Published by Credit Matters Pty Ltd.
Welcome to Credit Matters Newsletter for December 2017. Our monthly newsletter contains information about financial risk management issues, blogs, advice of new business listings and free advice from organisations such as ASIC.
You can always view past copies of our newsletters via our website at www.creditmatters.com.au
In December we added a new feature about Fraudsters on Credit Matters homepage at creditmatters.com.au. The feature is still being added to, however it is a start to help people understand what a fraudster may look like. As the final feature will show, a fraudster comes in many human forms.
We are also pleased that Daniel Turk from Turks has allowed us to feature one of their articles titled "A simple guide to determining priority between trade creditors with caveats registered on land". The link to the article is as follows: http://www.turkslegal.com.au/sites/default/files/publications/TurkAlert%20-%20A%20simple%20guide%20to%20determining%20priority%20between%20trade%20creditors%20with%20caveats%20registered%20on%20land.pdf
Advertising via Credit Matters
If you are interested in reaching business prospects who need your services or products, contact Kim to see what he can do for you. There are many different opportunities to advertise your business via Credit Matters and it may not be as expensive as you might imagine.
In this newsletter, you will find an article compliments of The Australian Small Business and Family Enterprise Ombudsman about a roundtable meeting between the Ombudsman, FinTech Australia and the Bank Doctor.
We also have a message from STOPline about taking care at Christmas.
Welcome to our last newsletter for 2017. What an interesting year it has been and I hope you have done well.
Credit Matters will be moving forward with new innovations in 2017 and will continue to adapt to the changing circumstances we will experience in 2018. I implore you to consider the same as there is nothing stable or static about doing business today.
I anticipate 2018 will offer many positive possibilities if you concentrate on the basics and reduce liabilities and increase your cash position. In addition, try to take advantage of the lessons learnt in 2018 to make you a better business owner, manager or professional.
May we all reach the end of 2018 with our businesses and careers growing successfully.
On that note, I wish you all the best for a safe and happy Christmas and New Year with your family and friends.
We have all encountered another interesting year in 2017. This has meant there have been many twists and turns which kept all business owners, managers and professionals on their toes.
The complexity of the modern business and social environments continue to grow, which means we all need to keep working on our businesses, not just in them.
My core observations as a financial risk management professional, business owner and front-line operator follow.
Globally –2017 started in a mixed state of gloom or optimism depending on your situation and beliefs. The doom and gloom merchants thought the world would see another financial crisis. Meanwhile, the naïve and positive thinkers, were looking forward with optimism that the best was ahead. The reality has been mixed as usual with winners and losers.
It would appear the greatest problems from a global perspective over 2017 has been increased business volatility, debt’ and the rise of tribalism within communities and countries around the world. These factors are also compounded by the impact of technology which when used by people with malicious intentions, fraudsters and nefarious government agencies, causes even more problems.
The full effects of Brexit and Trump policies are not yet fully known. There are indications in the short term, of a decline in business optimism within the UK and a relatively stable situation within Europe. In regard to the US, there seems to be slight rise of business confidence. In addition, there is some evidence of the initiatives of people in the poorest areas of the US, to reinvent themselves with new business start-ups.
China is an ongoing conundrum with the “experts” speculating about possible outcomes because so much information, good and bad comes out of China. In addition, many people are concerned about the accuracy and quality of their commercial information. The major negatives associated with China, seem to be its expansionary actions in the China Sea and its perceived meddling and involvement in the domestic affairs of other countries.
We continue to see other parts of the global community still at war, the rise of nationalism and the associated problems caused by political turmoil, for example in Spain. Of equal concern are those countries which are fundamentally insolvent. As these situations do not seem to be getting any better, it is difficult to see how global trade can be increased by any meaningful amount.
Equally disturbing are the continuing scandals which occur in every country. It seems no industry, profession, person, or country is immune from these scandals. Of course, these scandals have always existed, it is just that more people are speaking out about them due to a number of factors. The use of social media, changing attitudes to business practices, changing community expectations and a willingness to challenge the status quo, are amongst the factors causing this rise in the various scandals coming to our attention.
Government interventions continue which often defy common sense, add extra red tape and overly restrict genuine and honest businesspeople from operating an effective and profitable business. In the face of overwhelming evidence that many of these interventions only provide additional advantages to the unscrupulous and fraudsters, governments still persist with their interventions.
When governments get the legislative balance wrong and disenfranchises people, many change their practices to suit the new circumstances. With world business stagnating, I would suggest, penalising honest and genuine businesspeople is not the answer. However, if governments continue to intervene with the wrong initiatives, this may well happen.
Probably the greatest warning sign that business factors have not improved during 2017, has been the continued rise of global debt in all its forms. Even more importantly, much of this debt is currently still hidden by creative accounting practices and undocumented.
As a final observation, the 10th anniversary of the GFC is now upon us and the business factors which lead up to the GFC are once again being mentioned. Many of these negative business factors which lead to the GFC are again gaining prominence, the major problems remain unresolved, and the global debt is worse than ever.
Australia – according to the economic commentators, is supposed to be in reasonable economic shape, albeit there are areas of concern.
Indicators are that the Australian experience in 2018 could be improved by a rise in good news stories and as the Australian focus on mining is transferred to other business opportunities. There has also been a small reversal of the mining industry’s fortunes, small as they may be for the time being, which is another positive.
Regretfully however, in the analysis of economic conditions, the negative factors which impact on the success of Australian business enterprises are often overlooked or minimised. The social issues of youth unemployment, adult under employment, drugs, gambling, and the number of people without a regular roof over the heads, are not going away. When the negative effects of these issues are factored in to the overall picture, Australia’s ability to move forward with confidence must be a cause of concern.
In another sign that all is not well economically, the rise in robberies on homes and the elderly, plus soft business targets continue to be of concern. It is a well-known fact, known by those that operate within the field of criminology; more “good” people commit crimes in tough times in order to survive than in good times.
Australian households continue to be the most indebted in the world. This debt has compounding negative problems for us all. For instance, if people are paying back debt, this reduces their spending in the retail sector. Retail spending is also being constrained by other factors which include low interest rates affecting investors ability to spend, low wage growth and increased utility costs for both businesses and households.
We must also remember, Australia, an island, has no motor vehicle manufacturing industry to speak of these days. In addition, the associated businesses which remain, will never employ the same numbers of people who have lost their jobs. It is all very well to sprout on about retraining and further education on those who might move to another form of work. The reality is, these options are not available for everybody who have lost their jobs.
In regard to China and Asia, our politicians, business experts and academics, seem to be putting all our economic eggs in to the one basket. As a result, China and Asia are now amongst Australia's largest trading partners of the world. If there are problems within the Chinese economy or conflict between our Asian neighbours, the ramifications of this focus could well be less than pleasant.
With such an emphasis and effort focused on doing business in Asia, the other areas of the world which may be of equal value, are often being neglected.
In summary, these are all classical signs that the Australian community may not currently be in a good place, despite what many proponents would suggest.
Banks and other financial institutions - continue to show that when it comes to supporting small business, they remain a problem. Yes, they have advertising campaigns focused on small business as they seek to sell all their wonderfully expensive products. The fact is, they still appear reluctant to support micro and small business enterprises unless bricks and mortar security is provided.
As a consequence of banks’ strategies, alternative funding providers are entering the finance market with their range of products and easy access to finance. There are several issues which are of concern with these new finance providers and products. For instance, when we start to read and see such terms as “shadow banks and shadow bank loans” the potential for unforeseen negative factors to cause problems, cannot be overruled.
In addition, very few people seem to be asking such questions as: (i) who are behind these lenders, (ii) are they really cheaper than the banks, (iii) what are the real terms and conditions behind the loans, (iv) are sales strategies of giving out risky money to risky borrowers of value, etc. It would be interesting to know for example, how many of the funders would be deemed to be acceptable if proper due diligence exercises were completed?
Crowd funding seems to be another viable funding source. We have already seen possible negative issues starting to occur with this form of finance. governments seem to want to want to regulate the industry, which always increase costs. There are also issues with investor rights, possible conflicts with disgruntled investors, the businesses owners’ rights etc.
There are a lot of possible negative factors at stake in the current business environment when it comes to business funding. Desperate business owners or those seeking instant success and looking for finance, do not always explore all the factors of these alternative funding models properly.
Business payment options – another state of the art payment option seems to be developed almost on a daily basis these days.
No one seems to know how stable or viable many of these payment options may be over the long term. In addition, often we do not know the identity or ownership of these new payment facilities and whether they are sound business operators with the financial resources to manage these providers. The truth is, not all these new business enterprises will be as stable or offer the same transactional security of the major banks.
There are several additional issues which affect payment options these days, and not all are of a positive nature if reports in the media are to be believed.
The first of concern, is the rejection of genuine purchases by suppliers of payment services. These rejections are often an arbitrary reaction to their customers, claims of fraud, or non-deliver, or a lack of authorisation. When these claims are false, sellers are left with the costs associated with their lost products and services, plus the costs associated in recovering their funds.
Secondly, the cost of establishing and operating credit and debit card processing facilities can be expensive. Whilst many businesses seem willing to accept these costs, others will not. Surprisingly, many businesses seem to survive and grow, despite not having these facilities.
Thirdly, if there any disruptions to WI-FI or power facilities, then digital payment options, become inoperable. To further emphasise the problems of digital payment methodologies, the situation in Puerto Rico post Hurricane Maria, provides us with a sobering insight of these issues.
Fourthly, criminals use of hacking technology is on the increase. We also know they use technology better than most people. One of fraudsters latest strategies is to hack mobile phones, and why not? Unfortunately, many people store too much personal information, make payments, have access to travel information, plus record their life story in pictures, on their mobile phones.
Payment by and ownership of cryptocurrencies are amongst the leading discussion issues these days. Are they the way of the future, undoubtedly! Are today’s cryptocurrencies safe? A big question which is too hard to answer simply on this occasion.
The main issues with cryptocurrencies today include: (i) accessibility, (ii) trust, (iii) usability, (iv) avoidance, and (v) the focus by government and central banks. Of all these issues which should be of most concern to the holders of cryptocurrencies, is the focus by governments and central banks.
Governments and central banks hate secrecy, uncertainty, loss of control and missing out on revenue. Consequently, if governments believe they are losing control, they can easily declare non-authorised cryptocurrencies illegal as well. After all, if they can declare bank notes of a particular denomination as illegal tender almost overnight, they can do the same cryptocurrencies.
Can money be made out of cryptocurrencies? Yes, undoubtedly! Care is required however because the people which will make the most money are likely to be fraudsters, first buyers, early converts, or people with the discipline of a professional investor who specialise in risky investments and can afford to lose their investment.
Unfortunately, many of the later day converts will lose money by not understanding the negative factors associated with cryptocurrencies. These factors include negative government reactions, losing their holdings to a hacker, or losing their computers and mobile phones.
Other factors which will cause loss; (i) are people which got caught up in the hype and bought at the top end of the market, (ii) holding on too long to their holdings thinking cryptocurrencies are a normal investment product and (iv) being unable to sell for a profit, or if they need their money. After all, it should not yet be forgotten, cryptocurrencies are not currently universally accepted by everybody.
Of most concern are those governments which are endorsing cryptocurrencies, bitcoin in particular, plus recognised businesses which are succumbing to the cryptocurrency frenzy and creating products and services. If there are any major negative events, these organisations, effectively endorsing the authenticity of cryptocurrencies, will help magnify the extent of any losses.
The degree of loss will depend on the size of the investment and the person’s rationale for holding cryptocurrencies. For instance, if an individual has an inflated idea of their worth and spends in the belief that paper profits equate to real cash profits already in their bank account, there will be a problem. Many of those who hold a small stake in any cryptocurrency will probably survive OK. Others, where their asset worth is mainly tied up in cryptocurrencies will lose a lot.
Legislators and Regulators - continue to try and protect consumers and small business operators from the consequences of their lack of business acumen and financial disciplines. We know this from the stated purposes of their regulation and legislation. We also see this intent by a lack of equal rights for creditors and honest businesspeople.
The intentions behind many government initiatives are well meaning. However, governments are like most do-gooders in that respect. They all have the best of intentions however; their solutions often produce unintended and negative outcomes in the real world.
There are many examples that with every do-gooder or government initiative, the fraudsters and others with less honourable intentions, benefit at the expense of genuine business people and citizens.
The perfect example which we have seen this year has been the result of recent tobacco excise increases. Currently we see soft targets like shops which sell tobacco products being targeted by criminals. In addition, it is also no coincidence, the importation of illegal tobacco has escalated, whilst the payment of vital government taxes is being avoided.
The increase of excise was designed to put people off tobacco products. There is no doubt, some people have stopped smoking and therefore society is deemed to be better off. The question remains, was the increase of criminality and loss of government revenue factored into the scenario? I do not believe it was and therefore it could now be that society is worse off overall.
A contra view of government legislation taking a more realistic look at human behaviour, and what might be the good of society, is to look to the US. Currently in the US, selling marijuana is now legal in some states. Has the good of decriminalising a social drug and taking a profit away from criminals, plus the various states earning additional revenue, been a success? There appears to be little evidence either way at this time. It is an interesting story to say the least however.
The Privacy Act continues to be major negative issue for many businesspeople. Fraudster employees for instance, all too often get away with committing crimes without being reported in a meaningful manner because of the Act. As a result, these same people are employed by other unsuspecting businesses and then commit further crimes.
Despite promises to reduce government red tape and regulations continue to increase. As a result, genuine business people and organisations are continually penalised by another cost. Meanwhile, the less ethical and fraudsters get away selling their services and products cheaper because they simply ignore those costs imposed by governments.
Furthermore, when people and organisations make enquiries about issues with government services, too often, bureaucrats hide behind the Privacy Act from providing qualified information.
Business owners and managers – regretfully, continue to show all too often they do not learn from their past experiences and from the world around them. As evidence of these short-comings, we see them focusing on cheaper business inputs, reducing costs and the belief that technology is the answer to all their problems and the basis of their success.
As a result, many business owners and managers are failing to focus on actually doing business efficiency and profitably, which places their financial wellbeing and reputation at risk.
The short comings of many business operations, is seen in their failure to understand; people are the link between each business and each part of every business. When interacting with other businesses for example, you will often find that there are no advertised telephone contacts and/or names of employees you might need to speak about your issues.
If there is a telephone answering system, it is usually automated with an out-of-date contact menu list of options. I say out-of-date menu, because most menu options these days are time consuming to use and not customer friendly. In a time-poor world, expecting the people you need to do business with to spend so much time in such an unfriendly manner, shows a lack of business nous.
Visiting a business’s website is another issue. Inevitably, if there are no specific telephone contact details, you are likely to be directed to a “help desk”, or other contact facility. In such situations, rarely will any interaction between businesses be achieved quickly or efficiently.
Those business owners and managers which follow the herd relating to the use of technology and cheaper business inputs, often join their competitors in a race to the bottom and failure. When you do not focus on creating a positive business culture, quality operational processes, your business losses any point of difference with your competitors.
Further, as you follow your competitors into sameness and upset your customers, this provides the business disruptors with an opportunity to enter into your marketplace. There will always be room for business disruptors when the incumbents in any industry, fail to manage changes in their business environment and to respect their customer needs.
It would appear that many business people now fail to understand the art of business. With so many business people focusing on cheapness and technology, the fact there are customers willing to pay a fair price for quality and peace of mind is often lost. This is unfortunate because these customers are generally easier to deal with, forgiving of on an occasional problem, more loyal and therefore, more profitable.
Creditworthiness – is a priceless commodity too often forgotten today. Your creditworthiness is often a guarantee of better service, a less expensive purchasing regime and peace of mind.
There are often no financial measurements on the value of peace of mind in business. Never the less, there are potential financial benefits when things go bad, as they always do from time to time. Suppliers for example, knowing their customers operate under creditable and sound business practices gives them greater assurance of being paid within terms of trade.
The customer also benefits from sound business practices when they pay their suppliers on time. Suppliers are often more willing to help their customers through bad times if they have a good payment history.
Organisational and Personal Integrity – are becoming increasingly important to the younger generation, to your business stakeholders and to the general public. Your integrity is one of the foundation factors which helps you survive and grow your business interests.
As is the case for creditworthiness, reputation is another key to business survival, whatever your motives for the longevity of your current business. For instance, and it is legitimate business objective, a number of business entrepreneurs start a new business with the view of selling the businesses once it become profitable. Maintaining your long-term business objectives to be seen as a credible entrepreneur, is therefore essential.
On the other hand, if you are looking to build a long-term usiness, your individual and organisational integrity will be one of the core factors in the survival and growth of your business.
Another future factor of B2B commerce will be the changes in attitudes and requirements when extending credit. The focus of current government legislation, the beliefs of the “entitlement generation” and as the costs for creditors increase, cannot be ignored.
This means the laissez-faire fashion of extending B2B credit as it was in the past, will become increasingly and commercially unviable. In future, your creditor stakeholders will expect their customers to pay on time, be socially acceptable and legally compliant. With such expectations, there will be an increasing focus on your reputation, financial creditability and social acceptability.
Social Media – is growing ever more powerful in the success of your business for four main reasons.
The first is; there is nowhere to hide anymore. If you have a secret which may harm your reputation, you can only pray it never comes to light.
Secondly, when bad news does see the light of day, responding in the old-fashioned way of denial and silence will just not work We can already see that these old strategies rarely end positively. In future therefore, you would be wise to include a strategy which includes a prompt mea culpa and positive common-sense responses.
Thirdly, if you post something you shouldn't or act contrary to what is deemed to be acceptable behaviour, the public will soon let you and your friends know.
Fourthly, conviction by association is becoming increasingly a problem.
As social media continues to become more invasive, it would seem your future focus should include trying to act responsibly in order to protect your business and personal reputation at all times. You will make enough mistakes operating to the best of standards. To continue to make mistakes because of sloppy or unethical behaviour, will only hinder your business’s recovery from the negativity of mistakes even harder to overcome.
The ramifications of the events seen and reported in 2017, send a clear message to all business professional and business enterprises. Nothing stays the same. Furthermore, changing social and global issues, indicate what may have been acceptable in 2017 and prior, will not be acceptable in 2018.
I would suggest the key messages of 2017 were:
1 Businesspeople have continued their focus on quick and cheap fixes to their problems and less on understanding the factors required to create a profitable business.
2 Technology has continued to be used inappropriately to the point where it is starting to impact negatively on the long-term viability of many business enterprises.
3 Cybercrime and criminality continues unabated.
4 The amount of sovereign and household debt has continued to grow and impede local and global business development.
5 There are no secrets anymore due to impact of social media, disenfranchised employees and whistleblowers. In another development, we have seen Legislative requirements now seek to protect whistleblowers.
6 Government legislation and the costs of do-gooders will continue to impact negatively on creditor rights and other honest and genuine businesspeople.
7 Reputation and financial creditability have become even more important factors in the survival and growth for all businesses and professionals
2018 and Beyond
The genesis of what will happen in 2018 can be seen in what happened in 2017.
There is no doubt, further turbulence can be expected in 2018 with the ever increasing fragile economic and global factors being the norm.
Those that prosper will do so because they understand their business does not operate in a vacuum. Every business and person, lives and operates in both a local and global business community. What affects one community or country, affects another.
In such environments, it would seem the traditional practices of operating fairly, accepting the value of discipline, working with the best stakeholders and never stop trying or learning, provides the best factors for survival and success.
Word of the Month - The aim of Word of the Month is to share those many words used in Australian English which cause confusion. The confusion arises because there's often two spelling variations.
Businessman is listed in both the Australian Oxford and Macquarie dictionaries as a single word. Businessperson/business person isn’t listed in the Australian Oxford, but is listed in the Macquarie dictionary as one word.
If you perform a check on the internet using Google for sites ending in .au, you’ll find a ratio 1 to 5 people using business person or business people, when they really should be using businessperson and businesspeople. Surprisingly, there’s a ratio of 1 to 5 people spelling businessman as two words, when they shouldn’t.
If you’re using Microsoft products the problem is, if you type business person or businessperson, both are considered correct. The reason in the case of business person is because the spellchecker looks at each of these words individually, and since both business and person are themselves valid words, there’s no spelling mistake. Another gotcha is many people use online dictionary resources such as the online UK Oxford dictionary or Wiktionary. In many cases these are not suitable for Australia. The online UK Oxford dictionary lists the spelling as business person, which doesn’t correspond to the Australian spelling.
TIP: If you’re not sure whether the spelling of a word should contain a space or not, type the word without a space and the spellchecker will generally let you know if it is a spelling error or not.
For more information on the Preferred Australian English spelling visit www.Australian-Dictionary.com.au .
What has changed and why? Major reforms to Australia’s insolvency laws were recently passed making ipso facto clauses unenforceable in certain insolvency procedures. The reforms have been made so that contractors will still be able to receive benefits under the contract whilst in an insolvency administration, providing them with an opportunity to turn their business […]
A recent case we conducted on behalf of Gympie Regional Council has highlighted the effectiveness of enforcement action against an environmental offender, utilising an Environment Protection Order (EPO) combined with a prosecution for development offences. View the PDF to read more on this alert.
1. Introduction On 6 December 2017, the Senate released its report on proposals to ‘shake up’ rural lenders and the Insolvency Practitioners they appoint. Whilst it remains to be seen if anything will come about as a result of this report, the Banking Royal Commission has currently dominated everyone’s attention for the time being. In […]
In the recent case of Australian Competition and Consumer Commission v JJ Richards & Sons Pty Ltd1, Moshinsky J declared that a number of terms in JJ Richards’ standard form contracts with small business customers were unfair and void under the Australian Consumer Law. The proceeding was the first court action by the ACCC to enforce new laws […]
On 25 October 2016, the Federal Court of Australia (FCA) published 26 new practice notes as part of the National Court Framework reforms. Amongst these is the Intellectual Property Practice Note (IP-1) which establishes guidelines for all current and future Intellectual Property matters in the FCA. The practice note updates and expands the previous practice […]
Would you like to know more?
High turnover rates can have serious repercussions for your business, therefore it has become extremely important for employers to really listen and understand the wants and needs of their employees in order to ensure retention.
Here are three simple ways that you can adopt to reduce employee turnover.
It comes as no surprise that remuneration packages are the key drivers as to why employees decide to work for a company. Thus, it becomes imperative for employers to offer well-rounded salary packages which specifically target the needs of their workforce. This will have a positive effect on employees and as such ensure retention.
Opportunities for growth
Without avenues for employees to move up or grow within the company, employees will seldom stay. Increased employee development, mentoring programs and continual improvement will insure increased productivity and engage employees to become more skilled which as such reduces employee turnover.
Creating an environment for employees which is safe, enjoyable and stimulating also ensure a reduction in employee turnover. It is important for employees to be able to make jokes, be comfortable talking and making plans outside of work, as long as it doesn’t interfere with work. This ensures a healthy bond between colleagues and ensures overall employee retention.
We’re here to help! Contact Trace Personnel on 9218 5466 for all your recruiting needs!
Credit Matters provides access to blogs written by Kim Radok. Just go to www.creditmatters.com.au to read these and previous blogs.
Since our last newsletter, we presented the following blogs.
Since our last newsletter, the following posts have been added to the Invaluable Reading From Australia and Around The World section.
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.
"The past is a thief, it steals the present & the future from us"- time to let it go, clearly no way back for me!
Next year is shaping up to be an interesting year for all of us based on the issues exposed in 2017 and which will be ongoing into the new year. As always, there will be businesses and people looking forward with anticipation that their circumstances will improve. Others will be dreading what may happen, fully expecting the worst to happen. Meanwhile, others will try and meet any dangers head on; in the most proactive manner for their situation.
Sadly, there will be casualties along the road for those that continue to do business as they have always done without making the adjustments required to stay relevant for the modern world.
On the other hand, good profits will be made by those who understand how to operate in the new world order of 2018. More than ever, the fiscally responsible and the conservatively aggressive, will continue to survive and grow into the future.
Globally – there were signs of green shoots of growth in a small number of countries during 2017. We all hope these growth shoots will survive and grow into increasing business opportunities and confidence in 2018. Unfortunately, we still no evidence of growth or even relative business stability becoming the norm in many other countries.
Brexit continues to overshadow the current results and the immediate thinking relating to the state of the UK and the other European economies. It would seem it is too early to say whether the overall impact will be positive or negative. The real problem will come about if investments focused on business development and growth slows down in a material way. Any hubris in the development of business investment which goes on for too long, will have a negative impact.
The trade issues between Trump and China could cause problems if Chinese exports to the US are reduced through sanctions and other limiting initiative. Should such actions take place the negative implications for the global community, and China; are obvious. In addition, few people are comfortable with the economic figures coming out of China. This uncertainty causes further causes for self doubt and if there is one thing which causes negativity, it is uncertainty.
The US economy is said to be improving marginally. The accuracy of this scenario is also debatable with many people not appearing to be better off because of a decline in the spending power of real wages. On the other hand, not all people are sitting back waiting for conditions to improve. A number of people, particularly in the poorer areas of the US, are trying to reinvent themselves and start small businesses.
The number of countries involved in conflicts, basically insolvent or suffering internal political turmoil, doesn’t seem to get any better. In addition, we are all living under the shadow of North Korean.
It is difficult to see therefore, how these countries can contribute to world growth in a meaningful way until they resolve their particular issues and can start growing their economies again.
Governments in every country continue to live in the vain hope business can be conducted in a fairer manner and tax avoidance can be minimised. As a consequence, the growth in red tape, regulations and legislations grows unabated.
As history shows however, the main beneficiaries of all this new red tape and regulations, are the fraudsters, business incompetents or those of dubious character. It seems bureaucrats still don't understand that these people don't really care about government regulations and legislation. The main businesses and people which are penalised are the businesses and people which wish to operate ethically and fairly.
Creditor rights will also continue to be stripped away by government regulations and customer belief they are entitled to credit but not pay it back. When you add the increasing costs to defend their rights, creditors may reduce extending B2B credit to the very best customers which pay promptly. At the end of the day, if extending credit does not lead to more profitable sales, then what is the point of offering credit?
This is the great conundrum for governments and bureaucrats because if they continue to enact legislation and create regulations which enable debtors to avoid their responsibilities, then it is obvious that creditors will start cutting back on extending credit.
The other great blight on growth is of course, is the sheer size of outstanding global debt. Much of this debt remains hidden and out of sight. The most important aspect of this debt, which is rarely mentioned these days, is the “Great Race” between cashflow and profits verses debt.
There are many visible signs business is in a positive trend around the world today. The optimists are sure that 2018 will be year of improved optimism and business growth. Will this continued business growth be sufficient to keep debt payments in order and avoid debt write-offs?
Last year, we were reminded the last GFC occurred 10 years ago. We all know, the cycle of business downturns occurs roughly every 10 to 14 years. It would seem plausible therefore, to anticipate another economic downturn may not be far away. The problem with any event which causes a GFC, they often occur unannounced and without fanfare.
With the possibility of a GFC event occurring within the next few years, it would seem sensible to start getting your business house in order during 2018.
Australia - is not going as well as it might be as we enter 2018.
Despite the positive noise of new businesses being created in the Australia, there are major problems. Consumers are losing spending power to the increased costs of living, their current indebtedness. In addition, the falling incomes of investors and pensioners’ access to safe investments with a reasonable return are disappearing. As a consequence, these people are also losing their capacity to spend.
With the entry of Amazon whether the Australian economy will benefit or go backwards. We do know there will be winners and losers in the retail industry.
Regarding employment, there is a reduction in mainstream manufacturing and other businesses which employ large numbers of people. There are also large numbers of under employed, people without good dollar earning jobs or the semi-literate younger people who continue to lack employment opportunities.
In addition, there is the constant focus on reducing employee numbers with the indiscriminate use of technology and AI as the answer to most of their business issues. As consequence, many experienced and professional employees are retrenched indiscriminately.
In light of the above, it would seem the positive employment opportunities for employing people, do not look overly bright in 2018.
There is positive news to report from 2017 which should extend into 2018. The mining industry is enjoying small price rises, our international trading opportunities appear to be on the rise with China and Asia, the agricultural environment looks positive and micro manufacturing enterprises also appear to be doing well.
Reports also suggest a greater number of consumers are ahead of their housing loans, paying off other debt and in some cases, saving. Whether these people are in sufficient numbers with enough spare capital to offer any material relief to the economy in a major downturn, is unknown.
As this newsletter is being written, we note the housing market in Australia appears to be slowly cooling off in two largest Eastern States, and with rises in most other states of Australia. What impact this will have on the economy and consumers ability to continue to prop up the retail market is unknown at this time.
We already know that with Australian households the most indebted in the world, the retail industry can expect to struggle, irrespective of what happens in the housing market. The fact is, many consumers are running out of availability of credit and fast approaching bankruptcy.
With Amazon now in the Australian retail market, it will be interesting to see the impact on sales, the solvency of retail competitors, jobs nationally, and whether household debt continues to rise as consumers spend recklessly.
The China-US relationship with its political and economic relationships could cause further anxiety for the Australian community, with two questions to be answered.
What happens if the US-China relationship sours to the point of economic and verbal hostility?
What happens if the Chinese economy slows down in a material way?
As a confirmed “friend” to the US and China, Australia could well feel the effects of any dispute, and not in a good way.
The strength of the Australian economy is unknown and no one can predict the correct answer one way or another. As always, different people will offer suggestions based on their own circumstances. Realistically however, the negative factors seem to outweight the positive factors at this time and leave many people concerned.
Banks and other major financial institutions – will continue to send mixed messages about their willingness and ability to support micro and small businesses. The exception will be when there is bricks and mortar assets to offer as security.
As a result of bank practices, business owners are seeking other finance providers via brokers or other forms of finance such as crowdfunding. Unfortunately, this often means borrowers face a risk of increased costs, unconscionable business practices, and fraudsters.
In Australia over the last few years, we have seen the establishment of the The Australian Small Business and Family Enterprise Ombudsman. There are expectations that this organisation will continue to try and assist micro and small business operators in their interactions with the banks (and big business) to achieve more positive outcomes.
The future Royal Commission into the major banks will be an interesting event. However, whether there are any substantial benefits for bank customers, is already debatable.
Business payment options – are continually developed. Many new payment options are from unknown, and possibly unreliable or criminal parties. As a result, if a payment option is from an unreliable source, there is every likelihood of negative consequences for businesses and consumers alike.
It would seem wise therefore to investigate these different payment options with other parties which use the payment options under consideration. Failing to ask the right questions may result in an expensive payment option which is not right for your business or customers.
The call to eliminate cash continues. As always, such calls frighten thinking people as they understand the ramifications. Meanwhile the young, the lazy and those who do not think through all the issues professionally and in real terms, don't seem to care.
History proves eliminating cash does not hinder criminal activity. In addition, business people will always adapt and find different ways of doing business. The biggest losers in all these scenarios are, government revenue, consumers and the regular business community.
The indisputable fact is; if all your funds are in a bank or in another institution's account, you do not own your own money. The financial institution and the government owns your money. The day you find that out, is the day which is too late to do anything about it.
It would also be wise to note the access issues experienced in the immediate Puerto Rico post Hurricane Maria period. It was found that until power was restored, no digital payment facilities would work. Therefore, whenever there is a blackout, you will probably be unable to access your cash and bank accounts.
From a security perspective, if all your payment options and accounts are on a digital device, what happens when your digital device is stolen or hacked? If you have cash and are robbed, you lose the cash and your credit cards which are on your person. The loss of cash however is limited to what was in your pocket, and funds stolen via your credit card are generally replaced. When your digital device is stolen, you can lose all your money in the accounts which are linked via your digital device and to your cryptocurrency holdings.
Finally, having mentioned cryptocurrencies, beware of a major negative global event. If such an event occurs, the holders of cryptocurrencies are likely to panic or want their cash all at the same time. in such circumstances,there will probably be delays due to the load on servers at times of this volatility which cause further negative issues. In any event, the value of all holdings will collapse and severe financial trauma could be experienced all around the world.
Legislators and Regulators – will continue to try and protect consumers from their lack of fiscal and business discipline when obtaining finance. Unfortunately, the fraudsters and other criminals will be just provided with new strategies to rip off the regular business person and creditors.
Meanwhile these changes will create another expensive liability for those business organisations which prefer to operate within the law.
Business owners and managers – will continue to be hounded about using technology in their business because it saves costs. In an effort not to be seen as luddites, management will be swept up by the tide unbridled enthusiasm for all things technology.
As the reach of technology increases in business, the perceived value of human interactions will continue to be minimised. As a consequence, it will be found, not only did technology solutions not solve all problems, brand new problems never before found or conceived, will affect the business negatively.
As their employees are being dumbed down by the use of technology, so it appears the senior management professionals are also becoming less business astute. We will see this effect as major corporate businesses continue to implement technology systems, outsource their payables and receivables, and retrench their experienced and professional employees.
When this happens, I expect suppliers and their employees will becme increasingly frustrated and concerned about the lack of assistance by the customet to help them with their unpaid invoices.
Furthermore, based on my front line work experiences, a number of major corporate businesses have little idea of the extent of their financial and operational liabilities. Therefore, it will not be surprising to see a number of corporate businesses with some form of negative cashflow and balance sheet issues in 2018.
Creditworthiness – will be of increasing importance in business in 2018. It will be one of the key factors in (i) obtaining credit, (ii) being granted a credit extension if required, and (iii) even completing profitable business deals.
We also know credit risk providers continue to indicate bad debts and slow paying customers are on the increase in Australia and globally. Completing due diligence on your suppliers and customers would seem therefore, to be a common-sense necessity. Regretfully, we continue to note the evidence where proper due diligence will still be regularly ignored.
This situation is evident by a lack of improvement noticed in the actions of management in 2017 and is expected to continue in to 2018. At the end of the day, too many business management teams continue to see risk management as a cost, expenditure of which, impedes on the business’s ability to sell and market its product.
The evidence of the past however, shows, a positive risk management focus is an essential factor of doing profitable business.
Business today is hard enough. Those businesses which lack payment, ethical and operational creditability will always be a worry. It also means, these businesses are more difficult to deal with, and more likely to go out of business in tough economic times.
Organisational and Personal Integrity - will always be one of the key reasons your main stakeholders are willing to work with your business or provide the best terms of trade.
The loss of integrity is very costly. Last year we saw those organisations and people which were caught out and have had their reputations trashed. Many of those exposed, were once highly thought of by the rest of society, within their profession or by their industry group.
It is true, a number of these people and organisations will be able to shrug off being caught out. The rest, which are the great majority, will lose their reputation and/or a great deal of money and business.
Social Media - is as in the past, the elephant in the room. It can be a powerful friend or your worst nightmare. In fact, you should probably become more aware of how to deal with the consequences of being exposed negatively via social media, rather than worrying about marketing your business and products.
The year of 2018 is really just an extension of the new order of business which probably started, if we are honest, with the last GFC. Whether you like it or not, this is the new norm. Having mentioned the GFC, it is a sobering thought to realise the 10th anniversary of the GFC is now upon us.
We should also remember as we pass the 10th anniversary of the GFC, we are coming to the close of another business cycle. It is well known that most business cycles operate to a time frame of 10 to 14 years. Furthermore, not all the negative effects of the previous downturn have been washed through the system. We also know, much of the pre GFC debt has not gone away, and in fact, has never been higher.
When the next downward event actually will occur cannot be predicted. However, it would appear to be closer than many people would like. What will cause the debt? None of us can really say. What we do know is there will be no forewarning announcement or an announcement that it has commenced. In light of this situation, I respectively suggest, now is the time to start getting your business house in order.
Getting you house in order will take time, it is not something that happens overnight. Waiting for the next event to hit is too late. Therefore, now is the time to remember the following.
“Cash is King". Cash is not a lazy asset sitting in your bank account. Cash is just resting before helping you to pounce on the opportunities which always appear in turbulent times.
Therefore, be wary of the people who call cash lazy money. They either don’t know the power of cash or they want it.
Debt is a killer, especially in troubled times. Debt, if used wisely, can be a useful short-term survival or growth tool.
Unfortunately, what many people forget about debt are these three critical factors, (i) it has to be paid, (ii) it affects your ability to spend, and (iii) irrespective of whether you are in debt or your customer is in debt to your business, debt can kill your business.
If your business is in debt and your financier sniffs any trouble or needs the money, they will panic and demand to be repaid. If you cannot satisfy their requirements, you don’t have a business.
Likewise, if your customer owes your business a debt and becomes insolvent, there is no cash for your business.
It cannot happen to me – is a false statement and whatever couldn’t happen, usually happens anyway.
Cryptocurrencies - will have a part to play in the future. Currently there are many unknown negatives. One of these negatives is that too many people are holding these currencies who do not understand the rules of managing risk, taking an interest or knowing when to take a profit. Instead, these people have allowed the “greed” and “not wanting to miss out” factors to dominate their behaviour.
In 2018 therefore, it would seem wise to start protecting and growing your cash and clearing all possible debt owed and reduce the amount of debt owed to you.
At the end of the day, you are in business to make money. Business and making money are not without risk. To allow risk to dominate your decision making is not a good long-term business strategy. It is only by managing risk properly and taking a managed chance, which provides an opportunity to achieve the best results.
See you at the end of 2018 and all the best in between.
Our ‘Inconvenient Truths’ are facts-of-business that too many owners and managers either aren’t aware of, have forgotten, or lost sight of. Symptoms of overlooked truths are increasing expenses, depleting cash flow, diminishing profits and/or lack of winning new business opportunities.
Email us at firstname.lastname@example.org to discover the ‘Inconvenient Truths’ and how they can redirect your business back to success.
Christmas is a fraudsters' delight and the season fraud. People wanting to feel good and do the right thing by helping others in need, are tempted to respond to all sorts of scams.
Traditionally, Christmas is also when creditors which have been lax in following up on their outstanding invoices suddenly start contacting their customers. These late contacts are usually a waste of time because payments rarely arrive before Christmas.
The two problems associated with late calls are; (i) many debtors have already allocated their available funds to creditors who contacted them earlier, and (ii) cash is tight because the customer may not have been paid by their customers.
In addition, those businesses in financial difficulties with a limited future, try to stay in business long enough to give their employees one last paid Christmas and New Year break.
Christmas is a great time of the year to learn about how and how not to do business. It is the wise businessperson who takes notice of these lessons and uses the knowledge gained to improve their cashflow and business for the future.
If you do not understand this Business Inconvenient Truth, contact Kim
To view the full list of Business Inconvenient Truths, become a member at www.creditmatters.com.au. Membership is free.
29 November 2017
4 December 2017
6 December 2017
27 November 2017
A world first university-accredited course for financial intelligence analysts has just concluded in Melbourne following an intensive two weeks.
14 December 2017
A further 100 alleged contraventions against the Commonwealth Bank of Australia have been filed today by AUSTRAC, the Government’s financial intelligence and regulatory body, adding to the current civil penalty proceedings.
This report outlines the responses of Victoria Police employees following research into their understanding of corruption, perceptions of corruption and misconduct, attitudes to reporting corruption and misconduct, and attitudes towards preventing corruption.
This special report details the findings and recommendations of a major IBAC investigation, Operation Lansdowne, into allegations of serious corrupt conduct relating to South West Institute of TAFE and Bendigo Kangan Institute of TAFE, and third-party agreements those TAFEs had entered into with TayTell Pty Ltd.
The media releases this month refer to the matters which are covered by the above publications
14 December 2017
In December 2017, the ACCC released its final report for the new car retailing industry market study. The ACCC has prepared a factsheet for independent repairers.
14 December 2017
30 November 2017
11 December 2017
13 December 2017
15 December 2017
A free smartphone app developed by the Australian Securities and Investments Commission (ASIC) will help business owners undertake important checks before they enter into business transactions with other organisations.
For more information ASIC APP INFORMATION
Credit Matters is continuing to grow and provide marketing and knowledge about financial risks to the Australian business community.
Furthermore, 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 Click to see email
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 Click to see email for options.