On 3 November the Reserve Bank board raised the cash rate target by 25 basis points, from 4.60 to 4.85 per cent. It was not unanimous: six members voted to increase and three voted to leave the rate unchanged. If your business borrows, you will want to act on this soon.

Why the RBA moved

The board said inflation is elevated and broadly based, and that it now expects inflation to stay above 3 per cent for the coming year. It pointed partly to higher fuel and other commodity prices affected by the conflict in the Middle East, and noted indications that higher fuel prices are being passed through to the prices of other goods and services. The board judged that further tightening of financial conditions was warranted.

The RBA also said the Middle East conflict remains unresolved, and that there are scenarios where inflation is higher and activity lower than forecast. In plain terms: nobody can promise that this is the last move, so plan for rates to stay high for a while.

What to do this week

  • Check which loans move. List every variable rate loan, overdraft, equipment finance facility and business credit card. Ask your lender when the new rate applies and what your repayment will be.
  • Update your cash flow forecast. Put the higher repayments in and look at the next three to six months, not just this month.
  • Talk to your lender early. Lenders have more options for a customer who calls before a repayment is missed. Ask about fixing part of the debt, or changing the repayment structure.
  • Review prices and costs. If fuel, freight or supplier costs are climbing, check your prices still leave the margin you need.
  • Chase invoices. Money owed to you is the cheapest finance you have. Send reminders on overdue accounts and tighten terms on new work.
  • Ring fence tax money. Keep GST, PAYG withholding and super in a separate account so higher interest costs do not push you into an ATO debt.

If you cannot pay the ATO on time

Do not wait for the due date to pass. The ATO says businesses may be able to set up a payment plan online through Online services for business if the debt is $200,000 or less. You can use the ATO's payment plan estimator first to see what you can afford. Keep in mind that missing future lodgments or payments can cause a plan to default, which makes the full overdue balance payable straight away.

Talk to your accountant or bookkeeper about the numbers this week. A plan made early is much cheaper than a rescue made late.

This article is general information only and does not take your circumstances into account. Check the RBA and ATO websites or speak to a registered tax professional about your situation.