Home' Australian Automotive Aftermarket Magazine : Australian Auto Aftermarket e-Zine - Mar 13 Contents AUTOMOTIVE AFTERMARKET MAGAZINE MARCH 2013 99
There is continual development in the area of
cash flow management, so it's important to
regularly review how your business is managing
its income and outgoings.
Some of the new techniques available can
make a huge difference to cash flow, enabling
customers to pay more quickly and conveniently,
reducing operating costs and assisting in risk
NAB Transaction Services General Manager,
Steve Betinsky, said now is the time for
managers to examine their cash flow cycle,
looking at how the money is coming in and what
you do with it when you have it.
He said advances in technology provide new
options to collect payments online and may pull
cash into the business faster and cut down on
Mr Betinsky said many SME business owners
have no control over payment terms set by a
major customer, but that they still have options
to enable that customer to pay more easily.
Why wait to receive your funds? NAB can
provide same day settlement for your merchant
facilities, even on weekends.
One way you can run your business more
efficiently is by accessing your card sales as
soon as possible.
Your cash flow will be optimised with same
day access to settled funds seven days a week.
This service is not offered by all banks, so
it's important that you contact your financial
institution to ensure you are eligible.
If you bank with NAB and already settle your
merchant transactions into a NAB account, Mr
Betinsky said you are probably already seeing
the benefits of same day settlement.
Not all businesses operate 9-to-5, so you can
even access the funds from night-time sales.
Just settle by 10pm and you'll see your sales
on your statement by 11.30pm the same day
With same day merchant settlement, you can
see your receipts and cash position more easily.
You can transfer your funds to another
account, pay your bills, staff and suppliers and
get a more accurate view of your cash position
any day of the year.
Cash flow is the lifeblood of business, so
owners who make the time for regular reviews
will be able to quickly take advantage of
improvements in cash management.
Mr Betinsky said the benefits will flow across
the business as risk management is improved
and managers and staff spend less time on
For more information contact National Australia
Bank on 1300 EFTPOS (1300 338 767).
Good cash flow management is critical to business success
There are a number of different levers businesses can use to help improve their payment systems and free up more cash.
A company selling $A100,000 and buying
USD would have seen a $US16,000 difference
in costs over this period.
With the AUD/USD having recently stayed
above parity since June last year, many
Australian dollar sellers have been content to
ride the wave and buy USD cheaply.
But how long will the Australian dollar's
OPTIMISM VERSUS OBJECTIVITY
Companies often become complacent when
the 'good times roll', swapping common sense
for optimism and believing a strengthening AUD
will continue forever.
Eventually though the market falls and a
minor issue balloons into something far worse
which increases costs, cuts profit margins and
hits the bottom line.
Experience shows that many companies
only take an interest in FX rates when it's
already too late and the market takes a turn for
Smarter companies are those that plan
ahead, who take FX risk into consideration, and
who realise that even smaller, unlisted
companies need to hedge FX risk and protect
Companies can better protect themselves
from FX volatility by understanding what the risk
is, following a few simple rules, investigating the
FX hedging tools available and choosing a
hedging strategy which best matches their
The smart approach to FX hedging is simple.
First, you need to understand the link
between a company's costs and FX risk.
Most businesses, whether product or service
orientated, fall into two cost categories.
Some costs are relatively static over a certain
period, whether it is a financial year or the
lifecycle of a project, but other costs are more
fluid and move around on a weekly or even daily
FIXED COST HEDGING
To establish a hedging strategy, a business
needs to recognise whether its costs are of the
fixed or fluid variety.
Those with fixed costs will have greater
opportunity to lock in FX rates in advance.
For example a company with a year-long
contract to supply spark plugs to an auto store
chain for a set amount of units each month
knows in advance how many spark plugs they
need to buy each month.
If it imports in USD and agrees to a 12
month contract with its overseas supplier, the
FX risk will be the underlying changes in
AUD/USD exchange rate.
During the 12-month period, FX rates could
increase the actual cost price far higher than the
originally budgeted cost price, so the
manufacturer might consider locking into a
string of 12 single FX deals, known as forwards,
each month to match the payment schedule and
mitigate the risk of a lower AUD/USD; simple
FLEXIBLE COST HEDGING
Businesses with flexible costs are better
suited to a hedging strategy which is equally
For example, a supplier of engine oils to the
same chain of stores could be faced with a
fluctuating oil price which means his costs are
always moving and changing on a month by
Would such a business benefit from locking
in forecasted costs 12 months in advance? The
answer is doubtful.
A smart business would instead consider a
dynamic hedging strategy, using a number of
products to give a blended or average rate over
the full year period.
A dynamic hedging strategy requires
consistent vigilance of currency market
movements on an ongoing basis.
Those organisations which recognise the
threat posed by FX risk and form a considered
approach on countering these risks, regardless
of complexity, will be the smart ones.
For more information on risk management visit
www.ozforex.com.au or contact Paul Candelori
from OzForex on 02 8667 9117 or
Smart approaches to mitigating foreign exchange risk
Since early 2011 the Australian dollar has danced around parity with AUD/USD hitting lows below 94 cents and highs in excess of $1.10.
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