Managing Interest Costs with Good Cash Management

Agrifocused Blog Feature Images_Blog 1 - Managing Interest Costs

Interest rates are at the lowest point on record, however for many businesses, cash could well be close to the lowest point on record too. 

Just a little reminder about interest costs with a few examples of how managing cash can reduce your overall interest cost. In these examples we assume an overdraft interest rate of 5% per annum. 

  • Submit a BAS resulting in a $40,000 refund from the ATO ASAP rather than 30 days after the end of the month – $166 saved. 
  • Get your paperwork to your accountant and receive a $10,000 tax return three months earlier than normal – $125 saved.
  • Use your overdraft facility, rather than a supplier provided credit facility at 12%pa, for your $50,000 fertiliser bill for two months. – $583 saved. 
  • Selling a load of something worth $100,000 a month earlier or buying it a month later $416.

Obviously, these figures will vary from business to business, however in this example, a day getting your bookwork up to date could be worth a hundred dollars an hour. 

Staring out the window during year 9 maths? 

Here is the calculation

Convert percentages to decimals by dividing by 100. Eg 5% is 0.05, 12% is 0.12

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