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Credit Matters
What's New At Credit Matters?

What's New At Credit Matters?

Welcome to our April newsletter. The focus this month is on making tough business decisions.

The Special Topic discusses the “forest and trees” saying and what it means for your business.

In view of the risks in business today, you need to find ways to mitigate any risks wherever possible. To assist, there is a brochure from Enable Workplace Consulting offering their course on Crises Management in the Workplace. Another brochure is from Peter Nash of Absolute facts offering due diligence and investigative services.

Kim is available to help with your questions and concerns if you need any assistance, and as always, the first chat is always free of charge or obligation.

Quote Of The Month

Quote Of The Month

“We must all suffer from one of two pains: the pain of discipline or the pain of regret. The difference is discipline weighs ounces while regret weighs tons.” – Jim Rohn

Monthly Business Observation

Monthly Business Observation

This month’s quote has value as long as you understand where and when the meaning behind this month’s quote applies to your business decisions.

For instance, understanding when discipline is of value and proves to be the right decision or holds you back from making future beneficial decisions is essential. There are certain actions for which maintaining strong discipline is a no brainer. These actions include, apologising when your business is in the wrong, honesty and sticking to your word, empathy, completing due diligence on all customers, offering the best possible customer service, paying your suppliers in a timely manner as per signed trading agreements, etc.

When should you be wary of sticking to a disciplined approach is also worthy of careful consideration. For instance, there are times, when after completing due diligence, or a customer is upfront about financial problems or asks for an increased limit, you may need to put aside your normal disciplined approach for sound commercial reasons. In these situations, common sense, which isn’t so common these days, your professional experience, the customer’s previous good record of payments and assistance with problems, may be acceptable. It is also important to acknowledge that although a loss may occur, there is a sound commercial decision to proceed and accordingly, your positive decision is worth the risk.

The proviso for the above is however, the favourable decision must not be made because,

  1. of pressure by management or the sales department to increase sales,
  2. you think it will make life easier if you agree to their request,
  3. it is a desperate attempt to stay in business, or
  4. because the customer threatens to take their business elsewhere or acts in a bullying manner, etc.

If a positive decision in the customer’s favour in these situations results in a loss, then this means a bad decision was made for the wrong reasons.

When the above situation occurs, this then leads nicely into the discussion of the regret factor.

Regret also has a double meaning. In the above situation, the decision should be regarded as a bad decision because it was made for all the wrong reasons. All is not lost however if an acknowledgement is made and the organisation has learned a lesson and tries not to repeat the same mistake in the future. After all, every mistake can also be of benefit if a positive lesson on how not to behave is learned.

In truth, regret for past decisions which has led to a loss was made after reviewing the situation and was a genuine commercial decision, must be understood. If you regretted the decision in hindsight and you allow it hold you back from making other future beneficial decisions, that is not good outcome either.

We cannot be right all the time, and every business owner and manager will make mistakes from time to time. For example, events can unfortunately occur after you decided in the customer’s favour. Alternatively, the customer was not honest in their initial request or in the supply of information at the time of their application for assistance. In these situations, your regret should be tempered and accepted that the outcome was not expected and that is just a part of being in business.

This month’s quote has value, as long as you understand where and when the meaning behind this month’s quote applies to your business decisions. For instance, understanding when discipline is of value and proves to be the right decision or holds you back from making future beneficial decisions is essential.

There are certain actions for which maintaining strong discipline is a no brainer. In other situations, it is acceptable to put aside your normal business disciplines if you have fully reviewed the situation and made a commercial decision. Likewise, regret over making bad decisions or, making a commercial decision which caused a loss also needs to be understood and managed. Learning the difference is an essential component of managing and operating a business.

Monthly Business Conundrum

Unfortunately, keeping a customer just to sell to them on credit, even if it results in a loss, is often a strategic decision for many businesses these days. The fact is however, this strategy is also one of the quickest ways to becoming insolvent when selling at a loss or when you do not get paid within agreed trading terms.

The problem for many businesspeople is a failure to accurately identify and calculate where they might be making a profit by using outdated costing scenarios. Too often, profit calculations are not based on other business income earning opportunities., or for a specific strategic objective. Alternatively, management is encouraging their salespeople to sell to almost any type of customer on credit to maintain an outdated idea that total sales will eventually lead to a positive cashflow and profit outcome. This positive cashflow or profit situation rarely eventuates.

There are many different factors involved when selling your goods and services. Not all of these factors are easy to quantify in dollar terms. It is essential therefore to record these other factors for each sale which may justify selling to the customer on credit which may otherwise be classed as unprofitable. Periodically you should review these customers and make an informed decision on whether your efforts have been achieved.

It is not that you sell to potentially unprofitable customers on credit is the problem. The problem is to evaluate whether these customers add value in some other way for your business. This issue will gain increasing importance in the coming years as the financial viability of all your customers may come into question. Trading with customers on credit with doubtful integrity and financial strength for which you cannot evaluate and identify any worthy reason for trading with, is one sure way of testing the financial viability of your own business.

At the end of the day, if selling on credit is not a viable option, try selling to them for an upfront payment and offer a discount on the sale price. That way, you will test both the customer's worthiness, and if accepted, means you made a cash positive and profitable sale.

Monthly Business Conundrum
This Month's Business Inconvenient Truth

This Month's Business Inconvenient Truth

The inconvenient truth of business and life is that if you don’t have the cash, you cannot buy. This means when an ideal opportunity to buy an asset or goods at a discount means you may miss out on buying it. That will occur either because you don’t have the cash, or whilst you are looking for finance, another party buys the asset or goods on offer.

In another example, if you don’t have the cash in the bank, you may miss an opportunity to take up a settlement discount offer made by a supplier, or a great deal to buy goods at a discount. In either case, your business has lost the potential for a “cheap” buy, and these opportunities don’t happen every day.

The other problem you have when you don’t have the cash and urgently require funds or are looking to expand, is that you can waste an awful lot of time filling in forms, attending interviews and waiting around for your application to be approved.

Cash in the bank also allows your business the luxury of riding out business downturns without having to sell valuable assets at a discount, or access expensive borrowings to survive.

The truth is as these examples show, cash is never lazy, or cannot add value to your business. As I have said previously, cash in the bank is just like a big cat waiting to ambush prey for dinner. Cash is there to take advantage of the unexpected opportunities which always occur in tough economic times. These opportunities are expected to be increasingly on offer in the near future as more businesses and people struggle with the costs of living and doing business.

A management saying when you talk about taking action for the long term and they are concentrating on the short term is, “… it’s a forest and trees exercise” at the moment.

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

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 for options.