The SCS Financial Outlook

Date

22.05.18

The state of the financial nation we believe is currently healthy. The tax take it up and the debt ratios are good (take a look at the graphs at the end of this blog, NZ vs AU). The big question is what is going to happen next?

Will Labour’s policies increase the standard of living for NZ and at the same time keep the books balanced?
Will the Minimum Wage increases significantly effect the economy?
Will the coalition remain intact?
Will Auckland ever not have traffic? And will the fuel tax actually achieve this?
Will housing ever be affordable again in NZ?
Will there be war, in Syria, in North Korea or Iran?
Will there be trade wars?
Will Artificial Intelligence take over the world? Or will it take my job?
Will the next recession hit this year?

With so many variables it is extremely difficult to predict, with any certainty, what will happen next. So what can you do about it? We can’t financially advise you on what approach to take but we can talk to you about the SCS approach so that you have some peace of mind that you are partnering with a sound company.

Cash is king. We put in a considerable amount of effort to not only forecast our profit and loss, but also the flow on effect it has on our balance sheet and cashflow. We create a fully integrated model that the bank and the shareholders love.

A great bank manager. We work with a great bank manager. Most of the banks are good, but the key is your bank manager. Essentially, this is because a bank has 2 elements; the bank managers and credit team. Using a simple analogy, the credit team is the safe and the bank managers are the keys. You need to find someone that is smart, interested in your business and who gets you results. It is simple, if your sales person is not making sales you would do something about it, the same applies to your bank manager (don’t let them hide behind the credit team or “bank rules”). I am happy to introduce anyone who is interested, to our bank manager at BNZ

A company strategy aligned with what’s financially possible. We make sure there is a company strategy and then we ensure it is aligned with what is financially possible. During this process we also insist that if the team desires any major investment in Capex or R&D, that it must be presented with a profit and cashflow forecast as well as any strategic goodwill or intangible benefits. Over the last 5 years, SCS has really focused on governance and this has resulted in some great practices. These days we actually offer our knowledge of governance and strategy through our Professional Services division offerings (which Brad leads). Get in touch if you want to review this service, but be quick because there is a waiting list!

4. Innovation. Be it big or small, every little bit helps. We leverage our suppliers and contacts constantly looking for ideas. We can’t help you with your products but we can help you with your supply chain. Currently we have several projects on the go with your fellow SCS customers that are creating strategic points of differences so leverage us.

The following 2 graphs show the relative personal debt of the New Zealanders vs Australians compared to the country’s Gross Domestic Product (GDP). You can see Australia’s (120%) position is far more exposed than New Zealand (90%).

Gross Domestic Product is the total expenditure of the country in a period (usually an annual figure). The expenditure is everyone’s personal spending, business expenditure, government expenditure plus everything we export less anything we import.

The next 2 graphs show the relative government debt of New Zealand vs Australian compared to the country’s Gross Domestic Product (GDP). You can see Australia’s (40%) position is far more exposed than New Zealand (25%).