A New Year – And New Interest Rates

According to a recent poll conducted by MNP Ltd., Canadians are increasingly worried about their ability to repay debts.

As 2018 unfolds, there will be even more reasons to be financially literate and vigilant about debt: rising interest rates. On January 17, 2018, the Bank of Canada raised the overnight lending rate by .25 percent, the third rate hike since July 2017, settling at 1.25 percent. Analysts anticipate this to be the first of three this year.

Even before the announcement was official, the largest banks let consumers know their rates would be increasing and they were true to their word - the prime rate will now be 3.45 percent as of January 18^th, 2018. What this means for businesses is if you have variable rate debt (debt that fluctuates with prime), you will see an immediate increase in interest rates and you will pay more interest on your debt. If you are fortunate to be debt free as a business and have cash to invest, this could be good news as you may earn a slightly higher rate of return on investments. But, let's be honest: the investment rates won't go up as quickly as the lending rates and it certainly won't increase by .25 percent in line with the increases in debt.

Financial Literacy Key to Strategic Planning

Many people have a cycle of starting a new year off with grandiose plans – setting goals that will help achieve personal and business objectives. Having goals is critical in your business and when it comes to financial management, you should not only have goals, but create a solid plan of how to achieve them. Setting a goal is not enough – its time to aim higher!

Whether your business is kicking off a new fiscal year, or whether you are part way through a fiscal year, its time to remind yourself how important it is to understand what your financial statements are telling you, recognize early warning signs and make sure you budget and understand your business cash requirements. There are strategies that can be implemented to help increase revenues and decrease expenditures and help drive profitability for your business – but these are predicated on accurate financial information as a starting point. While this has always been important, changes in the interest rate environment make financial management and knowledge of cash flow even more important. 

As you plan for 2018, take stock of what is happening around you and the impact on your business. Take advantage of resources and education available to help your business better manage finances. MNP has partnered with Conexus Credit Union, the largest credit union in Saskatchewan, on the Conexus Business Accelerator program. The goal of the program is to help Saskatchewan based businesses grow and succeed and several of the webinars in the program are specific to financial literacy – to help your business financial well-being.

While we can't stop daydreams about heading south for the lure of warmth and sun in the cold winter months, we can put some focus to your goals on financial well-being and work together to make those goals a reality through planning and learning.

Contact Annette Bester, National Leader Credit Unions, at 306.664.8327 or [email protected].