment and machinery topped the list. The instant asset write-off is helping to stimulate business investment in the small and medium business sector. In general, large businesses are paying down debt rather than spending and small and medium businesses have not sought to extend debt to fund investment. 
Note: The material and contents provided in this publication are informative in nature only.  It is not intended to be advice and you should not act specifically on the basis of this information alone.  If expert assistance is required, professional advice should be obtained.