Credit Matters Newsletters

After three years, the revamped Credit Matters is coming to the close of what we have called our Foundation period.

Currently we have nearly 80 businesses and organisations listed.

Please note, if you were offered a special deal to join Credit Matters and list in our Better Business Club, this offer may no longer apply after the 1st of July 2014.

If you are interested in taking up the previous offer, or have been contemplating joining the Better Business Club, now would be a good time to contact Kim to discuss options.

In the new financial year we will no longer display our Associate Blogs feature. Due to changing circumstances, we have decided to change the way we provide interesting blogs and news articles. It would appear the previous methodology was no longer appropriate for a number of reasons.

Friends in business are the focus of this month's conundrum.

A business connection is made during the ordinary course of business and in time, the relationship may develop in to friendship. Alternatively, pre-existing friends (and family) may also ask us to do business with them.

The problem in either case is; "How do we do business together and stay friends?"

Let us be honest. Friends in business is a problem because, as they treat you badly, they simply rationalise to themselves (and to you)  "Well it is just business!"

Furthermore, you will probably find over time, some of your best friends will become your worst non-paying, and even fraudulent, business acquaintances.

In my view, you must deal with friends as they deal with you. If they are honest, be honest in return. If they are less than honest, you must deal with them as you would with any other business customer.

If in doubt, and you wish to maintain the friendship, deal only in cash upfront basis and with a great discount on the normal price.

Genuine friends will understand the reasons for such trading terms and continue to do business with you, or not. Either way, you should keep the relationship if they are genuine friends. The rest of your so called friends - well you don't need them!

This month's quote and proverb are interrelated and equally valid together in today's modern business world. I would go further and suggest the themes behind the quote and proverb are continually being ignored by many business owners and professionals.

Too often we read and see stories of business people losing their cash, assets and business reputations. In almost all of these situations, the losses occurred through a lack of discipline, inappropriate spending behaviour, a refusal to learn from the mistakes of others and a lack of respect towards normal business risk issues.

What is most regrettable, was on reflection, many of these losses were preventable.

Let us review a number of situations where appropriate business disciplines are ignored (the stitch in time) and require additional work to try and repair the situation (closing the door after the horse has bolted).

Let us start with due diligence towards employing the right people, selecting the best suppliers and customers.

Not all people which you could employ bring the same attributes to your business. A number of these people might have excellent reputations, the right skill sets and experiences. Other people with less desirable attributes which you may be tempted to employ only bring problems. Working out the difference is essential.

Suppliers can help you create a profitable business, or they can damage your business potential with the quality of their products and services. Suppliers can also embroil your business in unwanted publicity because of where they source their products or in the quality of their contractors.

Customers which pay within agreed terms and work with your business through occasional problems are an asset to your business. Other customers cause problems, additional expenses, a loss of focus and profits. Finally, there is a third group of customers - fraudsters, which come in many guises, which just blatantly steal your goods and services.

Management philosophy and spending allocations can also be part of the problem. To be overly optimistic and "positive" in your business endeavours may result in a lack of focus on normal business risks. To ignore the potential for problems and to expect all customers to pay on time, and to ignore the advice from risk management professionals is naive at best, foolish at worst.

Too many times as a result, we see the following examples of where the "stitch in time - bolting the door after the horse has bolted" theme, results in unnecessary losses.

(i)  The trusted salesperson or administration employee commits fraud and potentially ruins the business.

(ii) Where the benefits of the PPSA and a properly crafted Trading Credit Application and /or legally prepared Terms Of Trade are ignored. Consequently we see assets are lost and there is no ability to take legal action which may have recovered the missing cash or assets.

(iii) The purchase manager has secret side deals with suppliers who continually fail to deliver the correct product and service.

(iv) Senior managers enter cartel type arrangements with competitors which bring short-term gains and long-term pain through financial penalties and reputational loss.

(v) A lack of a positive organisational culture encourages laziness, where a person's professionalism is ignored or belittled and where disenfranchised employees can find ways to earn extra dollars at the expense of their employer.

Many of these aforementioned examples could have been avoided if business owners and their managers paid due respect to the normal financial risk. These issues are just a part of the experiences you will encounter when operating any form of business.

Understanding the benefits of having a financial risk management program is akin to a maintenance program in the manufacturing world. It is well known that if you don't maintain your production machinery properly, costs can add up far beyond the cost of any maintenance program.

The same situation exists in other sectors of the business organisation. The failure to understand the core themes of "stitch in time - bolting the door after the horse has bolted" exposes your business to unnecessary losses on a daily basis. In some cases, these losses become terminal.