There is more noise than usual in the business environment.
Across regional Australia, businesses are facing a combination of rising costs, increased uncertainty and changing market conditions. While none of these challenges are necessarily new on their own, the cumulative impact is placing greater pressure on cashflow and working capital requirements than many businesses have experienced in recent years.
Some of the key factors contributing to this include:
- – Higher fuel and fertiliser costs.
- – Rising wages and labour expenses.
- – Increased machinery and technology costs.
- – Supply chain disruptions and delays.
- – Tax and regulatory changes.
- – Proposed Capital Gains Tax (CGT) changes.
- – Political and economic uncertainty.
- – Higher livestock replacement costs than many producers initially budgeted for.
The reality is that most businesses now require more working capital simply to maintain the same level of operations.
What Does This Mean for Business Owners?
At SproutAg, we are seeing a significant increase in working capital requirements across our client base, from Goondiwindi through to Adelaide.
In many cases, businesses are not necessarily borrowing more because they are expanding. Rather, they are requiring larger operating facilities because the cost of running their business has increased and there is less room for error when unexpected events occur.
At the same time, lenders are experiencing higher demand for working capital reviews and facility increases, resulting in longer turnaround times for approvals.
This means businesses need to be thinking further ahead than they may have in the past.
One of the most important lessons from the last few years is that profitability and cashflow are not the same thing. A profitable business can still experience cashflow pressure if input costs rise unexpectedly, seasonal conditions change, markets soften, or a major capital expense arises.
Businesses that maintain a healthy cash buffer are often better positioned to:
- – Manage unexpected cost increases.
- – Navigate seasonal volatility and market fluctuations.
- – Take advantage of growth opportunities when they arise.
- – Avoid making reactive decisions under financial pressure.
- – Maintain stronger relationships with lenders and suppliers.
Put simply, working capital is no longer just about funding day-to-day operations. It is about creating resilience within the business.
You don’t have the option of stopping business activity when costs increase or conditions become uncertain. Ensuring adequate access to cash, whether through retained funds or available lending facilities, is one of the most important steps you can take to protect your business.
For many businesses, this may mean carrying more cash in operating accounts or maintaining higher lending limits than previously considered necessary.
Five Tips to Strengthen Your Cash Position
- Regularly Update Your Cashflow Forecast
Develop realistic cashflow projections and revisit them regularly as conditions change. Small changes in costs can have a significant impact over a 12-month period.
- Maintain a Rolling Forecast
A rolling 12-month forecast allows you to identify potential pressure points early and make informed decisions before they become problems.
- Build in a Contingency Buffer
Allow for higher costs, delayed income, or unforeseen events. Budgets that are too optimistic can quickly become outdated.
- Review Lending Facilities Before You Need Them
If you believe additional working capital may be required, start discussions with your bank or funder early. Securing funding is generally easier before pressure emerges.
- Review Profitability Across the Business
As we approach the 2027 financial year, assess each enterprise, investment and expense category to ensure it continues to deliver value and remains commercially viable.
The businesses that will be best positioned over the coming years are not necessarily those with the highest turnover or the fastest growth. They will be the businesses that maintain strong liquidity, plan ahead and retain the flexibility to respond to changing conditions.
In an environment where costs, regulation and uncertainty continue to evolve, preserving access to cash and working capital remains one of the most important risk management strategies available to any business.
