Credit Matters Newsletters

We are pleased to introduce our new feature via the Credit Matters website; a business cycle clock and the philosophy behind introducing the clock.

We stress the purpose of the clock is to help you prepare your business in an orderly fashion before the next business downturn occurs. Waiting until the next down turn is in full swing will be too late to maximise any actions you may undertake

You will be able to access the clock via the Doomsday Clocks link on the main menu on the Home page at www.creditmatters.com.au

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 the following offerings: the RSM introduction to the CFE exam course, AICM training courses for Feb-March and Jan Reeves brochure if you need assistance with your outstanding invoices.

To extend B2B credit, or not to extend B2B credit, is this month's conundrum.

In good times, I was once advised, that you can be a little more generous with credit terms because customers have a lot more power to change suppliers.

In bad times, credit becomes scarcer because no one seems to have the money to pay their invoices in a timely manner. Businesses are often therefore far more protective of extending credit.

In my view, it makes no difference.

In good times or bad, crooks and bad business people don’t change. They are still crooks and bad business people.

Good business people do not change their behaviour in good or bad times. They work at protecting their reputation and largely pay in a timely manner or under set terms. It does not mean they cannot go broke.

The other conundrum factor to consider when extending credit is, without risk, there is no reward and if you never have a bad debt, you have not maximised your profitable opportunities.

Your conundrum therefore, is to decide how and when to extend B2B credit to minimise risk without losing profit potential.

If you review the history of the worst business downturns, you will note that the initial cause of every downturn was seemingly an isolated event. For example, the demise of a major business or bank, the collapse of debt housing market in the US or a stock market crash in one or more countries. The resultant business downturns however all flowed on from these apparently isolated events.

Today, every business is globally connected in some way to other businesses and what affects them, affects your business. This means, the days of an insular view of your business only and ignoring the rest of the world around you, are gone forever.

Recently therefore, it has been pleasing to speak with business people who have understood the realities of today’s interconnected business environment. They have reviewed and adapted their operating processes, products and services and strategies to suit the need of their business as the world is changing around their business.

These business strategies include:

1. exporters no longer supplying until paid;

2. the “hands on business person” who is letting go of doing everything or the DIY business person who realises others can do it better and more affordably than they can;

3. changing their range of products and services on offer;

4. looking to clear bank and other finance facilities whilst interest rates remain low;

5. employing the best quality people under mutually agreeable employment terms,

6. learning to manage risk better;

7. confronting slow paying and unprofitable customers to try and create a profitable trading arrangement; etc.

As I write this article, we have seen a reduction in the value of cryptocurrencies and the value of stock markets around the world.

Do not be fooled by simplistic statements that these events were necessary reductions in values to more realistic valuations. There have been casualties because of these events with loss of money and confidence. The full effect of any losses from these value reductions will not be felt for the next six to 12 months. It takes that long for the effects to wash through the business environment.

The extent of any negative outcomes will depend on what happens in the coming weeks. You would be naïve however, not to think that there will not be some negativity even if there is no further bad news. As a business owner, manager or professional, you simply cannot take your eye of the broader economy.

Business operates in cycles between good and bad times.

In the bad times, the business people which lose out are those which operate with little respect for what goes on around them and are therefore unprepared. The business people which win, are those which understand there are business cycles. These people saw the signs of potential trouble and adapted their business strategies to prepare for the expected troubled times ahead.