Most operators know exactly what a tanker load costs. Far fewer could say how many weeks of cash they have left if the next three loads cost what this one did.
Fuel prices have been high for most of this year. Diesel averaged $2.77 a litre at the pump across the five largest cities on 21 October, about $1 a litre more than before the Middle East conflict began in February, and the wholesale price servos pay has risen by a similar amount. On a 30,000-litre delivery, that is roughly $30,000 more cash in the tank before a single litre is sold, and operators have been carrying that since March. Margins have not grown to match, and customers are putting less in each time they fill up.
None of this is news to anyone running a site. What is different now is the calendar. Months of higher costs have worn down the cash buffer most businesses started the year with, and the busiest weeks of the year are coming. That means bigger fuel orders, public holiday wages, and extra shop stock for the holidays, such as drinks, ice, confectionery and gift lines, much of it paid for before it sells. Most sites don’t carry that load at any other time of year. The operators who get through are the ones who see the tight week coming and act early.
Know your number, eight to 13 weeks out
Start with a simple forecast of cash in and cash out, week by week, through to the end of January. Put in your fuel orders at today’s prices, your extra Christmas shop stock and when each order has to be paid, plus wages (including public holiday rates), rent, loan repayments and your next BAS. The point is to find the week the balance gets tight before you reach it, not on the day the direct debit bounces. Your bank’s free template will do; ANZ publishes one as a spreadsheet. If you have an accountant, this is an hour of their time well spent.
Look at how your fuel is ordered
Payment terms on fuel are fixed across the industry, so the lever is how much cash sits in your tanks at once. Check whether smaller, more frequent deliveries make sense for your site over the holidays: less cash tied up in each load, weighed against freight and the risk of running dry on a busy day. If a bank guarantee sits behind your supply agreement, ask your supplier whether they accept an insurance bond instead, which can free up the cash or security the guarantee is holding.
Talk to your bank early, not late
Banks have been expecting this. NAB said in April that its bankers had contacted almost 200,000 business customers about fuel costs, and urged customers to “engage with their banker early”.
The Banking Code of Practice gives small businesses real protections. If you expect to struggle with upcoming repayments, that already counts as financial difficulty under the Code, and the bank must work with you on a solution and give you its decision and reasons in writing. Options include:
- interest-only repayments for a short period
- extending the term of a loan
- deferring repayments
- a temporary increase in a credit limit
Go in with your cash flow forecast, your recent bank statements and a clear ask. One caution: an overdraft can be reduced or called in at short notice, so do not build your whole plan around one.
Lodge on time, even if you cannot pay on time
The ATO’s special payment plan for fuel-affected businesses closed on 30 June, but its standard support still applies, and it has said it wants to hear from businesses early. The rules worth knowing:
- Always lodge your BAS on time. Late lodgement adds penalties to a problem you are already managing.
- Payment plans: if you owe $200,000 or less, you can usually set one up yourself through Online services for business.
- Interest still applies: the general interest charge is 11.51 per cent a year for October to December, compounding daily.
- Interest-free option: businesses with turnover under $2 million and an activity statement debt of $50,000 or less may qualify for an interest-free plan, if they cannot get finance elsewhere and can show the business is viable.
- PAYG instalments can be varied down if your income has fallen.
Free up cash already in the business
- Account customers: check who owes you and how long they have had it. Holiday trading is not the time to be funding someone else’s business on 30-day terms. Chase overdue accounts now, and consider shorter terms or tighter limits until prices settle.
- Slow shop stock: look at what has not moved in 60 days and order less of it for Christmas. Put the cash into lines that turn over.
- Your fixed costs: electricity, insurance and merchant fees are paid every month whether trade is good or not. A saving there is cash you keep every month.
If it is already tight, do not do it alone
The Small Business Debt Helpline is free and confidential, run by Financial Counselling Australia, on 1800 413 828. A financial counsellor can talk to your bank on your behalf, and the Banking Code requires the bank to deal with them if you ask.
Whose job is it?
Cash pressure is rarely one big problem. It is a dozen small costs and timings that nobody has had time to look at. For ServoPro members, reviewing the biggest fixed costs, electricity, insurance and merchant fees, is our job, and every dollar saved there stays in your account through Christmas.
The operators who get through tight months are rarely the ones with the most cash. They are the ones who saw the tight week coming.