There’s more to managing your cash flow than skimming through your monthly bank statements. New technology is making it easier to track your spending, putting you back in the driver’s seat.
Historically low interest rates combined with the ongoing housing affordability crisis add up to Australians being in more debt than ever before. Whether you’re repaying a mortgage or trying to get a foothold in the property market, managing your cash flow has never been so important.
It affects not only you and your family – it has the potential to affect the whole economy, according to the Governor of the Reserve Bank of Australia, Philip Lowe.
“In terms of resilience, my overall assessment is that the recent increase in household debt relative to our incomes has made the economy less resilient to future shocks,” he told a recent Economic Society of Australia meeting.
Yet according to the latest research by the Australian Securities and Investments Commission, more than one-third of Australians either don’t have a budget, or don’t stick to one.
Tools to help manage your money
Managing your money begins with knowing where it comes from and, more significantly, where it’s going.
FinTech Australia CEO, Danielle Szetho, says the rise of cashless payments can help us by providing data that gives us valuable insights into our spending behaviour.
“From a consumer’s perspective, this means fintech companies like Moneysoft, Pocketbook, Acorns and MoneyBrilliant can access rich data streams to show customers how they are spending their money, and can help them budget accordingly,” she says.
This new wave of tools provides visual and interactive summaries of account balances and transactions from across multiple institutions. They can automate spending into categories, monitor trends over time, and project your expected future balances.
Make it easier for yourself
Below are five ways to help stay in control of your cash flow.
1. Embrace automation:
It’s increasingly quick and easy to set up automatic payments for bills and credit cards, and automatic transfers for regular savings. That means they’re taken care of every month.
2. Maximise your accounts:
Continued low interest rates mean there’s not much to be gained from money sitting in your transaction account. Using a mortgage offset account, or exploring a high interest savings account with a sweep facility to your daily account, can make the most of what’s on offer.
3. Set specific goals:
Having a tangible goal is a powerful motivator to change your financial behaviour and stick to a budget.
4. Get informed and get active:
Developing financial literacy is a lifelong journey. Keep building your knowledge and you’ll find it easier to make wise decisions. It also pays to take the time to shop around – new customers can often get big savings on anything from internet service to car insurance.
5. Small businesses may be small but their impact on the Australian economy belies their size:
The growth of the small business sector, which employs almost 5 million people, is held back by big businesses and government departments regularly paying their invoices late.
Sixty per cent of small businesses said late payments have increased over the past year while almost one in five report average payment delays of more than 60 days, according to the Australian Small Business and Family Enterprise Ombudsman (ASBFO).
The cash flow impact can be devastating with more than half of small businesses forced to borrow funds or use credit cards due to late payments to their business.
“Businesses are the most likely repeat offenders when it comes to late payments,” according to the ASBFO. “This makes sense since the practice of paying late allows a business to hold on to its money for its own use.”
The Business Council of Australia has proposed a voluntary code that would prompt its members to pay within 30 days. However, the ASBFO has made a range of stronger recommendations including that the government legislate a maximum payment time for business-to-business transactions.
Until then, technology such as new accounting platforms, mobile payment platforms and e-invoicing can provide an effective solution to encourage faster payments.