Credit Matters

Invaluable Reading From Australia and Around The World

Contributing to our position as Australia’s premium Financial Risk Management resource, our management globally explores and surveys relevant and valuable articles published by respected professionals, academics and organisation. The articles offered here are suggested reading for any Business Owner and Financial Risk Management professional.

Invaluable Reading From Australia and Around The World

What Do You Mean That the Creditor Will Not Sue!

Martin F. Goldman, Attorney

10 Aug 2015

Business is its own art form. Amongst the tools an artful business person will use to collect their accounts from recalcitrant debtors, is legal action. Taking legal action can be expensive if used badly, just like any other business tool. Using legal action as it should be used is often the difference between making a profit or a loss.

I am not suggesting all debtors should be sued for all outstanding debts. Knowing how and when to take legal action is the important issue. If you always run from a contest at the legal action stage, then you are unlikely to come to grips with use of legal action. Furthermore, and inevitably, you will continue to lose money unnecessarily.

In my experience, the business people who know how to use legal action properly are generally good business artists. I also believe they operate more profitable businesses over the long term, than the business person who is always afraid to take legal action.

If you are unsure of what I mean, reading this article is a good place to start when thinking about legal action. The writer has declared their vested interest in this subject and his desire that more business people consider taking legal action if appropriate. However that should not distract you from looking at some of the more positive reasons why, on the right occasions, legal action is effective.

Trade credit insurance

Holman Fenwick Willan LLP - John Barlow, Graham Denny and Daniel Martin

4 Aug 2015

Trade credit insurance is a form of protection against the losses which may result from dealing with slow-paying and financially challenged customers. Whether it is a viable proposition for your business, is another matter. Nevertheless, it is worth considering whether trade credit insurance should be part of your risk management policy.

Many business owners and managers unfortunately have a misguided view of how trade credit insurance operates. Consequently there can be issues between the expectations of policyholders and the actual workings of the insurance policy. Like all insurance policies, there are requirements and responsibilities which must be met by prospective policyholders before the insurance policy becomes valid.

If you are unsure about trade credit insurance, and would like a general introduction, this article may be a good place to start. As always, you should seek professional help when in doubt.

Why ROI is a Bogus Number

Vincent W. Mayfield

9 Jul 2015

As Vincent Mayfield writes:

"No other term is more overused in the business world than Return on Investment (ROI), except perhaps “The Bottom Line.”  Armies of well-meaning managers throw out superfluous business jargon like ROI to demonstrate they are good stewards of corporate finances. ROI was originally used to evaluate financial transactions by calculating the return of profit versus the capital investment. Over time, ROI has become the de facto measure used to evaluate one-time capital projects."

Whist Mr Mayfield is writing about the use of ROI within software operations, the issues raised in his article, apply across many other different business operations.

The use of ROI as a measurement term is used as much to confuse people as it is used properly and within the context originally conceived. Too often ROI is used to shut down conversations by those people with a hidden agenda, those who do not understand your concepts or because your concepts threaten their own position within the proposal.

When the term ROI is used, many business people do not fully understanding its concepts or do not believe the outcomes presented by the ROI exercise. Irrespective of your current understanding of ROI, I suggest this article is worth reading if you are interesting in learning more about the ROI concept.

Customer Selling Their Business Beware!

Dean Kaplan

23 Jun 2015

There always seems to be another reason why your account never gets paid. One example, as Dean Kaplan advises, is when your customer decides to sell their business

All too often, when a small business is up for sale, the net result for many of their suppliers is increased costs and a bad debt. If you hear that one of your customers is selling their business, review the situation before doing any further business with that customer.

The four critical questions you need to consider in these situations are:

1  Why are they selling their business?

2  Will the customer have difficulty in selling their business?

3  What will happen to your debt after the business is sold?

4  Have you red-flagged the account and warned all staff to be vigilant in their dealings with this account?

If a customer has never contacted you about selling their business prior to the sale of that business or you have lost funds previously in similar circumstances, Dean Kaplan's article is worth a read. You may still not recover your debt. However you have at least an idea of how to deal with this situation, with the possibility of reducing any loss.

Some Customers Are Not Worth Doing Business With

Shep Hyken

16 Jun 2015

Shep Hyken presents a blog discussing the concept "that all customers are right!"

As a credit management professional, I know the problem caused by customers which are not right. I see such issues through the blatant changing of payment terms, constantly raising invalid credit claims and the reasons used to justify their slow payment behaviour.

Mr Hyken raises two more important aspects of dealing with the wrong type of customer. His view is that bad customers (i) suck the energy out of your employees and therefore this can lead to (ii) the destruction of your organisation's culture.

You probably know the feeling you have when dealing bad customers. There are some customers who seem to believe they have the right to use your goods and services and not pay for them on agreed terms. In addition these customers try to blame your employees for any issues which are clearly the fault of the customer and not of your business.

As Mr Hyken advises, bad customers destroy value and it is perfectly okay to "sack" them.

If ever you need support in dealing with bad customers and wonder if they are worth keeping, perhaps you should have a quick read of this article. It just may help you say "not every customer is right all the time!"

The Thank You Experiment

Jeffrey Slater

7 Jun 2015

Thank you is so easy to say and the effect lingers long after it is expressed in gratitude. However many people forget to say thank you.

We live in a fast paced world, crowded with people, noise, and information. Therefore how do we stand out in such a world so that people want to do business with you? Saying thank you is one of the few actions we can take and costs so little.

Jeffrey Slater provides a nice story on the value of saying thank you through his story.

If you have forgotten how to say thank you, why not read Jeffrey's article and try it yourself?

10 questions you need to ask your accountant

Jason Smith

15 May 2015

Jason Smith is right you know. As business owners, we are often so busy working in our business, we forget to take the time to work with our Accountant on the business. As is usual, we rush to prepare the figures required for essential returns, drop them off with the Accountant and rush back to work. Rarely do we take the time to actually review the figures to ascertain whether we can make improvements to our business.

There are a number of parties you could consult on various aspects of the business to improve your business. For instance you might consult with your credit management adviser or debt collector, the marketing firm which you work with, etc. Your accountant is another person you should liaise with regularly to ascertain whether your business can be made more efficient and profitable.

If you have not taken the time to discuss your business affairs with your Accountant for some time, Jason's article has 10 topics you can use to prepare background information before starting that conversation.

Directors Beware - Company Assets are not your own

Harvey Bowlt

5 May 2015

Directors are not entitled to use the assets of the business as if these assets are their own assets and available for personal use. Directors must remember, they are always to act in the best interests of the company.

This situation was reinforced recently in a Western Australian case of Weaver v Harburn [2014] WASCA 227.

Too often Directors get in to trouble by forgetting the assets of the company are not for their personal use. The causes for Directors overstepping the mark and using the company's assets incorrectly, usually occurs for one of three reasons.

1  The Directors have inflated egos and treat the company's assets as if they own the assets rather than act as the custodian of the assets.

2  The Director(s) are in financial difficulties and believe there is nothing wrong in "borrowing or using" the company's assets to pay their debts.

3  Director(s) often forget their primary duty of care is to the company not to their own well-being.

If you are in any doubt about your duties as a Director, please seek professional assistance. As easy as it is to step over the mark and act illegally, so it is equally easy to be found guilty of acting against the best interests of your company. The risk is just not worth it in the long-run. 

Remember, ASIC is always there looking over your shoulder to ensure you are acting properly as a Director and doing the right thing by the company.

Are you prospecting or just making noise?

Gregory Ferret

20 Apr 2015

How many times do we receive a poorly framed sales call, which is nothing more than a prospecting contact which annoys the hell out of you? Unfortunately it happens far too often.

The problem in business today, is that sales people are often employed for their willingness to try anything to get a sale, rather than for their sales professionalism.

Regretfully we also see this practice currently occurring in other work professions. However I transgress.

Returning back to Greg's article, regrettably many non-professional salespeople and other salespeople who are desperate for work, no longer seem to understand the difference between the two types of contact. Therefore it may be interesting to ask a salesperson, "Are you prospecting or are you making a noise in the hope of making a sale?" I respectfully suggest, many salespeople would be unable to answer this question with confidence.

You may have salespeople within your firm who can fill one of these roles successfully at the moment, but not both. To add value to your existing salesforce therefore, assisting them to be successful in both roles would seem to be advantageous. If you are looking to review your work practices and to have your salespeople act more professionally, I suggest Greg's article is one source worth reading.

PS: As an example of the difference between a sales prospector and a salesperson, I have a friend who is a fantastic sales and business prospector. Sadly, I would not trust my friend to represent any company as a salesperson.

 

Business emails: Legal matters (Part 1)

Colin Porter

13 Apr 2015

Colin Porter highlights a number of issues in relation to what you say in your emails.

It is always wise to remember what you put in writing maybe used against you if the email is seem by other parties other than the intended recipient. This possibility is always a possibility if you are involved in any legal action.

We are always surprised when we stories in the media on what was said in emails when they are leaked by disgruntled people or in discovered in the event of any legal action.

Colin also provides additional information in his second blog - Business emails: Legal matters (Part 2)

If you do not have a policy or have taken the time to review how you write emails of late, I suggest these articles are worth reading. However before preparing any policy and procedures, please ensure professional advice is sought to assist in your particular situation. This action will assist in preparing the right policy for your business.

Turning A Branding Negative Into A Positive

Sue Palmer

7 Apr 2015

Occasionally, despite your best intentions, there is bad press levelled against your brand and your business.

Sue discusses concepts to be considered when these events occur. These concepts include addressing the matter as quickly as possible, completing a review of the situation, being honest and having a plan for when such situations do arise. Even if you believe the situation is minor, always treat the matter with respect because the issue is always important to the person raising the issue.

Therefore three key concepts stand out in Sue's blog as follows.

1  Don't panic but confront the issue with an acknowledgement and carefully with a honest reply.

2  In order to reduce the effect of the bad news, prepare a plan of action.

3  If you feel overwhelmed, seek professional help.

In today's world, bad press at some stage is almost inevitable. With the advent of social media, bad news travels faster than an out of control bushfire. Therefore doing nothing is not an option these days. Follow through properly with any bad press and you will create a stronger brand.

What role for the CFO in credit management?

Bertrand Mazuir

20 Mar 2015

It is not often you have the opportunity to read an article about the role of the CFO in the credit management process. Therefore it is interesting to read Bertrand Mazuir's review.

Finding the best way of operating a business is an on-going process of evolution. Therefore we should periodically review all aspects on the way we operate our business. These aspects under review should include the processes used, the people we employ and the titles we give them and their operational duties.

The CFO and Credit Mangers roles are no different. In preparing our review, the questions must always be: are these positions fulfilling the needs of the business at this time and do the respective people have the required skill sets for these roles? Bertand's review is one such opportunity to encourage you to evaluate these roles within your business.

Furthermore, irrespective of the size of your business, and even if you do not have the personnel to warrant such titles, you should be occasionally evaluating your own business processes and the people completing the roles of CFO/Accountant and Credit Management.

11 Secrets of a Successful Website

Ron Stark

11 Mar 2015

The eleven secrets which should be considered when building a successful website according to Ron Stark could also be considered in building your own business. People about to start a business, or those wishing to re-evaluate their business, are advised to complete a business plan.

Aspects of all business plans contain similar topics as those covered in Ron's list. The benefit in using this list of topics as part of your review is the language used. Ron uses topic headings which look less threatening to people not familiar with business and accounting terms and the issues of creating a business plan.

Many people enter the business world believing once they have created the business, nothing much changes. Unfortunately for these individuals, yesterday's business model, does not always survive over the long-term. Whilst the original business model might have been successful, that model may no longer be suitable for the current business environment. 

Irrespective of whether you are a newcomer or an experienced business person, evaluating your business from time to time, is part of doing business. If a business plan is perceived to be too big a challenge, perhaps using this list of 11 secrets is another way of undertaking the task. Ron says of websites, "A successful website is one that delivers what you expect of it." Therefore it may be a useful exercise for you to ask yourself periodically "Does my business deliver what I want?"

If your business is not delivering according to your expectations, it would seem to be a wise decision to complete a review using the 11 secrets as a guide or a fresh business plan.

The 5 legal issues to watch out for when investing in a franchise

Katherine Hawes

23 Feb 2015

Franchising is becoming an option for entrepreneurs by which they can enter in the business environment in one of two ways. It maybe as a franchisor who had a viable business and thought it would make a profitable franchise. Subsequently the franchisor prepares a franchise by which other people can buy in to and operate as their own business.

Less experience businesspeople often enter in to a franchise and provided a business structure and supported by the franchisor.

However you chose to participate in a franchise arrangement, there are legal codes which you should be aware of in order to protect your investment.

Katherine Hawes presents five legal issues which you would be wise to consider and explore before commencing any franchise relationship. The five key issues covered in Katherine's article are:

The Disclosure Document

The Code of Conduct

Buyback clause at the end of the franchise

Providing ongoing support

Establishing too many competitors

As usual, this information is a guide only and you should seek further legal advice before proceeding with any franchise agreement.

Best Practices: Invoicing to get paid

Colin Porter

17 Feb 2015

One of the reasons you might not get paid as quickly as possible is because you failed to complete your invoice(s) properly. When your invoice is incomplete, it provides another good excuse for your customer to hold back payment.

Colin's article highlights the key criteria which need to be completed before sending out your invoices. In addition, as Colin also helpfully points out, create a process to ensure your invoice is completed properly. This process can then be employed to train your existing staff and any new staff appointed to the task.  

Ensuring your invoice(s) are completed properly, removes one key reason the customer cannot use for not paying you on time.

 

Statutory Demands

Adam Stewart

8 Feb 2015

One of the weapons available for use against a delinquent debtor is the use of a Statutory Demand. Used properly, it is an effective tool in obtaining payment from your non-paying customer.

However the use of the Statutory Demand must be applied correctly as it is not without certain pitfalls if not served properly.

If you would like to know more, this blog by ADC Legal offers an introduction on the Statutory Demands. Of course, legal advice must be sought to ascertain whether a Statutory Demand is applicable for your situation.

Cloud Accounting Yes or No?

Peta Schimming

9 Jan 2015

Technology offers wonderful applications and tools for use in our business. One of the more interesting concepts is the use of cloud based products.

Peta discusses the possible benefits and negatives of using cloud based accounting systems. However many of the issues raised by Peta apply across all cloud based products and services.

If you are still wondering about using cloud based products, Peta's blog is worth reading as a start.

Don't Turn A Contract In To A Handcuff: The Boardroom Report

Adrian Kitchin

9 Jan 2015

If your business completes projects on a regular basis, you will probably already be aware of the importance of taking out an insurance policy on the major projects.

On the other hand, if you are a business owner or manager with little experience of the possible pitfalls of projects, you may not have thought of taking out an insurance policy for your next project. After all, not all projects are equal and many include significant risks for the unwary.

This blog raises a number of issues associated with projects which are worth considering. For instance, the importance of seeking professional assistance in understanding the terms of conditions of the contract associated with the project.

If you are inexperienced with the risks which may occur when planning your next project, this blog is worth a read as a starting place to begin the process of understanding project risk. You would also be wise to consider the benefits of obtaining insurance if there is any possibility of a material loss if the project does not go to plan.

Know your competition: Learn from their mistakes

Colin Porter

28 Nov 2014

Knowing your competition is one of the keys of operating a successful business.

Colin Porter in this article explains how you can learn about operating a better business from your competitors. In his view, you can learn a great deal about works and does not work in your marketplace.

Colin also provides his 5 tips for staying competitive.

I suggest this article is worth a read as a starting point for understanding why studying your competitors can help you operate and grow your own better business.

ATO Friend NOT Foe!

Peta Schimming

27 Nov 2014

In business, there are times when we have to interact with organisations which may not always our favourite business partner. In truth, most business people would argue the ATO as a party which does not add value to their business. Obviously many business people would not disagree with the previous sentence.

Unfortunately, whether we like it or not, the ATO is a serious player in our business affairs. As a result, Peta encourages us to take a proactive approach to our dealings with the ATO. Unless the circumstances are exceptional, the ATO is usually willing to work with you to resolve a problem rather than fight you (notwithstanding the ATO will probably always win).

There is also another business message you can take from this article. If you work with your suppliers and customers in a reasonable manner, many short-term problems can be resolved and so enable you to continue with the business relationship.

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