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