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

Red Flags Of Potential Collection Problems

Dean Kaplan

11 Jan 2016

Dean Kaplan is an experienced business professional and debt collector from the US. In this article, Dean provides a number of red flag indicators which may indicate future cashflow problems for your customer.

These same indicators are observed and applicable within the business environment of any country. For instance, I suggest other experienced credit professionals, debt collectors and insolvency practitioners from all countries would have seen similar red flag indicators during their careers.

Dean points out there are other indicators which may be useful in specific situations which he has not detailed. Educating yourself to be on the alert for any unique red flag indicators which are applicable for your industry, is just as important.

A useful aspect of this article are the explanations which are included to illustrate the problems behind the red flag indicators.

In the turbulent business world of today, being aware of the indicators of customer cashflow problems is an essential component of business survival and to reduce unnecessary costs and bad debts.

If you are unaware or would like to refresh your knowledge of the red flag indicators of cashflow problems, this article may be of value to you.

Four Important Questions To Ask When Choosing A Recruitment Consultant

Vic Careedy

10 Nov 2015

The task of taking on a new employee is no longer as simple as it once was. Today and into the future, undertaking due diligence on all prospective employees, will be the new norm. One of the parties best placed to assist you in this process will be recruitment agencies or consultants. Again however, you must choose your recruitment agency or consultant with care.

Vic Careedy puts forward a number of issues to be considered when choosing an employment agency or consultant based on his experiences and perspectives.

"Having been a client, a candidate and, for several years now, a consultant in the recruitment industry, I've learned there are some starting issues you need to be clear on."

The four areas worthy of investigation and questions in Vic's opinion are:

1  Who will doing my work?

2  What background experience does my consultant bring?

3  What is the process?

4  What will I pay?

If you have never used a recruitment agency or consultant before, or a dissatisfied with your current service provider, reading Vic Careedy's article may be of assistance. As is always the case, care is required when employing anybody these days and having a professional service provider who understands the issues may well be your best assistant in this process.

 

Persistence Reaps Rewards

Dr Vesna Grubacevic

24 Oct 2015

We have all read those business stories of success which have suggested, success only became possible after surviving one or more setbacks. Yes, sometimes, the people involved had to take a step back or hold up the development of their idea for a while. Having to take a break or re-evaluate the development of your ideas, is a perfectly normal and acceptable part of the process of success.

Sometimes however, as Vesna suggests, we become overwhelmed by our situation and self-doubt contributes to our eventual giving up on our ideas and objectives.

As individuals, we all have different ways of dealing with stress or managing the issues which affect our determination to last the journey and achieve the success we desire. One of the references which may help you understand and overcome the doubts which test your perseverance, may be this article. After all, it is not that we will not face obstacles which may prevent us achieving our desired objectives, it is how you overcome these obstacles which is the important thing.

Future proofing against corruption in Australia

Professor Adam Graycar

7 Oct 2015

Imbedded in Professor Graycar's article is a brief insight in to Australia's history of corruption in Australia. As he mentions, many people do not see any purpose in wasting time talking about corruption "... because it has always been there and always will be."

However, as Professor Graycar points out, the facts demonstrate when corruption is tackled, positive outcomes are possible. The Professor also highlights some of the issues ahead in fighting corruption as a result of today's volatile world.

"While Australia is very highly regarded, it would be foolish indeed to become complacent. In the face of economic turbulence, demographic change, environmental threats, and knowledge and communications revolutions among other things, the public policy challenges will be formidable. Good governance and unimpeachable integrity will have to be the bedrock of our policy and delivery apparatus. We can deal with corruption, maladministration and misconduct at the coal face if we have good principles, good practices and good data."

This statement presents guidelines and principles to help business owners and managers identify and operate their businesses to avoid being caught up in corruption matters.

As a starting point in your own efforts to understand and avoid the pitfalls associated with corruption, this article may be worth reading.

2015: The rise of impersonators

Debbie Fletcher

4 Sep 2015

Debbie Fletcher presents a number of key issues relating to the bots which are visiting your website. Not all of these bots will be visiting with the right intentions. Unfortunately we live in age when the internet is both our window to the world and a wonderful research facility. However the internet also allows unwelcome visitors to visit our site.

These unwelcome visitors are designed to seek advantages for their own business enterprises. The advantages which are sought include, finding out the weaknesses in your security systems, website designs, seeking to over-ride human operating disciplines and stealing your IP and other work.

Any business which is deemed to be profitable, or rich in ideas and IP, will be targeted. It is not about if, it is about when. It would seem therefore to be sensible to build a website which has been designed by professional website designers who understand and use appropriate security measures. Any alternative over the long-term is a recipe for disaster.

In today's world, if you have a website, it would be wise to understand these issues. If you are interested in knowing more about the visitors to your website, this article may be a good place to start.

 

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.

 

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