The 50 basis point rise was higher than almost anyone predicted, reflecting a real urgency around inflation. We expect that major banks and other lenders will adjust their lending rates in response. While the rate may have changed, the rest of the article stands – read on to find out how this new reality will affect your business.
What this new cash rate means, for logistics and freight providers.
The official cash rate has just gone up for the first time in more than a decade. After two years of COVID-related challenges, what will this mean for business?
The economy is changing rapidly. In the short time since this article was posted, the cash rate has risen again – it now stands at 0.85%. The 50 basis point rise was higher than almost anyone predicted, reflecting a real urgency around inflation. We expect that major banks and other lenders will adjust their lending rates in response. While the rate may have changed, the rest of the article stands – read on to find out how this new reality will affect your business.
The Big Announcement
Earlier this month, the Reserve Bank of Australia (RBA) announced that it would raise the official cash rate for the first time since 2010. After decreasing the rate to protect the economy during the pandemic – to a record low of 0.1% in 2021 – it is now changing direction to curb steep inflation as the economy starts to recover.
The Consumer Price Index (CPI), one core measure of general inflation, rose by 2.1% in the first few months of the year. Although the cash rate rise isn’t a cure-all for keeping inflation at the optimum level, it is one economic lever that the RBA can pull. Inflation will continue to rise, according to forecasts, but at a slower rate.
After the announcement, major banks made quick changes to their variable home loan rates. Other types of lending will also be affected, with borrowing becoming more expensive.
Another challenge for business owners
The last two years have been anything but smooth sailing for business owners, as the pandemic wreaked havoc on global supply chains. Importers, freight and logistics companies and retailers have all been dealing with major disruptions, delays and shortages as a result. These issues aren’t just frustrating for customers, they also have an ongoing financial impact on logistics companies and retailers often forced to pay for orders well in advance of being paid for customer sales. Some businesses experienced dramatic cost increases across their supply chain, as well as slower shipping – which is often taking double or triple the usual time.
The RBA cash rate could create additional challenges for struggling business owners. As interest rates rise, consumers and businesses may be more cautious about spending, and payments may be delayed as businesses seek to stretch their cash flow cycles further. For importers and shipping companies trying to keep their cash flow under control, payment delays are another challenge at a difficult time.
If you’re running a shipping or logistics company, you’re in the middle of the supply chain crunch, facing struggles from both sides. On supply, you may be forced to pay suppliers for orders months in advance. Whereas on the sales side, you could send an order out and not receive customer payments for weeks or months. No wonder balancing cash flow is a massive challenge for businesses.
What are the options?
Bridging the gap between orders and payments is a crucial part of running a logistics or shipping company. You need to be able to pay staff and your vendors even if you’re waiting for a large payment from a customer. Short-term loans and credit cards have been used by many business owners, but those options are getting more expensive as interest rates increase.
Want to regain control of your money?
That’s where Butn Pay comes in. Our simple system lets you regain control of your money and pay over a longer period. It works like this: Butn pays for essential goods and services upfront, on behalf of your business. You repay Butn in instalments over time, along with a small fee, making costs more manageable and reducing the gap between paying for goods and being paid by customers.
It’s an affordable, efficient way to bridge cash-flow gaps and keep things moving.
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