Our new features are not quite ready yet despite our efforts. Hopefully you will see further interesting features in he months ahead.
Meanwhile we are pleased to announce that Jan Reeeves is a first winner of the Red Flag Comptition - Challenge. You can read her contribution later in this newsletter. Well done to Jan.
The attached brochures this month are focused on learning more in these troublesome times. First is dealing with debtors by CreditorWatch, a brochure on what a criminal looks like, Jan Reeves book on getting paid, all about our Red Flag Competiton - Challenge and identfying what is bugging you in business.
If you would like to advertise at a very affordable rate, comntact Kim on email@example.com to see what we can do for you.
‘When major declines occur, however, they offer extraordinary opportunities to those who are not handicapped by debt.’
Debt whether it be owed, or owing to you, is one of the greatest impediments to survival in troubled times. Whilst Warren Buffet’s quote is focused on debt owed by the debtor, there are many issues also applicable to the creditor. In troubled times, no one is safe from the issues of debt.
Debt owed is money your business has not yet earned or received and needs to be repaid, plus interest. There is also no guarantee that there will be money available to pay your debt when required, even in good times. In tough times when sales are falling and margins are tight, there is even less certainty you will have the necessary funds to pay your debts as they fall due. Even if you can hold off paying your debt repayments as they become due for a short period, usually a higher rate of interest becomes payable as a penalty.
Even if you can manage your business’s cashflow to meet existing debt commitments, the money required for debt repayments is not available to take advantage of other opportunities. Let us not forget, some of the best buying and profit enabling occur during troubled times. For instance;
a desperate supplier unexpectedly offers settlement discount to pay an account early;
business supplies or new stock is offered from an insolvency administration at a large discount;
machinery or motor vehicles become available at a great discount;
an opportunity to purchase land and buildings becomes available so your business can now own its operating premised rather than rent, etc.
These types of opportunities always materialise in downturns and can set your business up for the future. They are unobtainable however if you don’t have the cash because you have to pay off debt. Furthermore, going into debt to buy them in these times is not always the best option either.
One of the issues when operating a business, is to try and minimise costs without losing business or profits.
Unfortunately, too many businesses lose more money than they save money because they operate short-staffed. This situation occurs due to an out-of-date or deficient business model, a lack of awareness of how money is lost, or a failure to understand and measure the costs of inefficiency and mistakes.
As in all things, there is a break-even point when costs lost through inefficiencies exceed the costs of employing additional people. However, if you don’t measure losses caused by mistakes or inefficiencies, then you cannot begin to understand or calculate the break-even point for your business.
Operating a successful business is much more than just managing costs. It also involves maximising profits by eliminating inefficiencies which create costs which do not enhance the value of the business.
It is interesting to see how few businesses, particularly amongst the largest corporates, no longer reconcile their debtor and creditor ledgers these days. For some reason, financial managers no longer believe it is necessary, or they can save costs by not reconciling these accounts.
Interesting, after nearly 40 years in business dealing specifically with debtors and suppliers, I find such thinking interesting to say the least. After all, to my knowledge, there are no studies advising whether or not reconciling these accounts is NOT cost effective.
From my personal experience, I believe the cost of employing just one extra person in receivables and another in payables will be more than paid for to prevent money being sent incorrectly. In fact, many years ago according to a story I heard, an unemployed credit manager offered to reconcile a large business’s accounts for free. All he wanted was 10 per cent of the funds he identified as being paid incorrectly.
The outcome of this offer was his contract was withdrawn three months later because he made more money than a standard accounts employee and senior management was embarrassed.
His experience was no different than my own, only I have never been allowed to keep the 10 per-cent of the incorrect payments discovered.
When a business reconciles its cheque book and bank account but not its receivables and payables you need to ask the questions of: “what do we actually save by not reconciling and who manages our incorrect payments received and paid?”
When you contact customer about not sticking to specifically agreed payment terms they become rude and aggressive.
This situation usually indicates the debtor is under stress because they either physically don’t have the funds, or they are untruthful in business dealings. This situation is another business red flag and indicates you will probably be paid late or not at all.
By Jan Reeves
Is the spelling checkbook, check book, check-book, chequebook, cheque book or cheque-book?
It’s been a long time since I’ve written a cheque. Remember ripping out those cheques. But how do you spell the thing you ripped the cheques out off?
The easy part is we can eliminate checkbook (and any variation) as checkbook is listed in the Macquarie Dictionary as the US spelling. The Australian Oxford dictionary lists cheque book and the hyphenated variation as in cheque-book journalism. The Macquarie Dictionary has the entry chequebook and chequebook journalism. Two dictionaries with two different spelling variations.
If we perform a search on the NAB, Westpac, Commbank and ANZ sites, our four main banks nearly always use cheque book.
A search of Google restricting sites those ending in .au for cheque book and chequebook gives 36,00 and 31,900 respectively. Using the plural cheque books and chequebooks gives 12,000 and 6,320 respectively. If we search for cheque book journalism and chequebook journalism the results returned are 508 and 74 respectively. Of the 508 results for cheque book journalism around 30% used the hyphen, as in cheque-book journalism. Finally, if we use chequebook diplomacy and cheque book diplomacy we get 70 results and 44 results respectively.
Certainly this is not an easy one. The banking industry appears to mostly use cheque book as two words. The results returned from Google for sites ending in .au also indicates cheque book is the preferred spelling. When used as an adjective with the word journalism, the most common usage was cheque book without the hyphen.
Based on these results, for Australian usage, the preferred spelling appears to be cheque book as two words and when used as an adjective, the spelling may not need to be hyphenated. Although this does make me wonder if it’s because using hyphens is often a problem for people. Normally, going forward we’d probably expect to see chequebook become the preferred spelling, however since cheque books are being used less and less, there’s a good chance cheque books may become a thing of the past.
Updates courtesy of www.asic.gov.au
15 July 2019
ASIC has disqualified Justin Lee Fischer of Rose Bay, NSW, from managing companies for three years for his involvement in two failed companies.
While Mr Fischer was not a nominated director of SE QLD Business Services Pty Ltd ACN 611 479 264 (SE QLD) and CCW Queensland Pty Limited ACN 607 611 610 (CCW QLD) (the companies), ASIC found that he was involved in the management of two companies and was therefore acting as an officer. ASIC further found that:
•his involvement in the two companies led to other companies controlled by him obtaining a benefit; and
•he did not act in good faith or in the best interest of the two companies and nor for a proper purpose.
In making its decision to disqualify Mr Fischer, ASIC relied on reports lodged by the liquidators of the failed companies. ASIC assisted the liquidators of SE QLD and CCW QLD to prepare supplementary reports that were used to disqualify Mr Fischer by providing funding from the Assetless Administration Fund.
The total amount of debts owed by the two companies to creditors was around $543,000.
Mr Fischer's disqualification took effect from 30 April 2019 and extends to 30 April 2022.
On 28 May 2019, Mr Fischer filed an application for review of the disqualification made by ASIC in the Administrative Appeals Tribunal (AAT). The review of ASIC’s decision is yet to be heard.
ASIC has also disqualified Ms Lauren Darwin from managing corporations for five years for her involvement in the companies (see 19-161MR).
Section 206F of the Corporations Act allows ASIC to disqualify a person from managing corporations for up to five years if, within a seven-year period, the person was an officer of two or more companies and those companies were wound up and a liquidator provides a report to ASIC about the company’s inability to pay its debts.
ASIC also maintains a 'Banned and Disqualified Persons' register that provides information about people who have been disqualified from:
•involvement in the management of a corporation;
•auditing self-managed superannuation funds (SMSFs); or
•practising in the financial services or credit industry.
15 July 2019
The New South Wales District Court has ordered a jury to enter verdicts of not guilty in relation to all charges against the chief executive officer and the former chief operating officer of a subsidiary of Hastie Group Limited, an ASX-listed company.
Mr Joseph Carmec Farrugia, a former director and chief executive officer of Hastie Services Pty Limited (Hastie Services) and Mr Ian Athol Thompson, the former chief operating officer of Hastie Services, had each been charged with two charges of conspiracy to falsify the books and records of Hastie Services and one charge of conspiracy to give false or misleading information to an auditor.
On 24 June 2019, the Court directed the jury to enter verdicts of not guilty for Mr Farrugia and Mr Thompson in relation to two of the charges, namely one charge of conspiracy to falsify the books and records of Hastie Services and one charge of conspiracy to give false or misleading information to an auditor.
Today, the Court directed the jury to enter verdicts of not guilty in relation to the remaining charge against Mr Farrugia and Mr Thompson of conspiracy to falsify the books and records of Hastie Services.
The Commonwealth Director of Public Prosecutions (CDPP) prosecuted this matter.
29 July 2019
David Justin Burke, of Natural Bridge, Queensland, has been committed to stand trial on five charges following a committal hearing before the Brisbane Magistrates’ Court.
Five charges of giving false or misleading information to ASIC during examinations under oath in March and June 2016 were brought by ASIC following an investigation into a 2015 takeover bid by G8 Education Limited (G8 Education) for ASX-listed Affinity Education Group Limited (Affinity) (18-094MR).
The investigation included enquiries into alleged undisclosed arrangements between G8 Education and West Bridge Holdings Pty Ltd (West Bridge) for the acquisition of Affinity shares as part of the takeover bid.
The charges relate to false information given by Mr Burke on 16 March and 1 June 2016 during ASIC examinations under oath relating to his relationship with the director of West Bridge.
Burke was committed to stand trial in the District Court of Queensland on a date to be fixed.
The matter was prosecuted by the Commonwealth Director of Public Prosecutions.
07 August 2019
An appeal by Mr Yingjie Wang (also known as Jay Wang), a lawyer and accountant from Sydney, against his permanent banning from providing financial services has been dismissed by the Federal Court of Australia.
In February 2017 ASIC permanently banned Mr Wang from providing financial services after finding that he had acted dishonestly in causing Easy Capital Global Pty Ltd to use an investor’s money for unauthorised purposes, and that he was not of good fame or character (refer: 17-036MR).
At the time of the relevant conduct Mr Wang was a director and sole signatory of the bank account of Easy Capital Global Pty Ltd, a company which held an Australian financial services licence.
Mr Wang subsequently appealed the banning decision to the Administrative Appeals Tribunal (refer: 18-156MR) and then, to the Federal Court of Australia.
07 August 2019
ASIC is calling for public input on its proposed guidance on the new legal obligation on companies to implement a whistleblower policy.
Public companies, large proprietary companies and corporate trustees of registrable superannuation entities must implement a whistleblower policy and make it available to their officers and employees by 1 January 2020. This requirement was introduced as part of the reforms to the corporate sector whistleblower regime that commenced on 1 July 2019.
Proposed Regulatory Guide Whistleblower policies explains how companies can establish, implement and maintain a policy. It covers the information that companies must include in their whistleblowers policy, including how they will support and protect whistleblowers and handle and investigate whistleblower disclosures.
Whistleblower policies help:
•ensure whistleblowers are protected
•encourage whistleblowers to come forward
•reveal and address misconduct occurring within companies
•deter wrongdoing within companies, by increasing the likelihood that wrongdoing will be reported
•improve compliance with the law
•foster a more ethical culture.
16 August 2019
ASIC notes the decision by Botai Technology Limited (Botai), formerly known as Wonhe Multimedia Commerce Ltd, to impair its trade receivables by $6.4 million.
ASIC had raised concerns about the impairment assessment for trade receivables at 31 December 2018. Botai was required to allow for expected credit losses under a new accounting standard. Botai has announced that it will recognise the $6.4 million of expected credit losses in the comparative financial information for the year ended 31 December 2018 appearing in its financial report for the half year ending 30 June 2019.
As outlined in ASIC media release 19-143MR Major financial reporting changes and other focuses, the application of the new financial instruments standard remains a focus area for financial reporting at 30 June 2019.
Directors are primarily responsible for the quality of an entity’s financial report. This includes ensuring that management produces quality financial information on a timely basis. Companies must have appropriate processes, records and analysis to support information in the financial report.
Companies should apply appropriate experience and expertise, particularly in more difficult and complex areas such as accounting estimates including impairment of non-financial assets.
theBankDoctor offers free banking and finance advice to help small business owners get the best business banking set-up.
29 July 2019
The last piece of legislation passed before the previous Morrison Government went to the polls was the Australian Business Securitisation Fund (ABSF) Bill which makes $2b available to SME lenders over the next four years to kick start the development of a market for securitised SME loans.
Will the ABSF which is administered by the Federal Government’s Australian Office of Financial Management (AOFM) solve the funding gap or is it more of a political stunt? This article examines what the ABSF means for small business lenders and borrowers.
04 July 2019
Watch out for scams involving phone calls or emails from people pretending to be AUSTRAC staff. They usually demand payment or personal information and sometimes threaten imprisonment. Emails can feature the AUSTRAC logo in an attempt to appear legitimate.
Signs of a scam
There are certain things AUSTRAC will never do. You should be suspicious of a call or email that:
•asks you to pay a fee or tax to authorise release of funds to your bank account
•asks you for documentation regarding imported goods
•tells you we have intercepted your package at the border
•tells you that you’ve won a lottery
•threatens you with arrest if you don’t pay a penalty
•asks you to pay penalty fees by money transfer
•tells you we are freezing accounts or transactions
•says you can avoid prosecution by paying penalties.
If the phone call or email does any of these things, you can be sure it hasn’t come from us.
If you want to check whether a call is legitimate, contact AUSTRAC.
What to do if you receive a scam call or letter
If you receive a scam call or email, don’t engage with the scammer. Do not:
•phone them back
•reply to the email
•click any links
•download any files.
•Report the incident to Scamwatch or your local police.
•For online or email scams, contact the Australian Cybercrime Online Reporting Network.
14 June 2019
AUSTRAC has released new case studies to make you aware of indicators of money laundering, terrorism financing and other serious financial crime.
The case studies include a ‘what to look out for’ section that lists suspicious behaviour and transactions. They also explain how business reporting contributed to the detection and prosecution of offenders.
AUSTRAC values our business and industry partners as critical allies in the fight against domestic and international financial crime.
Read the case studies:
Joint-agency effort disrupts international crime syndicate
AUSTRAC disrupts large-scale international money laundering syndicate
Suspicious deposits lead to arrests and frozen bank accounts
International crime-fighting effort smashes global money laundering network
AUSTRAC links Australian assets to suspects wanted for crimes in China
AUSTRAC reveals overseas investment scam defrauding Australians
Business owner jailed for ‘phoenixing’ to avoid tax
30 July 2019
In the 2018-19 Budget, the Government responded to the Black Economy Taskforce's Final Report. This included the introduction of an economy-wide cash payment limit of $10,000 for payments made or accepted by businesses for goods and services.
The Treasury is leading a consultation process on the draft legislation and accompanying explanatory materials to implement the cash payment limit from 1 January 2020.
You can read the draft legislation, explanatory materials and participate in the consultation process, by visiting the Treasury’s website. The consultation period closes Monday 12 August 2019.
For any questions about the draft legislation and the consultation process please contact the Treasury by emailing Blackeconomy@treasury.gov.au
01 August 2019
Online spare parts retailer Big Warehouse has paid a $12,600 penalty after the ACCC issued an infringement notice against the company for allegedly breaching the Australian Consumer Law (ACL) by misleading a consumer about their consumer guarantee rights in relation to spare parts they had ordered.
In addition to paying this penalty, Big Warehouse has provided a court-enforceable undertaking to the ACCC in which it admits it was likely to have contravened the ACL by representing to consumers that:
•spare parts were available for dispatch, when in fact they needed to be ordered from the manufacturer;
•spare parts were compatible with the model of electrical appliance purchased by the consumer, when this was not the case;
•the consumer was not entitled to a full refund or replacement where: ◦a spare part ordered was not supplied within a reasonable time after payment was made;
◦a spare part was not compatible with the electrical appliance set out in the consumer’s order; or
◦a spare part was damaged during delivery and the consumer had not purchased insurance from Big Warehouse.
“Big Warehouse has admitted that when consumers requested a full refund or replacement, they were either denied one, only given a partial refund, or offered a store credit instead,” ACCC Commissioner Sarah Court said.
02 August 2019
proceedings brought by the ACCC, the Federal Court has declared that certain terms of contracts between Australia’s largest potato wholesaler, Mitolo Group Pty Ltd, and potato growers entered into between December 2016 and February 2018 were unfair contract terms and therefore void.
The Federal Court ordered that Mitolo pay a pecuniary penalty of $240,000 for contraventions of the Horticulture Code of Conduct in relation to 19 contracts entered into with potato growers, arising from Mitolo trading pursuant to contracts which did not specify the time in which the price was to be agreed with growers in writing. Mitolo was also ordered to pay the ACCC’s costs in the amount of $50,000.
The contract terms which were declared to be unfair included terms that allowed Mitolo to unilaterally determine or vary the price Mitolo paid farmers for potatoes, unilaterally vary other contractual terms, declare potatoes as “wastage” without a mechanism for proper review, and prevent farmers from selling potatoes to alternative purchasers.
The Court also declared that terms in Mitolo’s contracts preventing farmers from selling their own property unless the prospective purchaser entered into an exclusive potato farming agreement with Mitolo were unfair contract terms.
“This is the first Court imposed penalty for a contravention of the new Horticulture Code,” ACCC Deputy Chair Mick Keogh said.
“This is an important case for the ACCC as it goes to the heart of fairness issues the ACCC is seeking to address in agriculture. Since the ACCC’s Agriculture Unit was set up, a key concern raised by farmers relates to the degree of risk they carry and detriment they suffer as a result of imbalanced contracts.”
02 August 2019
Japanese shipping company Kawasaki Kisen Kaisha Ltd (K-Line) has been convicted of criminal cartel conduct and ordered by the Federal Court to pay a fine of $34.5 million.
The Federal Court found K-Line engaged in a cartel with other shipping companies in order to fix prices on the transportation of cars, trucks, and buses to Australia between 2009 and 2012.
K-Line’s fine of $34.5 million is the largest ever criminal fine imposed under the Competition and Consumer Act.
K-Line pleaded guilty on 5 April 2018, following an extensive criminal investigation by the ACCC and the laying of charges by the Commonwealth Director of Public Prosecutions (CDPP).
The cartel operated from at least February 1997, and impacted the transportation prices of cars, trucks, and buses to Australia from the US, Asia and various European countries. K-Line, and other shipping lines transported these vehicles on behalf of major car manufacturers such as Nissan, Suzuki, Honda, Toyota and Isuzu and others.
14 August 2019
The Federal Court has ordered CLA Trading Pty Ltd (trading as Europcar) to pay $350,000 in penalties for charging excessive credit and debit card payment surcharges in breach of the Competition and Consumer Act 2010.
Eurpocar admitted that, between July and August 2017, Europcar charged Visa and MasterCard credit users fees that were higher than Europcar’s costs to accept payments from those credit cards.
It also admitted that, between July and 5 November 2017, the company had charged excessive surcharges on Visa and MasterCard debit cards.
“Europcar imposed excessive surcharges on transactions affecting 63,012 customers, and over-charged more than $67,000,” ACCC Deputy Chair Mick Keogh said.
“As a large and sophisticated business, Europcar was well aware of its obligations to comply with the law prohibiting excessive surcharges.”
“Europcar also knew its actual cost to accept payments by these cards from at least July 2017, when it was notified by its bank. Despite this, Europcar continued to impose excessive surcharges,” Mr Keogh said.
The amount of each excessive surcharge charged by Eurpocar was relatively small, at an average of just over $1 per customer.
“While the amount per customer was small, Europcar imposed these charges on thousands of consumer transactions which quickly added up to a considerable amount,” Mr Keogh said.
“This decision is a warning to businesses that choose to impose surcharges. The onus is on them to get it right. A failure to comply with these laws may result in significant penalties.”
The ACCC instituted proceedings against Europcar in July 2018 for breaches of the excessive surcharging laws. Europcar subsequently admitted liability, and the ACCC and Europcar made joint submissions to the Federal Court that Europcar should be ordered to pay a penalty of $350,000 and a proportion of the ACCC’s legal costs.
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.
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