Business owners and/or managers are now faced with the greatest risks of operating a successful and viable business today more than has been the case in recent times. Today, many businesses are fighting a losing battle to protect their assets and businesses because their rights are being progressively destroyed. The businesses particularly in trouble are those which offer credit facilities in the B2C and B2B environments.
If you believe the above statement is a bit over the top, you are probably not in business and or are in one of two groups who don’t have to pay personally the financial and emotional cost of their thoughts and actions.
There are many negative factors facing business today. One critical factor in the destruction of creditors’ rights, which seems to be increasingly supported by government and people with vested interests. This has resulted in the unfortunate situation where:
- badly run businesses can avoid paying suppliers invoices and can be excused of their debts because creditors are denied an inexpensive process to exercise their rights,
- B2C and B2B customers can easily avoid their debts and get away with fraud, and
- properly run business doing the right thing and acting responsibly to collect their debts in a timely manner, are penalised by preferential payment legislation.
The first of two groups responsible for a loss of creditor rights are the do-gooders of society and those who have never operated or managed a business. These people have good intentions and feel sorry for people who have paid the price of their own bad decisions, or have lost everything because of no perceived fault of theirs.
The second group are those who operate in the protected worlds of a political organisation, a government bureaucracy, or with associated vested interests which allows them to avoid the adverse effects of their actions which they inflict on others.
We see for example, landlords which do not wish to go broke are exiting the world of rental accommodation. The truth on why this is happening is because of the insistence by renters and do-gooders, which are supported by government regulations and legislation, that they have certain rights. Unfortunately, as well-meaning as these actions are, the extent of the changes mean that landlords are often being denied even-handed rights to earn a reasonable profit and protect their interests. As a result of these changes, landlords are finding their own financial and emotional well-being is now impacted negatively. No wonder they are exiting the rental accommodation market.
In the B2B commercial world, delinquent debtors are being given every opportunity to avoid their responsibilities by the Courts via increased costs and the insistence cases go through a pre-mediation process before an actual court hearing. In reality, all too often, this process supports the delinquent debtors’ interests and increases the costs to the creditor.
In addition, if the creditor should go through another form of recovery action, i.e., through VCAT in Victoria for example, the delay in hearing the case due to insufficient staff, just allows the debtor to further avoid their responsibilities.
From another perspective, as many in the business community know, even if they are prepared to go through the legal process, the Courts have no responsibility to actually force the losing debtor to pay their debts. In turn, alternately, many businesses are going to make the decision that it is not worth their while to actually offer B2B credit, just like the banks are already doing. As a result, the unintended consequences means that usually the start-up business person, or the small business operator, will suffer due to a lack of affordable finance.
Yet another example, is when businesses pay for the costs of creating professional and legal terms of trade. Unfortunately, now it appears many of these terms designed to protect the creditor in the event of default, are increasingly being limited to the detriment of the creditor. This is not withstanding the fact that these terms and conditions when signed off by customers, are responsible adults who claim to have read and understood the documents they have signed.
Finally, for this article, let’s talk about the effect of preferential payments refunds and those businesses that maintain an up-to-date process on making sure they are paid within terms agreed upon by the customer. If the customer subsequently goes into an insolvency administration, suddenly the business can be told to refund funds already collected in “the normal course of business”. This is yet another negative against those businesses which operate properly. Unfortunately, we see little evidence that the old legislation is being challenged because it is now so out of date these days. The fact is today, creditors are constantly reminded they need to collect funds from outstanding invoices to maintain cashflow.
Today’s business owners and/or managers are now faced with the greatest risks of operating a successful and viable business like never before. Today, many businesses are fighting a losing battle to protect their assets and businesses because their rights are being progressively destroyed. The businesses particularly in trouble are those which offer credit facilities in the B2C and B2B environments.
The unfortunate and unintended outcome for all concerned, businesses and customers, will be the lack of affordable finance to progress their lives. I say affordable income, because there will always be organisations, or other parties, which are not bound by legislative and legal niceties, which will offer finance at higher rates.
Want to know more about this topic, contact Kim at kim@creditmatters.com.au, or on Mobile 0411 649 261. Alternatively, have a look at what we offer via our website at www.creditmatters.com.au
