It wasn’t just interest rate rises that challenged small businesses last year. They also had to deal with inflationary pressures, continuing supply chain issues and high transport costs.

Paul Evans, National Sales Manager at Prospa, says he was impressed by how businesses adjusted.

“Incredibly resilient is how I would sum up small businesses over the past six to 12 months,” he says. “Their ability to adapt has future-proofed their businesses and given them confidence to overcome challenges.”

Given the landscape ahead, Paul says the next step is a change of mindset.

“Adaptability to me is about reacting,” he explains. “I thought we saw businesses do that very well. The pivotal transition in 2024 will be proactively adapting. We know these challenges will continue to play out, so how do they continually adapt and stay ahead of the curve?”

Here’s how you can help your small business clients prepare their business for the year ahead.

Encourage clients to collaborate

Paul says it’s always important for business owners to lean on financial professionals.

“One of the things we saw in the last six months of last year was that a larger percentage of businesses were doing that more frequently – whether it was an accountant, mortgage broker or adviser.”

In turn, financial professionals are finding this more holistic value offering is a tremendous benefit to their own businesses.

Right now, people of all stripes are taking the beginning of 2024 as an opportunity to reset, take stock, and plan ahead. However, Paul believes the current environment means doing this as a once-off could put businesses behind.

“Business owners should be talking to financial professionals about the challenges they’re seeing so they can unearth ways to navigate through them. I would suggest that should continue well into the future, and at regular intervals – via quarterly reviews, for example.”

Prepare them for interest rate adjustments

As for what’s coming ahead, it’s not clear if there will be new trends that should concern businesses.

“I don’t particularly see any significant shifts on the horizon,” says Paul. “We’re all watching the interest rate environment very closely. The expectation is that we’re pretty close to the top of the cycle, and I think if that turns out to be the case that will increase the confidence of people and business owners.”

That being said, Paul believes it would be a misconception to think this environment is unmanageable. Though interest rates are higher than they have been in the very recent past, between 1994 and 2008 the Reserve Bank’s cash rate target hovered between about 4.25% and 7.5% – so only rarely dipping below today’s rate.

At the same time, cost-of-living pressures and higher import and transport costs are affecting many businesses, says Paul. So brokers should encourage businesses to examine their operating expense structure and look to find efficiencies and reduce non-essential costs.

“Anything outside of people, technology and revenue drivers should be revisited,” he says.

One suggestion Paul has for business owners to use disposable income or positive cash flow to pay off debt.

“From a small business perspective, at Prospa we introduced the ability to pay lump sums into term loans, which can drastically reduce interest.”

Paul says it’s also worthwhile for business owners to review the terms of credit facilities to see if there’s an opportunity to renegotiate or extend terms to alleviate financial pressure.

Work with clients to future-proof their business

With the labour market tight at the moment, Paul thinks that businesses would benefit from looking beyond recruitment to adapt.

“The focus should be on retaining existing staff and looking to them to upskill so they can play various roles across the business,” he says.

In 2024, Prospa is busy working on new tools and product features to help small businesses, says Paul. The driving idea is to empower Partners and customers to withstand any financial hurdles and, more than that, to grow their businesses.

Beyond the tips he’s already offered, he believes this mentality of empowerment is the right one for 2024.

Help guide your clients prepare for the rest of 2024 with these 7 financial tips.

Last year saw rising inflation and interest rate increases. In 2024, businesses are asking, what’s next? Use these tips to help prepare.

  1. Last year might have thrown you for a loop, but a lot of businesses adapted well. This year it’s time to be proactive – how can you be ready for changes before they happen?
  2. Don’t just turn to financial professionals – advisers, mortgage brokers, accountants – when there’s a problem. Tap their wisdom to plan for the future and find out what changes are coming down the pipe that might benefit you.
  3. Given the current relatively high interest rate environment, directing positive cash flow towards repaying debts earlier can be beneficial.
  4. In the same vein, look at existing loans to see whether they can be renegotiated or extended.
  5. Continually examine your operating expense structure to see where efficiencies can be found. Is there money being spent on non-revenue drivers and can it be repurposed?
  6. Many industries have a tight labour market, so rather than trying to recruit for a new need, look to retain and upskill existing staff.
  7. Cash flow lenders aren’t necessarily a last resort – with the right planning, they can help businesses achieve key growth targets.