Australian businesses are missing out on this one big thing
Australian businesses have lost sight of the importance of cash flow, which can determine whether a business thrives or fails. Businesses must take steps to get tighter control of and visibility into cash flow, according to RSM Australia.
Peter Saccasan, national head of Business Advisory, RSM Australia, said, “Every single decision affects a business’s cash flow, whether it’s a capital investment or simply ordering new stationery. Buying items on credit can help preserve cash flow, while selling items on credit reduces cash flow. It’s essential for business owners to make smart decisions about when to use cash versus credit.”
In the first year of operation, the availability of terms from suppliers for most purchases can produce a good uplift in cash surplus. However, in the second year, that uplift is much smaller since it’s only measured on the change from one year to the next.
Businesses can also inject cash into the business through a one-off sale of an asset or a one-off investment from the owner. The emphasis here is on the “one-off” nature of these injections.
Peter Saccasan said, “Sustainability is judged by assessing whether or not the business cash flow next year will be in surplus without these one-off injections. Investors and owners need to understand why the business may have needed a one-off injection this year, and whether that injection fixed the problem so that, next year, cash flow will be in surplus again.”
RSM’s 2016 thinkBIG study revealed that 77 percent of business owners were planning to fund their business growth through cash flow, indicating that management of the underlying business cash is a key factor to business sustainability and expansion.
The study also showed that 29 percent of businesses fund operations through debt and 28 percent choose to reinvest profits to fund the business. Furthermore, another recent study showed 32 percent of business owners dip into their own accounts while 44 per cent use credit cards as their primary tool to manage cash flow – an expensive habit that one.
RSM Australia recommends the following when it comes to improving cash flow in your business:
1. Budgeting for tax liabilities:
Many businesses spend or reinvest all of their pre-tax profits without considering their tax liabilities and the timing of when they will fall due. During the last quarter of the financial year, it is crucial to review financial results for the year with an advisor
2. Clearly understand your bank obligations:
Although debt is cheap to maintain at the moment, be wary about leveraging the business with too much debt.
3. Review your debtor collection policy:
Don't fall into the trap of not chasing up non-payment by customers, and make sure that you have a strong policy in place for collecting fees.
4. Push creditor payments out until they are due:
Be organised when paying bills. Paying just before the due date maintains cash flow without missing out on early payment discounts.
Peter Saccasan said, “A cash flow statement tells you a lot about a business. RSM recommends that businesses ask their adviser for a cash flow statement each year, as well as a profit-and-loss statement and balance sheet, so that the decision-makers can see just how sustainable and healthy the business actually is.
“Australian businesses seem to have lost sight of the importance of this crucial tool and it’s essential for them to put it back on the radar as an indispensable measure of business performance and sustainability.”
Seo JungJin: Who is EY’s World Entrepreneur of 2021?
Seo JungJin, founder of biopharma firm Celltrion, which most recently developed an antibody treatment for COVID-19, has been named the EY World Entrepreneur of the Year 2021, becoming the first South Korean in the award’s 21-year history.
Regarded as one of the world’s most prestigious business awards program for entrepreneurs, the EY Entrepreneur of the Year celebrates visionary and innovative leaders from across 60 countries who are transforming the world and fostering growth.
JungJin, who is now honoroary chairman of Celltrion Group, was up against a worthy cast of entrepreneurial competitors, taking the crown from among 45 award winners across 38 countries and territories.
Speaking during the virtual event, JungJin described his own interpretation of entrepreneurship as something that brings together “a group of people toward a common vision, embracing challenges as opportunities and committing oneself to contribute to the greater good”.
Why was JungJin crowned King Entrepreneur?
A South Korean native and now 63 years of age, JungJin founded biopharmaceutical firm Celltrion in 2003. In the nearly two decades since its founding, Celltrion has lived up to its goal of advancing health and welfare for all by developing ground-breaking drugs to treat autoimmune disease, various forms of cancer and, most recently, COVID-19.
The company, which JungJin started with just US$45,000 and five of his colleagues, has since growth to more than 2,1000 employees with sales permits in more than 90 countries and revenues exceeding US$1.69bn.
According to the panel, JungJin’s story is a shining example of the power of an unstoppable entrepreneur to change the world with the pandel moved by both his incredible story and his purpose-driven leadership, innovative mindset and entrepreneurial spirit.
Described by the chair of the EY judging panel Rosaleen Blair as “representing everything an unstoppable should be” from taking on the world’s biggest health care challenges to consistently creating long-term value for his company, JungJin’s story is one of incredible tenacity and perseverance that the judging panel felt most represented the entrepreneurial spirit.
“He’s taken breathtaking risks, both personal and professional, to found Celltrion and grow it into one of the world’s leading biopharmaceutical companies,” says Stasia Mitchell, EY Global Entrepreneurship Leader. “His passion for creating affordable, life-saving health care and flair for tackling global problems has led to many treatments that have helped millions of people worldwide and was especially evident this past year through the creation of a COVID-19 antibody treatment.”
How did JungJin get there?
JungJin's entrepreneurial journey started at an early age when he worked as a taxi driver to get himself through Konkuk University in Seoul, South Korea. After studying industrial engineering, he rose through the ranks of Daewoo Motor Co. before losing his job amid the carmaker’s financial troubles following the 1997 Asian economic crisis.
Following this, JungJin started collaborating with colleagues to explore business opportunities in different industries, though none delivered lasting success. The turning point came after he attended a talk hosted by renowned scholars, which inspired him to focus on the biopharmaceutical sector.
And so he founded Celltrion with just US$45,000 of his savings. The launch of Remsima, credited with being the world's first antibody biosimilar, quickly moved Celltrion up the ranks of the country's fairly underdeveloped pharmaceutical sector. Celltrion followed this success with the launch of drugs for breast cancer and lymphoma that today are being used worldwide.
With ambitions to be the world’s first in different areas, Celltrion has pioneered numerous uncharted areas to great success over the past two decades, most recently responding to the global pandemic by successfully developing an antibody treatment for COVID-19 and working to ensure a timely supply of the safe and effective treatment.
“When I first started, my vision was to help patients gain access to safe, effective and affordable medicines and thereby enhance the quality of people’s lives,” explains JungJin. “The success of Celltrion has enabled me to expand on this while finding new ways to fuel my entrepreneurial drive.”