Over the last few months we have been reviewing our website content. You will note a number of changes already and more are to come over the next few months.
More than ever, we are aiming to make Credit Matters one of your premier sources of essential risk management and news. If you believe the world is getting even more risky in 2020 which may affect your business objectives negatively, visit www.creditmatters.com.au.
In addition, we have kept our brochures to a minimum this month with an update by The Bank Doctor on the issues which the major banks face in the coming years, and an interesting observation by leading marketing strategist Barry Urquhart.
Talking about marketing, if you need to reach the people who need your services the most, contact Kim at email@example.com and let us work out a very affordable deal.
Credit Matters will continue to adapt to the changing circumstances we anticipate will occur in 2020. I implore you to consider the same as there is nothing stable or static about doing business today.
It appears 2020 could be damaging for many in the business community due to the changing nature of business fundamentals with an anticipated down turn in global and domestic trading conditions. You will need to therefore concentrate ever more strongly on the basics of your business. This means following up promptly on all unpaid invoices owed, reducing liabilities, increasing your cash holdings and protecting your reputation. In addition, try to take advantage of the lessons learnt in previous years to make you a better business owner, manager or professional.
It is my hope that we all reach the end of 2020 with our businesses and careers intact and 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 and may 2020 be a safe and happy one.
Is the spelling financer or financier?
Whilst editing a document recently I noticed the spelling financer and financier in the same paragraph. I couldn’t help think is this a difference in usage, or perhaps a spelling issue.
Checking the Macquarie and Australian Oxford dictionaries there is no mention of financer, but financier is included in both dictionaries. Checking online dictionaries including the Merriam Webster (American), Oxford (UK) and Collins, none include financer. The only online resource to include financer was Wiktionary, but as Wiktionary isn’t a reliable authoritative resource, you need to take care putting any credence on whether or not it is a correct spelling.
Microsoft Word’s spellchecker marks both financer and financier as correctly spelled words, which is one reason people may inadvertently use financer and think they’ve used the correct spelling, when they really should have used the word financier.
A check of Google for Australian sites (sites ending in .au) produces 872,600 results for financier and 42,700 for financer.
As there is no reference in any of the authoritative references to the spelling financer, this would tend to lead us to accept financer is a spelling error and financier is the correct spelling.
A great deal has happened in the business community during 2019. The evidence suggests at best, there is lack of confidence in both the commercial and consumer environments and the effects of a global downturn are starting to be felt. Whether a full-blown recession will be evident globally or restricted to specific regions is still the big unknown.
As a result, 2020 is likely to be a challenging year for all of us, irrespective of where we live or work. As is the case in all downturns and recessions, it is not all gloom and doom and there will be good business opportunities. As a business owner, manager, professional, or investor, it is one of your primary responsibilities to locate these good business opportunities and avoid being too negative when opportunities occur, as they always do in difficult times.
THE GLOBAL ENVIRONMENT
The situation is different in all countries and regions of the world as we come to the end of 2019. To gain a better understanding of what is happening, we have introduced a new feature “Country Economic Updates” at Credit Matters. You will be able to gain a very basic idea of the economic climate around the world by visiting www.creditmatters.com.au
Global trade looks to be declining and under pressure at the moment. Irrespective of what happens elsewhere in the world, the effects of this decline may still affect many of those in business, irrespective of their location.
The main issues of 2019 have been the continued trade war between the US and China, Brexit, the movement of business out of China, the loss of business opportunities and the continued social issues in Europe and many South American countries. The current situation in Hong Kong is very negative as visitor numbers decline, students are leaving and corporate organisations are evaluating whether to stay or relocate elsewhere in world.
As we observe the global trade situation, it would appear globalisation has not lived up to the benefits promised by its proponents. It is fair to say, there have been many losers and few winners. Countries are now increasing tariffs and other economic strategies to protect their home-grown industries and to maintain employment of their citizens.
Does this mean globalisation is a failure? I don’t think so long term. What may happen when times become a bit more stable, is the development of a better globalisation model.
If there is anything which has been learnt from globalisation, it is that customers are not always right. Another lesson we are learning is that customers just want cheaper prices. When this is their focus, customers and by default their suppliers, show no loyalty.
Of course, we cannot get past the effects of negative interest rates which have resulted in massive debts worldwide. No country has been spared the effect of these policies which many commentators and ordinary citizens have suggested have been an absolute failure. The changes in human behaviour and the resultant ramifications because of these policies are unknown and do not bode well for the future. It is also noted that some countries are now working towards zero interest rates.
There have also been issues which are becoming more important for governments and big business to address which are being promoted heavily by the general business community and from a change of social expectations. These issues include the payment of sovereign taxes, climate change, increased regulation by legislators, the behaviour of directors and with the general populace advocating that big business must operate more ethically.
How do we gauge Australia’s economic situation at the moment? There are many people which suggest Australia is doing okay, all things considered. Furthermore, we must also not mention the “D” or “R” words because if we do so often enough, these economic conditions will probably become true.
The problem with such thinking is that when a downturn or recession has become evident, there is much horror and angst to why it happened so suddenly. It would also appear people forget how downturns and recessions occur and become arrogant about their debt and spending problems as a result. It is not surprising therefore that we currently see in Australia:
1 massive amounts of known and unknown debt;
2 those people which keep on acquiring more debt;
3 overblown asset valuations;
4 a lack of safe investments; and
5 businesses becoming insolvent and people losing their jobs.
Many businesses are avoiding taking on additional employees and would rather operate short-staffed, because of the hideous costs involved when employing people these days. As a consequence, with the increasing use of technology, fewer people are employed. Another factor which doesn’t make much sense is the levelling of payroll tax by state governments. After all, when you want as many people in employment as possible why are you taxing their employers?
With all these factors currently evident, the RBA has dropped interest rates twice this year in the hope people will borrow even more in the vain hope it will help business. The result has been less than impressive. The decrease in the interest rates has led to increased, and probably unsustainable valuations in the housing and share markets. In addition, and unfortunately for the RBA, it has been found that many people are not spending but rather paying off debt or saving.
Meanwhile the loss of safe investments for conservative investors, and people who seek to protect their future is a worry. The loss of income from investments is forcing these investors to rethink their strategies and many are slowing down on their spending.
When investors and pensioners seek higher returns to survive, they are often exposed to the fraudsters and wheeler and dealers with their glib sales pitches. What usually eventuates is that investors are either gullible or so desperate for a better return, they forget common sense. The result is predictable, a further loss of income and the ability to buy and/or the creation of another pensioner.
In view of the above factors, Australia my not be in a good place if the “D” or “R” environment becomes a reality.
BANKING AND FINANCE
The banks were part of the problem in helping consumers and businesses create the historical debt they have now. Furthermore, these same customers are prevented from buying as they pay off their debts. Banks have always been willing to provide easy credit in the good times, often to customers which should never have been given that credit.
We know on reviewing the files of bankrupt people and insolvent companies, that many had additional debts they had hidden away and hoped nobody would find.
Another problem the banks have all over the world is with legislators and regulators which are now focused on responsible lending (but not responsible borrowing). All the new regulations are further slowing the banks capacity to bring in new business and grow their profits.
Of course, another in-house issue for all the banks is that like other businesses, they have become fixated on the use of technology and employ fewer people. As a result, they are still closing branches against the historical evidence that as they close branches, their competition benefits. In addition, their customers now feeling betrayed and seeing that loyalty is no longer valued, seek other service providers.
Fundamentally, and it doesn’t matter which business we are talking about, customers leave because their needs are not met. Banking and finance companies are now finding that their customers are not prepared to be dictated to by ideologists which live and work in head office.
Over the years we have seen a great number of disrupters entering the void left by the major banks. I cannot think of any other industry which has so alienated their customer base and allowed the competition to thrive and steal their customers.
Unfortunately, the outcome has not always been beneficial for customers. Customers were often fooled into thinking that the new arrivals were offering the same terms of business as the traditional banks. The truth is that the customer is obtaining a cheaper upfront product. When circumstances cause them to miss payments however, they find that they are paying a very heavy price.
Furthermore, the secondary banking markets often had looser lending criteria and so even more customers were provided with unsuitable loans. The default rate for these banks is likely to be even higher than the regular banks as times become more difficult.
Then you have the shadow banks which operate in every country, the payday lender styled financiers, and finally, the criminal element which were, and always will be, the lender of last resort to the desperate. As much of this market is unregulated, there will be no public records of the amount of debt held by these financiers. As times get even more difficult, we expect these debts and the effect of those debts on the general community to be even more damaging.
Payment Options - General
The number of payment options these days is mind boggling. We also seem to see another payment platform launched so regularly, that we wonder how anybody keeps up what works and what doesn’t. With all these options, how does a business organisation work out what is best for their customer base? Unfortunately for the business oweners and managers, whatever decision is made, there will always be those customers which complain.
In many cases, these payment options are expensive to run and maintain. Again, who is going to pay for these options, the business or the customer? When we analyse the costs of payment options, we can start to see that they are not cheap. Interestingly, recently the Governor of Australia’s Reserve Bank said he doesn’t see the demise of cash any time soon in Australia because of the cost of these payment options.
Finally, let us not forget the importance of cash as a payment medium. The business which does not have the option of accepting cash payments is flirting with lost sales. This is particularly evident for those selling perishable goods and consumer services. It only takes a power outage or technical hitch/service denial, such as the one at a major bank and a second one at retailer recently, or an unforeseen disaster, to reinforce the importance of cash as a payment option. We note that people in Sweden are starting to rethink the cashless society as is the Governor of Australia’s Reserve Bank.
It is evident that if the current business downturn or recession gets worse, there will be fewer people with credit or debit card facilities because of their financial situation. These people will soon work out, that cash is the cheaper option for them, because there are no charges or fees eating into their reduced cash resources. In the US for example, we have seen some States have already legislated that all businesses must be able to accept cash to ensure poor are not discriminated against.
My disclaimer: Currently I do not have any cryptocurrencies and perhaps will never. I have been told a story however that makes some sense on why people may want to own and use cryptocurrencies. As a result, I have thought seriously about owning cryptocurrencies in the future.
Cryptocurrencies are the great elephant in the room for regulators, banks and their financial competitors, and even for dictators. The main reason these parties are concerned is that they cannot control the actions of people who own and use cryptocurrencies.
Regulators still do not know how to deal effectively with cryptocurrencies. Meanwhile banks and finance providers will have issues in keeping their clients from using them. When the banks offer no interest but still charge a fee for minding people’s money, you can see why investors are already dabbling in cryptocurrencies as an investment option. If cryptocurrencies are ever “deemed” a safe money transferring and investment option by the majority of the general public, banks are going to have a major issue attracting customers.
Irrespective of why Bitcoin and the other currencies were developed, there are many positive advantages to having and using cryptocurrencies if used legally. I cannot emphasise strongly enough this legal aspect. Provided you are not involved in criminal or other illegal behaviour, there may be a time and place where cryptocurrencies become a better payment option than more traditional methods.
LEGISLATION and REGULATIONS
The increasing use of legislation and regulations by authorities, is of concern to the business community.
The amount of red tape and social obligations being forced upon the business community has reached a stage where it is slowly strangling the effectiveness and the ability of all legitimate businesses to operate. Worse, much of it is illegible, badly written and conflicting. For instance, just recently an experienced lawyer said in respect to one piece of legislation, if you do one thing under one part of the Act to conform, you run the risk of deeming to have contravened another part of the Act.
When such complexity exists, you can understand why some businesses are closed down and the owners walk away. Other business practitioners ignore most of the legislation and regulations in the hope they will not get caught or if they do, not hurt too badly financially.
It also seems that legislation and regulations are written to protect the perpetrators of fraud and other negative acts, rather than to offer all parties an equal playing field of protection. As a result, the innocent or those who acted in good faith, are made to look like they are guilty rather than the victims they actually are in truth.
The outcome currently of the above factors is another reason there is much negativity against employing people or extending credit in traditional business formats.
BUSINESS OWNERS and TECHNOLOGY
Business owners are slowly being seduced into a concept that technology will soon solve all their business options. It will be cheaper than employing people and all their suppliers and customer seem to want to do business digitally. The problem with such thinking is everything!
Technology only provides one of set of tools for business. Therefore, just like when you employ the wrong people, if you use the wrong technology products and services, your business can be in trouble.
Irrespective of whether you are a supplier or a customer, there is nothing more frustrating and expensive than when dealing with your stakeholder which relies only on technology interfacing options. When the technology is poorly designed, purchased with price in mind rather than functionality, then the issues really start.
One of the fascinating aspects of doing business is to study the outcomes of dealing with another business which operates mainly with technology-based communication options. It seems the last thing that happens in practice is operational efficiency for either business.
Furthermore, often it seems as though you are dealing with a “ghost organisation” because you can never seem to be able to connect with a real person. In desperation you send an email via any means possible and if you are lucky, receive one back. On receipt of the email however, you usually find there is no name of a person or a telephone number with the email signature.
To conclude for the time being, here are a few quick observations about the inappropriate use of business of technology.
1 Technology tools do not own money, people do.
2 Tecnology doesn't buy anything, people do.
3 When people cannot communicate properly with your business, then they will probably not buy.
4 Fraudsters love technology as the success of one of their business models depends on poor technology systems and disenfranchised employees.
5 When a supplier cannot communicate to get paid, they stop supply.
6 There are so many technology products out there, many cannot communicate properly together without people to sort out the problems.
7 When the power stops, technology stops, people don’t.
Until business owners accept that the best businesses operate with the best technology and the best people, many of them will continue to struggle and perhaps not survive as a result. Never has this truth been more evident than in business downturns and recessions.
BUSINESS and PERSONAL INTEGRITY and SOCIAL MEDIA
Business and personal reputation has always been an important part of surviving and success over the long term. We are seeing how important your reputation is in relation to many aspects of our business and social lives. There is no place to hide anymore and secrets are soon exposed, especially if another party was involved. If you do something wrong you will be extremely lucky if it isn’t exposed sooner or later.
The most powerful sources of exposure of wrong doings these days are the general media, government sponsored corruption inquiries, social media, and individuals who act as whistleblowers or with vindictive agendas. Protecting your reputation therefore, has never been so difficult.
During periods of economic and business downturns or recessions, protecting your integrity and reputation is even more important. It does not help if there are adverse perceptions and ratings against your business or professional name at the commencement of such negative periods.
Managing the repairs to your reputation needs to start as early as possible and be genuine. Being able to say sorry for the past, or offering a mea culpa without being under duress, is really important. It is a bit late to start making apologies as creditors, insolvency administrators or the authorities are on your doorstep demanding retribution.
A great deal has happened in the world during 2019. The business community has not been immune. The evidence also suggests a global downturn is starting to be felt by many in business, along with whole regions of the global community. Whether that will lead to a full-blown recession is not yet evident. In all likelihood the negative effects of any recession will vary between different regions of the world. Unfortunately, there are a number of countries already effectively in recession. We hope the situations in these countries will not get any worse.
The year 2020 is likely to be a challenging year for all of us, irrespective of where live or work. No one will be exempt except the super-rich which may have the resources to ride out the recession. The exception may be if the governments of the world take unified action to deprive these people of their riches “for the good of their country.”
As is the case in all downturns and recessions, there will be areas of positive business outcomes amongst other areas which will be less successful. As a business owner, manager, professional, or investor, it is one of your primary responsibilities to locate these good business opportunities. The best chances of survival and growth are to prepare your business and finances in case the worst happens and still be able to take up any positive opportunities. History shows us that cash in the bank, little or no debt either owned or owed, and creating a good reputation, should all be part of your preparations.
Credit Matters is a financial risk management resource centre for the Australian business community. If you are in business, Credit Matters is your ideal source of financial risk management solutions.
Credit Matters is continuing to grow and provide marketing and knowledge about financial risks to the Australia business community.
Futhermore, we invite marketing and knowledge ideas from our readers and contributors on how we can assist our respective firms grow. If you have any ideas, please contact me at firstname.lastname@example.org.
If you are interested in finding new ways to reach your marketplace, why not try Credit Matters. Our prices for advertising are very reasonable and advertising packages are on offer to make any cost, even more affordable. So if you are interested in reaching your customers at the right price, please contact Kim at email@example.com for options.