What's New At Credit Matters?

The focus of the August newsletter is all about keeping your eyes open on the business world and understanding the influences that might apply for your business.

The attachments with this newsletter

1. RSM regarding their workshops on the 2023 CFE Exam Review Courses,
2. Absolute Facts regarding their due diligence services,
3. Barry Urquhart with interesting information regarding online sales information,
4. The IMA regarding negative call centre experiences and customer expectations,
5. What’s a criminal look like?

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

“It is not the strongest of the species that survives. It is the one that is the most adaptable to change, that lives within the means available and works cooperatively against common threats.” Charles Darwin.

Monthly Business Observation

It was expected that on the conclusion of COVID, the world would return to some form of normality as we once knew it. Unfortunately, we seem to be in a more negative and volatile situation than ever before, or at least since the GFC.

The lessons from the GFC, although only a bit of a decade over, seemed to have largely been forgotten until COVID came along. We then found that many of the lessons learnt in the GFC were repeated once more. Essentially, we learnt that again CASH was KING, and debts in all its forms were a risk to our businesses and personal well-being.

COVID also provided a new set of factors that businesses had to contend with, some of which had been growing in importance gradually over recent years. These factors, which were largely negative, included:

1. the demise of creditors’ rights,
2. the continued interference by politicians, bureaucrats and do-gooders in our business and personal affairs,
3. an increase in fraud in all its forms,
4. central bankers’ actions which declared cash was bad and debt was good,
5. the FOMO effect that saw people buy homes they couldn’t afford and are now home loan debt prisoners,
6. nationwide rental accommodation shortages,
7. the inability of your customers and their customers to control their use of credit, etc.

In light of the developments and changes in the world today, to see businesses and people operate in the same old way is to worry about whether they have actually learnt anything about doing business. The pace of change has been mentioned continually in the business press and the general media for many years now. Yet, we often see little evidence that this message has been received by businesspeople and the general public.

The reality is that all businesspeople, and people in general, have to understand they need to change to survive. In the business world today the core factors which have to change include:

1. building cash reserves to cover emergencies, to take advantage of opportunities and to cover the cost of transition to the new world of business;
2. understanding the difference between good debt and bad debt and how debt may not be the business saviour as was once thought;
3. taking opportunities by identifying risks, and acting on those which may be negative, or alternatively which are adding value to your business,
4. having different strategies to combat fraud and cybercrime,
5. understanding advancing credit is for banks and finance companies, as it often does not add value to your business,
6. being able to sell using different types of sales strategies,
7. understanding how micro and SMEs need to employ people, yet operate with a minimum of employees, etc.

In summary, on the conclusion of COVID, it was expected that world would return to some form of normality as we once knew it. Unfortunately, this did not happen and we are in a more negative and volatile environment than ever before.

Two of the most important lessons of the GFC, that CASH was still KING, and debts in all its forms were a risk to our businesses and personal well-being were also forgotten.

Post COVID, we found that there is a whole set of new factors affecting our businesses. These factors have been gradually growing in importance over recent years. It appears many of these factors do not appear to have been acknowledged and is shown in the way people do business currently. Unless these changes are better understood and factored into future business decisions, many businesses are unlikely to achieve their potential, or worse still, end up insolvent.

This Month's Business Inconvenient Truth

It may be a simplistic overkill to say it, but unfortunately when you sell your products and services on credit, all too often there is a chance that the customer will not pay for them. When this occurs, it is a time and costly exercise to seek the payment via investigation or negotiation. Alternatively, you can try debt collection or legal action. Irrespective which of these strategies you try, there is no guarantee that you will actually get paid.

The reason for non-payment may be one of many reasons, one of which will be the customer simply refuses or cannot pay. In these cases, you will find many barriers in your way of getting pad.

When you consider the situation for your business, in today’s world, due to these barriers, it may be beneficial to consider not extending credit at all, or only for a few dollars, or for very short period of time, for example seven days. After all, your business is not a bank or a finance company, despite your customer trying to make you act as one.

The above scenarios are easy to put forward, however they are not easy to adhere to or maintain. If you feel that your business must offer credit, you should build a “finance cost” into the price of your product, have a very good terms of trade contract and be willing to enforce your rights to get paid.