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 email@example.com. You will be surprised at what we have to offer.
‘If you can’t dazzle them with brilliance, baffle them with bulls**t.’
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.
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.
“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.
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.
Updates courtesy of www.asic.gov.au
03 April 2019
Christopher Edward Eric Skelly, of Lark Hill, Queensland has been found guilty by a jury of one fraud-related charge brought by ASIC.
Mr Skelly, a former director of C & G Group Industries Pty Ltd ACN 168 873 578 (C&G) was found guilty of intent to defraud by deceit or fraudulent means and gaining a benefit, namely $529,380.72, for C & G between 11 December 2014 and 12 January 2015.
Mr Skelly deceived a factoring agency by emailing them an invoice and other documents that created the false impression that monies were owed to C&G by debtors, when in fact they were not. Relying on those documents, the factoring agency paid C&G a total of $529,380.72.
10 April 2019
ASIC has assisted employees gain access to the Fair Entitlements Guarantee scheme (FEG) by exercising its wind-up powers and appointing liquidators to five abandoned companies.
From 1 January 2019 to 31 March 2019, ASIC appointed liquidators to five abandoned companies owing at least 39 employees more than $410,000 in employee entitlements. The companies are:
Current panel liquidator and firm
NISS Technologies Pty Ltd
Alan Hayes of Hayes Advisory Pty Ltd
Jovawill Pty Ltd
Tim Heenan of Deloitte
Rushci Pty Ltd
Rob Brauer of McGrathNicol
Steel Project Services Pty Ltd
Hugh Armenis of Bentleys
Surat Basin Group Pty Ltd
Damien Lau of Bentleys
Abandoned companies are those where directors are unable to discharge their duties or have abandoned their insolvent companies without first putting them into liquidation.
11 April 2019
ASIC has disqualified Ms Heather Knorr of Traralgon, Victoria and Ms Ge Zhu of Hurstville, New South Wales from managing corporations for four years.
The disqualification follows an ASIC investigation into the affairs of six companies* within the Uglii Group that led to orders being made by the Federal Court of Australia for their wind up in 2016 and 2017.
Each of the six Uglii Group companies were wound up with a deficiency, with Uglii entering into liquidation with approximately 2,400 shareholders who received no return.
12 April 2019
Recent surveys of market sectors supported through ASIC’s Innovation Hub shows fintech businesses are continuing to see growth in demand for alternative funding sources.
ASIC’s Innovation Hub exists to foster innovation that could benefit consumers by helping Australian fintech startups navigate our regulatory system. Marketplace lending (also known as peer-to-peer lending) and crowd-sourced funding (CSF) are two examples of such fintech business models. Marketplace lending offers an alternate source of funding for investors and borrowers, while CSF offers a different form of capital raising for new and smaller companies.
ASIC recently conducted its third survey of the marketplace lending industry and its first survey of Australia’s crowd-sourced funding (CSF) sector. These surveys track the growth and development of these sectors.
18 April 2019
Restaurateur Mr Gaowei Shi (Mr Shi), of Highbury, South Australia, has pleaded guilty to one charge of falsifying company books.
An ASIC investigation found that Mr Shi, director of The Crane Japan Restaurant (SA) Pty Ltd (the Company), a restaurant in Glenelg, South Australia, entered into a purchase and sale agreement in December 2015 to sell assets of the Company to East and West Venture Pty Ltd for $100,000. Mr Shi redirected approximately $47,000 of the sale proceeds to his personal account.
ASIC found that Mr Shi falsified the Company’s bank statements to show that the $47,000 was deposited into the Company bank account.
The Company entered liquidation on 9 March 2016 and the liquidator, Peter Lanthois of DuncanPowell reported Mr Shi’s conduct to ASIC.
At the time of liquidation, the Company owed creditors approximately $328,000.
The matter is being prosecuted by the Commonwealth Director of Public Prosecutions (CDPP).
08 March 2019
This is a joint media release between the NSW Police Force and AUSTRAC.
The NSW Police Force and the Australian Transaction Reports and Analysis Centre (AUSTRAC) are reminding digital currency exchange providers to be aware of their obligations following amendments to Commonwealth legislation last year.
In April 2018, amendments to the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 were introduced, which included expanding the scope of the Act to include regulation of digital currency exchange providers
These changes included registering with AUSTRAC, verifying customer identity, reporting suspicious matters and over-threshold cash transactions; and complying with record-keeping requirements.
08 March 2019
This is a joint release between the Australian Federal Police and AUSTRAC
A 27-year-old Bulleen man has been arrested during the second phase of an Australian Federal Police (AFP) investigation into an organised crime syndicate. Following the arrests, AUSTRAC suspended the registrations of two digital currency exchange businesses the man is associated with.
The initial phase of the investigation led to two men being charged for drug trafficking offences in October 2017. The AFP continued its investigation into those responsible for allegedly importing border controlled drugs via international mail into Melbourne.
On Thursday, 7 March 2019, AFP officers executed search warrants in the Melbourne suburbs of Bulleen, Templestowe Lower and Malvern, seizing steroids, Australian currency and cryptocurrency related items.
02 April 2019
This manual is designed to help franchisors to understand their rights and responsibilities under the new Franchising Code of Conduct, which commences on 1 January 2015.
The manual will help you to understand:
•the minimum business conduct and disclosure requirements required by the Code
•how to comply with your Code obligations
•how to resolve disputes under the Code.
02 April 2019
This manual is designed to help franchisees and prospective franchisees to understand their rights and responsibilities under the new Franchising Code of Conduct, which commences on 1 January 2015.
The manual will help you to understand:
•the steps you should take before choosing a franchise
•how to research and verify information provided to you about a franchise opportunity
•your rights and responsibilities under a franchise agreement
•what to do if there is a dispute with a franchisor.
04 April 2019
A new Memorandum of Cooperation (MOC) between the ACCC and the United States Federal Bureau of Investigation (FBI) will strengthen the agencies’ joint efforts in combating cartels and other anti-competitive behaviour.
The MOC provides for the exchange of expertise and staff between the two agencies to enhance work in the detection, investigation and prosecution of criminal competition offences.
The agreement was signed in Washington, D.C this week by ACCC Executive General Manager Marcus Bezzi. It follows a visit to the FBI Headquarters by ACCC Chair Rod Sims and Mr Bezzi in March 2019.
17 April 2019
The ACCC is reminding people with disability to use their consumer rights when buying goods and services under the National Disability Insurance Scheme (NDIS) and to be aware of the range of organisations that can assist when things go wrong.
A new independent Commonwealth body, the NDIS Quality and Safeguards Commission (NDIS Commission) will be available to take complaints from participants in all Australian states and territories from 1 July 2019. Western Australia is an exception which will participate from 1 July 2020.
18 April 2019
The Federal Court has found ticket reseller Viagogo AG made false or misleading representations and engaged in conduct liable to mislead the public when reselling entertainment, music and live sport event tickets, in breach of the Australian Consumer Law.
The Court found Viagogo misled consumers by claiming tickets to certain events were scarce when the scarcity only referred to the tickets available on its resale platform and didn’t include tickets available elsewhere.
“Viagogo’s claims misled consumers into buying tickets by including claims like ‘less than 1 per cent tickets remaining’ to create a false sense of urgency,” ACCC Chair Rod Sims said.
The Court also found that using the word ‘official’ in its online advertisements was misleading. As a result of this, consumers were misled into thinking they were purchasing tickets from an official site, when in fact Viagogo is a ticket resale website.
“We urge consumers to only buy tickets from authorised sellers, or they risk their tickets being dishonored at the gates or doors,” Mr Sims said.
At the 1994 AICIM Conference, Hugh McLernon presented his paper titled "The Immorality of the $2 Company".
Mr McLernon's paper was subsequently reprinted by the AICM in its Credit Management Today magazine.
I was immediately impressed on Mr McLernon's view of how the $2 Company had been misused by many in the commercial environment to avoid their responsibilities, rather than protect their protect their personnel assets as was first intended.
Mr Mclernon's article is applicable today as it was then. There has been one major different however which all directors need to be aware of today. No longer can a person necessarily hide behind their director's title to protect their personal assets.
Whether you are a student of business or involved in a commercial enterprise, I suggest the article is worth reading again. You can obtain a free copy of the article by becoming a Member of Credit Matters and joining Credit Matters is free of charge.
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.
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 firstname.lastname@example.org.
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 email@example.com for options.