Credit Matters

Credit Matters Newsletters

Credit Matters
What's New At Credit Matters?

What's New At Credit Matters?

This month we have added another new feature "The Red Flags of Business" to our Members area. When operating your business, especially when selling on B2B credit, you need to be aware of the danger signs which indicate your customer may be unable to pay. The signs that all is not well with your customer are called "red flags". If you are unsure what a red flag may be, you can always become a Credit Matters Member at no cost.

All things being equal, our other new features will be available in the coming months.

The brochures attached to this month's newsletter include an older feature from The Bank Doctor highlighting the issues associate with borrowing, details of RSM's next fraud courses, the fact that large businesses do not seem to want to promote their payment practices from Australian Small Business and Family Enterpris­­e Ombudsman, and Jan Reeves book for small business "Get Paid" .

If you wish to promote your business services at an affordable rate, contact Kim at kim@creditmatters.com.au. You will be surprised at what we have to offer.

Quote Of The Month

Quote Of The Month

If you can’t dazzle them with brilliance, baffle them with bulls**t.’

WC Fields

Monthly Business Observation

Monthly Business Observation

THE DIFFERENCE BETWEEN A CUSTOMER OF SUBSTANCE AND A CUSTOMER OF OPPORTUNISM

One of the greatest traps for any business person is to fall for the seemingly fantastic offer of business from an organisation or individual which looks very good at first glance. It is really difficult at times to hang on to a sense of reality when we get these offers. It is especially hard to resist these offers if we have been waiting for such an offer, or are really desperate for business.

In such situations we often forget the old adage, “If it looks too good to be true, then it is probably is too good to be true.” The problem is when we forget this saying and only think of the potential benefits, we rarely consider the downside of the offer.

There are three major customer types which can cause issues, because they either lack substance despite looking good, or they target suppliers through opportunistic contacts.

The first are fraudsters. It would be wise to remember that one of the fraudster’s main operating formats is to approach their potential victims with a glitzy offer. We note for instance; how successful investment scams are when we see the glitzy approaches used to attract prospective customers. The same happens in business.

The second customer type is the deliberate slow payer or desperate buyer. These customers despite looking good at first, are usually on stop credit, or stop supply elsewhere. Their approach will usually be “time-critical”, i.e. the order(s) must be supplied very quickly or near the end of month.

This time poor approach is designed to pressure the supplier into rushing their decision to supply and avoid proper due diligence, which might expose the buyer’s real reputation and lack of substance.

The third customer type is when a potential customer with a “well recognised name” and appears to be an ideal customer, approaches your business. These businesses do not set out to intentionally operate illegally or to act unethically. They are in fact, proper and legally operated business enterprises.

The problem with these customers however is that they are often very difficult to manage profitably due to their size and entrenched operating processes. Too often a supplier is swept away with the glamour and the potential of the relationship. They then fail to complete a proper due diligence program. As a consequence, they can soon find themselves in trouble as they try to deal with all the issues of a large corporate business.

At the end of the day, there are a lot of businesses and businesspeople which appear to have all the attributes of a substantial business or product. If proper due diligence is completed however, you soon find out whether all is in order, or whether their brilliance was a facade covering their bulls**t proposition.

Monthly Business Conundrum

Is it better to pay off debts with no interest being charged, or debts funded by expensive interest?

Indeed, this is a tricky question because the conventional thought is to pay of the debt with most expensive interest rate first. In regards to consumer or personal debt, the answer is obvious. You pay off the debt with the most expensive interest rate first.

In business, the answer is a bit trickier. Obviously, if you have debt financed by high interest rates, then getting rid of that debt first sounds reasonable. If the debt is funded by a lower interest rate and the payments are affordable however, then you may need to consider another proposition.

B2B credit is free of an interest charge (plus there are no fees) providing all invoices are paid in a timely manner. If you concentrate on paying debt which has an interest component and don’t pay your interest free B2B debt, then the free debt facility can be withdrawn. If this happens, all other or future debt will incur an interest charge and fees because there will be no interest free B2B debt.

The best answer to your borrowing requirements will vary from business to business. If interest rates are reasonable, and the payments affordable for other debt, you need to be careful that you do not neglect the payment of any interest free B2B debts. It is essential to always do your best to maintain access to free debt by ensuring payments for both forms of debt are managed properly.

 

 

Monthly Business Conundrum
This Month's Business Inconvenient Truth

This Month's Business Inconvenient Truth

“A sale is not a sale until the funds are in the bank” a traditional credit management saying.

Today with a downturn in the business environment expected, the above saying is no longer completely true. The saying today should be, “A sale is not a sale until the funds are in the bank, plus six months and one day later.”

One of the effects in a downturn or a recession, is that an increasing number of businesses will enter insolvency administration. As a result, insolvency administrators will be looking to recoup funds through demands for preferential payments. These demands will affect not just those creditors which were enforcing their rights for payment. Other creditors which received payments for their invoices in good faith will also be affected.

The problem for all creditors will be the law which supports insolvency administrators’ claims for preferential payments. Irrespective of how the payment was made by the debtor, the supplier has done nothing wrong, but will still probably have to pay the preference claim.

Under such circumstances one of the few defences a supplier has against preferential claims, is that the payment was received six months and one day before the debtor entered an insolvency administration.

For further information visit the preferential payments feature on the Credit Matters website.

 

Word Of The Month

Is the spelling behaviour or behavior?

At first glance, deciding between the words behaviour and behavior, the choice appeared obvious. Many people would believe behaviour is the Australian spelling and behavior is the American spelling. The spelling behavior in Australia would be considered a spelling mistake. Certainly Microsoft Word marks behavior as a spelling error.

However, I decided to check Google for Australian sites and found approximately 54 million sites used the spelling behaviour, whilst 22 million sites used the spelling behavior. That’s a staggering one third of Australian sites (sites ending in .au), use the spelling which would be considered an error in Australia. Due to the high number of sites using the behavior spelling, it was felt important investigate the spelling.

According to the Macquarie and Australian Oxford dictionaries, both list behaviour as the primary Australian spelling and behavior is listed as an “also” and thus a secondary spelling variation. The authoritative references do not refer to behavior as a purely American spelling. It is common in Australia for people to incorrectly believe a spelling variation is only American, because that is the spelling used in America. In Australia, it is very common for words to have two spelling variations such as behaviour and behavior.

In Australia it is best to use the primary spelling behaviour, unless it’s not your preference, or there’s some reason to use the secondary spelling variation.

Word Of The Month

Updates courtesy of www.asic.gov.au

Media Updates

Media Updates

Publications & Resources


Media Releases

In the past, when you became a director of a business, the purpose was the protect personal assets in case the business became insolvent. The original purpose was well intentioned. However, over the years, the ethos behind separating your business affairs from you personal assets as a form of protection has been abused because many people became directors to avoid their responsibilities. Today, we see that being a director does not necessarily protect their personal assets when their business becomes insolvent, or illegal and negligent behaviour can be proved.

Credit Matters is a financial risk management resource centre for the Australian business community. If you are in business, Credit Matters is your ideal source of financial risk management solutions.

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Future Opportunities & Possibilities

Credit Matters is continuing to grow and provide marketing and knowledge about financial risks to the Australia business community.

Futhermore, we invite marketing and knowledge ideas from our readers and contributors on how we can assist our respective firms grow. If you have any ideas, please contact me at info@creditmatters.com.au.

If you are interested in finding new ways to reach your marketplace, why not try Credit Matters. Our prices for advertising are very reasonable and advertising packages are on offer to make any cost, even more affordable. So if you are interested in reaching your customers at the right price, please contact Kim at info@creditmatters.com.au for options.