Advice to Aussie businesses - keep a close watch on your customer credit lines

[John Clark]

Dear all,

When the next wave of the GFC starts to bite, business operators with solid reserves and good control over the credit they extend to customers will be much better off. Conversely, normally stable and profitable businesses could be put at risk by cash flow problems arising from your customers failing to pay (or failing to pay on time).

Mining aside, the rest of the Australian economy is deeply dependent on the performance of the housing market. This latest piece from MacroBusiness is indicating that the ongoing downturn in the housing market is now starting to bite property developers.

Read more here: Developer damage

The key take-home is this:

This does, however, have the possibility of leading to a self-reinforcing downturn. As business failures lead to unemployment which again leads to further business failures.

Keep that in mind.

Their warning for Victorian's to be particularly mindful is also important.

The next wave of the GFC will induce another free cash shortage at a huge number of businesses. No business owner wants to be in that boat and the smart ones are shoring up their reserves and credit policies in advance.

Take care out there,

John