What's New At Credit Matters?

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.

Quote Of The Month

”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.."
 

Monthly Business Observation

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.

This Month's Business Inconvenient Truth

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.