July 2018
This month's newsletter is earlier than usual due to a number of circumstances which will also impact on our ability to offer our newsletter in August. Therefore, our next newsletter will be in September.
This month we amended the title of a Doomsday Clock to the CM Business Clock. We believe the title more aptly describes our intent of acting positively rather than waiting passively for the next recession. Once the recession is with us, it is usually too late to protect your assets and business. In addition, as part of our strategy to keep business people informed, we have also introduced another new feature, the CM Land Cycle Clock.
This month you will find attached copies of the following brochures about the GCS Community 2018 Events Flyer, (creditor)watch on Dealing with Debtors, a brief cyber card brochure, and Peter Nash's "What is Bugging You" brochure to encourage you to become better acquainted with your business stakeholders.
”Remember the golden rule! Whoever has the gold makes the rules!’
From The Wizard of Id – a classic daily newspaper comic strip created by Brant Parker and Johnny Hart in 1964
An earlier version
Jean-Jacques #Rousseau 1764: "The rich holds the law in his purse.." or "Le riche tient la loi dans sa bourse.."
The unfortunate truth is, big business often acts arrogantly when dealing with its smaller and medium sized suppliers. Just as this month’s quote articulates, they can get away with this arrogance because they have the “gold” to deny smaller businesses their rights.
For instance, trading contracts may not be fully understood due to the complex nature of the trading relationship contract. Furthermore, management teams in smaller businesses may not have the skill sets to negotiate a mutually agreeable trading relationship.
It is always wise therefore when considering going into business with a large corporate business, to understand the critical aspects of the relationship. These aspects are often not properly understood by the smaller business's management team. This situation is especially true when the smaller business is approached by a large corporate business. Too often the management teams of smaller businesses become blindsided by the thought of the many dollars they anticipate earning. They rarely see the real dollar-cost benefit of the relationship may be nothing like they anticipated.
The critical aspects of doing business with big business are based on two key considerations.
The first is, a large corporate business these days more closely resembles a government bureaucracy than a business.
Secondly, a proper due diligence exercise on the corporate enterprise should be completed to understand the implications relating to the proposed trading relationship.
Once you understand these considerations the list of factors you need to consider, include the following.
1 Can you identify the senior management team of the business in order to complete due diligence on their business and personal reputation?
2 What is the corporate business’s true payment and ethical reputation compared to their espoused version on their website?
Points one and two is all about knowing your customer. In other words, is what you perceive about the business backed up in reality.
Once you understand the nature and behaviour of the people running the corporate business, it is wise to seek answers to the following questions.
3 What does their true operating and trading terms mean for your business?
4 When do they pay and do they pay all invoices in a timely fashion, or pay larger dollar valued invoices slower?
5 What are their dispute resolution processes?
6 Are there telephone contacts (not just email contacts) and real people to talk to when required?
7 Are they supplier-friendly?
8 Will you need to employ a data entry specialist to input your sales and invoice data?
As a side note, you may need to train a specialist data entry employee for every large corporate customer depending on their billing systems.
9 If you send an email to their supplier support centre, do they reply with an answer “… we will get back to you in 24,48 or “x” number of days, or is there an immediate reply?
10 Is your account opened and ready to pay your authorised invoices before you supply any goods or services?
Failure to ensure your account is operational before you supply goods and services, may mean a protracted wait before receiving the first payment.
It always wise to understand the issues you will face if a corporate business comes calling seeking to do business. Understanding the real factors of the trading relationship can be the difference between making a profit or loss.
After all, once you have commenced supply, they have your gold, and a whole lot more of their own to fight any action you may initiate to protect your business’s rights.
Do you go broke quickly or slowly?
Your conundrum is as Kenny Rogers sang in the Gambler,
“If you’re gonna play the game, boy
You gotta learn to play it right
You’ve got to know when to hold ‘em
Know when to fold em”
Nobody wants you to go broke, but there are times if you run a business, that you have to be realistic about your business's prospects of survival.
When times are tough, it is tempting to accept every sales order. Unfortunately, if you drop your sales and credit disciplines and sell to the wrong customer, you may go broke very quickly.
When you become insolvent, you are likely to lose your financial assets, creditworthiness, business and personal confidence. Consequently, starting a new business or moving forward positively with your life becomes very difficult.
Going broke slowly by maintaining sales and credit disciplines may mean you can avoid the worst repercussions. For instance, there may be a time where you realise your business is not viable and decide close the business in an orderly manner. If your timing is right, you may even able to sell parts or the whole business.
If you sell, you may have little money left, and yes, your pride might be dented. On the other hand, you may be able to move forward more positively in your life than if you had become completely insolvent and lost everything.
It is not the dollars of your raised invoices which is Important, it is the dollar profit gained from the invoices raised which is important.
It seems all too often there is an emphasis on raising invoices as though the more invoices raised, the more money you will make. There is some truth behind this emphasis because if you don’t raise enough authorised invoices you will go out of business.
The problem is to raise authorised invoices which get paid in a timely manner and are profitable. If this does not occur, any profits can be easily lost in chasing up unpaid invoices, or in writing off those invoices which are uncollectable.
It is essential therefore to monitor the number of invoices raised which are not paid within terms, as these invoices cost money. Once these invoices are identified, you need to find the causes as to why, and eliminate them from the business. After all, there is no point raising invoices which do not lead to a profit.
At the end of the day it is not the number of invoices raised that is important, it is the number of invoices which provide a profit.
Is the spelling pre recession, prerecession or pre-recession?
If you check the Macquarie and Australian Oxford dictionaries you’ll not find an entry for the spelling pre recession, prerecession or pre-recession. What are you to do if the dictionaries don’t help you?
Often words evolve over time. To-morrow became tomorrow. First, in general, if the word is not in an Australian dictionary, that would indicate the usage has not evolved enough to become a single word. If the hyphenated version doesn’t appear in the dictionary that doesn’t rule it out, but you still don’t know. Don’t fall for the trap of using dictionaries for other countries online as versions of English for different countries may evolve differently over time.
Is the usage of the two words an adjective, or adverb and perhaps should be hyphenated?
Sometimes if in doubt, perhaps the best approach, may be to rewrite the sentence.
21 June 2018
Power and PDP Group (Power) sued Paul Schembri and a company owned by his brother (Bettergrow) for patent infringement in the Supreme Court of Queensland in respect of a machine used to produce compost.
Liability was denied and a cross claim was made for revocation of the patent.
By Neil Sadler
26 June 2018
Artificial Intelligence – the Copyright Act cannot keep up
The Copyright Act 1968 (Cth) (Act) is facing a challenge keeping up with the increasing prevalence and capabilities of Artificial Intelligence (AI). Recently, Google released their new AI powered digital camera called Google Clips.1 This device deviates from the traditional method of taking photos. It contains a built-in AI that autonomously snaps pictures of the richest moments of life (or otherwise whatever Google Clips considers important). AI has become widely accepted in a variety of industries and has become essential for companies in attempting to attain a competitive edge over their competitors.
By cannot keep up
Ben Coogan and Sashank Krishnamoorthy
Psychological Health within a workplace: How to achieve it.
As we all know, corporate culture is one of the key issues in a workplace and it starts with you. Equality, diversity and communication are amongst the main components that companies need to be wary of when building their company structure.
Whilst companies can provide major benefits like flex days, a built in gym, pool tables, what companies have to remember is that it is down to the employees to build a sense of belonging and motivated corporate culture. Therefore, providing constructive feedback and creating a channel between management and their employees is a major key to a pleasant corporate culture.
By fostering an environment of psychological safety, it will ensure an increase in team morale and performance. We spend most of our time at work, working in teams so if we cannot foster this psychological safety, employees will not feel comfortable to be open and honest.
Ultimately comfort and trust are key indicators of a long lasting corporate culture. If your employees experience discomfort, a lack of communication and animosity between team members, it will lead to an increase in staff turnover and a lack of company morale.
We’re here to help! Call Trace Personnel on 9218 5466 for all your recruitment needs.
We’re here to help! Contact Trace Personnel on 9218 5466 for all your recruiting needs!
theBankDoctor offers free banking and finance advice to help small business owners get the best business banking set-up.
02 July 2018
Code of Lending Practice launched by fintech SME lenders
Fintech lenders Capify, GetCapital, Moula, OnDeck, Prospa and Spotcap have collaborated with the Australian Finance Industry Association, the Australian Small Business and Family Enterprise Ombudsman, theBankDoctor.org and FinTech Australia to produce a Code that will improve transparency and disclosure in this important alternative source of debt funding for Australian SMEs.
The Code will inform SMEs what they can expect when they engage with lender signatories and it will also include a pricing comparison tool which will show borrowers the true total cost of borrowing.
Updates courtesy of www.asic.gov.au
22 June 2018
18-182MR ASIC enhances its enforcement toolkit beyond Australia’s borders
ASIC has become one of the first signatories to the IOSCO Enhanced Multilateral Memorandum of Understanding Concerning Consultation and Cooperation and the Exchange of Information (EMMoU), an enhanced standard for cross-border enforcement cooperation.
By signing the EMMoU, ASIC has highlighted its power to assist foreign regulators by compelling physical attendance for testimony, obtaining and sharing audit work papers, communications and other information relating to the audit and review of financial statements, and provide guidance on freezing of assets. The EMMoU also provides the framework for ASIC to request reciprocal assistance of this nature from fellow EMMoU signatories.
27 June 2018
Mr Alexandre Alexander, the former executive chairman of Kimberley Diamonds Ltd (Kimberley Diamonds), was on 25 June 2018 found not guilty on two counts related to issuing false or misleading information to the market following a jury trial in the District Court of NSW. On 26 June 2018 the jury was not able to reach a unanimous decision in relation to two other charges of misleading the market.
28 June 2018
18-191MR Sydney woman jailed for dishonesty offences and dealing with proceeds of crime
Sydney woman Sarah Jane Busteed has been sentenced in the District Court of New South Wales to two years’ imprisonment following an ASIC investigation into her dealings with money belonging to clients. Ms Busteed was sentenced on 22 June 2018, after earlier pleading guilty to three charges and admitting her guilt in relation to a fourth offence. She must serve a non-parole period of 15 months.
29 June 2018
ASIC has disqualified Mr Craig Hall Walton of East Melbourne, Victoria, from managing companies for four years as a result of his involvement in two failed companies.
Mr Walton was disqualified after liquidators were appointed to Walton Construction Pty Ltd ACN 060 900 218 and Walton Construction (QLD) Pty Ltd ACN 100 833 225.
ASIC found that Mr Walton had:
•improperly used his corporate position to gain an advantage for himself;
•failed to prevent the companies from trading whilst potentially insolvent;
•failed to pay taxes; and
•failed to exercise his duties as a director with due care and diligence.
04 July 2018
ASIC's review into credit card lending in Australia has found that 18.5% of consumers are struggling with credit card debt. ASIC reviewed 21.4 million credit card accounts open between July 2012 and June 2017.
ASIC's report released today (REP 580) finds that while credit cards offer flexibility, they can present a debt trap for more than one in six consumers. In June 2017 there were almost 550,000 people in arrears, an additional 930,000 with persistent debt and an additional 435,000 people repeatedly repaying small amounts.
29 June 2018
Fundraising and takeover documents can now be lodged by email
On 29 June 2018, ASIC approved an instrument, ASIC Corporations (Email Lodgement Service) Instrument) to facilitate the electronic lodgement of documents that have historically been provided to the Corporations team in hard copy.
To take advantage of the instrument, lodging parties must comply with the terms of the ASIC Email Lodgement Service User Agreement for Corporations (ELS User Agreement).
26 June 2018
AUSTRAC brings industry together with RegTechs to support innovation
AUSTRAC is hosting a RegTech Showcase today in Sydney, bringing industry together with RegTech companies, to explore ways to harness regulatory technology to improve the ability of the private sector to combat money laundering, terrorism financing and serious financial crime, while reducing costs for businesses.
The event will be attended by about 120 representatives from across the financial and gaming sectors, industry groups and anti-money laundering (AML) service providers. It will feature presentations from a number of RegTech providers on innovative approaches to embedding AML and counter-terrorism financing (AML/CTF) processes into business practices.
04 July 2018
Joint Operation Astatine spurs further arrests in Europe
This is a joint media release between the Australian Federal Police, NSW Police, Australian Border Force, Australian Criminal Intelligence Commission, NSW Crime Commission and AUSTRAC.
A joint-agency investigation - responsible for dismantling an alleged global crime syndicate last year - has led to further arrests by international partners, after Dutch authorities charged two men believed to be involved in supplying drugs to the syndicate.
Operation Astatine began in early 2016, to investigate the alleged activities of a NSW-based drug-trafficking and tobacco-smuggling network.
04 July 2018
Proposed amendments to Chapter 38 of the AML/CTF Rules
The proposed amendment removes the requirement for distribution of the proceeds of the sale of security to occur in the same financial year that they are received by the ancillary fund. These amendments ensure that the requirements under the AML/CTF Rules are consistent with the Public Ancillary Fund Guidelines issued under the Taxation Administration Act 1953.
A public consultation period is open from 3 July 2018 to 31 July 2018.
Access the draft amendments on the Draft AML/CTF Rules page.
04 July 2018
Draft amendments to Chapters 4 and 15 of the AML/CTF Rules
These amendments exempt reporting entities from certain identification requirements in Chapter 4 and Chapter 15 of the AML/CTF Rules, for customers that are ‘custodians’. The definition of ‘custodian’ in new paragraph 4.4.19(1) limits the exemption to corporate custodians, rather than individuals who provide custodial or depository services.
The second public consultation period for these amendments is open from 3 July 2018 to 31 July 2018.
Access the draft amendments on the Draft AML/CTF Rules page.
04 July 2018
IBAC Insights Issue 16, July 2018
Issue 16 of our IBAC Insights e-newsletter features a message from our Commissioner, a special feature on corruption resistant organisational cultures by EPA Victoria Chair Cheryl Batagol, an audit of complaints handled by Victoria Police Professional Standards Command, investigations and prosecutions updates, corruption prevention resources, and more.
Read the IBAC Insights Issue 16 summary
20 July 2018
Country of origin food labels sign
This sign can be printed and displayed by businesses to help inform their customers about the Country of Origin Food Labelling Information Standard 2016.
26 June 2018
Country of origin food labelling surveillance to commence
After 1 July, Australian consumers will have much greater certainty about the origins of the food they buy, due to the introduction of mandatory Country of Origin food labelling. The ACCC will conduct market surveillance checks on 10,000 food products to ensure businesses are correctly displaying the new labels.
All businesses–including manufacturers, processors and importers that offer food for retail sale in Australia–will need to comply with the Country of Origin Food Labelling Information Standard, which specifies how claims can be made about the origin of food products.
The new requirements will apply to most food offered for retail sale in Australia, including food sold in stores or markets, online or from a vending machine. It does however exclude food sold in restaurants, cafes, take-away shops or schools.
26 June 2018
Action against Mitolo for alleged unfair contract terms
The ACCC has instituted proceedings against Mitolo Group Pty Ltd and a related entity (together, Mitolo) alleging that several terms in Mitolo’s standard form contracts with potato farmers are unfair contract terms, and that Mitolo has breached the Horticulture Code in its dealings with farmers.
“This is the first court action the ACCC has taken under the newly introduced Horticulture Code and our first unfair contract terms action in the agriculture industry,” ACCC Deputy Chair Mick Keogh said.
“The issues in this case go to the heart of concerns about unfairness in the agriculture sector that led to the establishment of the ACCC’s dedicated Agriculture Unit, which is investigating agricultural supply chains and engaging with the sector.”
02 July 2018
Warrnambool Cheese and Butter amends contract terms
Warrnambool Cheese and Butter Factory Company Holdings Limited (WCB) has altered terms in its milk supply agreements and milk supply handbook following engagement with the ACCC regarding potentially unfair contract terms.
WCB’s contracts with farmers contained terms that allowed it to unilaterally vary the milk price and other milk supply terms, with the farmer unable to terminate the milk supply agreement early without incurring a financial penalty.
WCB’s contracts also placed restrictions on farmers selling their farm and required farmers to indemnify WCB for loss which could be avoided or mitigated by WCB.
12 July 2018
ACCC institutes proceedings against Cryosite for alleged cartel conduct
The ACCC has instituted proceedings in the Federal Court against Cryosite Limited for alleged cartel conduct in relation to its entry into an asset sale agreement with Cell Care Australia Pty Ltd (Cell Care).
In June 2017 Cryosite signed an agreement to sell its assets in its cord blood and tissue banking business to Cell Care. On signing the agreement, Cell Care made an upfront, non-refundable payment of $500,000 to Cryosite.
Prior to their entry into the asset sale agreement, Cryosite and Cell Care were the only private suppliers of cord blood and tissue banking services in Australia. The stem cells in cord blood and tissue, which are collected at the birth of a child and then stored, can be used in the treatment of certain blood disorders.
The asset sale agreement required Cryosite to refer all customer enquiries to Cell Care after the agreement was signed but before the acquisition was completed.
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 info@creditmatters.com.au.
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