Published by Credit Matters Pty Ltd.
Welcome to Credit Matters Newsletter for March 2014. Our monthly newsletter contains information about financial risk management issues, blogs, advice of new business listings and free advice from organisations such as ASIC.
You can always view past copies of our newsletters via our website at www.creditmatters.com.au
Our new website is up and running now. It has taken awhile but we feel confident that it shows the way forward and another indication that Credit Matters is here to stay.
Unfortunately, due to outside issues, the newsletter is a bit light on this month. However we hope it will be to full strength new month.
As always though, we will keep growing and developing Credit Matters as opportunities present themselves. So if you have any ideas or would like to see anything more specifically added, please let us know.
This Month's Business Conundrum looks at the concept of, late month or last day invoicing. What are the issues?
The positive reasons for raising invoices on the last day(s) of the month include:
(i) you will not be paid if you do not raise an invoice;
(ii) a certain number of these invoices will be paid by those customers who treat the invoice as a current month invoice;
(iii) it was for a genuine "that day" sale; and
(iv) it usually will be paid by those customers who honour the "... x number of days from date of invoice" terms and conditions.
The negative issues include:
(i) many of your customers will include these invoices as a following month purchase - which can make the calculation of your cashflow budget more difficult;
(ii) it can be a sign of poor sales disciplines and practices;
(iii) a sales person or management may be behind in their sales budget(s) may believe they can hide their lack of sales this month by bringing forward sales from the following month;
(iv) this practice of late month invoicing to make up budgets may upset the customer if you try to make them pay for these invoices a month earlier than expected;
(v) if sales are brought forward to hide a sales budget short fall, irrespective of the reason, the sales person and the business start each following month sales budgets behind by the dollar value of the sales brought forward;
(vi) some customers advise they will buy this month, but only if invoiced on the last day of the month, because they know this gives them another 30 days to pay.
Only a full review of your work practices and operational efficiencies will indicate whether the late month or last day invoicing is really worthwhile for your business.
Time and tide waits for no man - nor does time and the tide of business wait for your business just because you wish it was so.
Nowhere do we see the importance of this saying then when we look at your business expenses. For example, have you seen the bank stop charging interest on your business loans because it is Saturday, Sunday or a public holiday? Alternatively, will your employees give you a moratorium on the payment of their salaries just because you have funding difficulties?
I don't believe so!
Time also does not wait for you in the selling function. There is always a constant effort to reach the next sales budget or to respond to customer sales enquiries or when delivering goods and services.
However once the invoice has been raised and sent, this awareness of the time factor and its critical importance to the business is not so evident. The classic case which we see in many businesses, is the lack of focus on customer enquiries relating to raised invoices. We understand why salespeople and service professionals hate these enquiries because they believe it restricts their time to sell. The fact is; they are right. However these are critical enquiries, which if not quickly resolved, will cause time and financial penalties for your business.
After all, there is no quicker way to lose a customer which places an importance on quality assurance issues than to leave these customer enquiries unanswered.
There is also no quicker way to lose access to your cash. Losing access to your cash because an issue is not resolved is damaging enough. To lose additional access to an upset a customer who supplies an ultimatum, "We are not paying you until you fix your mistakes!" is even more damaging. Not only will you lose access to your cash until the problems are solved, you will also lose time to correct these problems.
We also know that a mistake made and uncorrected, means similar mistakes will occur time and time again in to the future. If you want to distract your salespeople from selling, the best way is to waste their time with resolving problems which should not have occurred in the first place.
We note time is also a critical element in dealing with due diligence issues, especially when it involves taking on board a new customer. Take the excited salesperson for instance who advises they have made an important sale to a new customer.
The customer advises however, delivery must be made immediately or they will not buy. The salesperson ever keen to make another sales, insists the sale must go through. Furthermore, the salesperson may well use the argument, "... we need to show the new customer how efficiently our business operates because that will be a winner for them to come on board!"
In this situation, the time element is of critical importance for two reasons.
Time is off importance in a genuine sales situation to a new prospective customer because their former supplier may have let them down. Now they are scrambling to source your product or service to complete an important sale. If you can supply on time you may gain a new customer.
However the time element may also be used against you as a non-payment strategy. It is not unusual for a customer with a doubtful payment and integrity reputation to use this time tactic to obtain your goods and services. They are hoping you are so keen for a new sale and customer; the sale will be approved without finding their real reputation. If you cannot quickly determine the true reputation of this new customer, you may waste a lot of time in the future seeking payment.
Unfortunately, as you waste time seeking your payment, time is slipping away from you which could be better spent.
How you resolve these and other issues is dependent on how you value the importance of the time factor within your business. Failing to understand this time factor is not good business strategy in the modern business environment.
Credit Matters provides access to blogs written by Kim Radok. Just go to www.creditmatters.com.au to read these and previous blogs.
Since our last newsletter, we presented the following blogs.
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.
"Time and tide waits for no man” – Author apparently unknown
THE LATEST ASIC UPDATES
ASIC reports on penalties for corporate wrongdoing
We have released a report reviewing penalties in Australia for corporate wrongdoing to assess whether they are proportionate and consistent. 14-055MR. 20 Mar
Two Melbourne companies fined for failing to lodge financial reports
Two Victorian public companies have been fined and convicted for failing to prepare and lodge financial reports to ASIC and to hold annual general meetings. 14-048MR. 17 Mar
Managed investment schemes - CAMAC discussion paper
The Corporations and Markets Advisory Committee (CAMAC) has released a discussion paper on managed
ASIC information sheet on audit quality
We have released information to help directors and audit committees develop robust standards as part of its commitment to improve audit quality. 14-047MR. 17 Marinvestment schemes. 6 March
ASIC LAUNCHES ONLINE HUB FOR SMALL BUSINESS
Small business owners and operators have a new online hub to help them better understand their legal obligations and the role of the Australian Securities and Investments Commission (ASIC).
The hub, which is available at www.asic.gov.au/small-business, features information on starting and closing a small business, legal requirements for small business operators, one minute guides on popular topics and access to ASIC’s new quarterly small business eNewsletter.
A free smartphone app developed by the Australian Securities and Investments Commission (ASIC) will help business owners undertake important checks before they enter into business transactions with other organisations.
For more information ASIC APP INFORMATION
Credit Matters is continuing to grow and provide marketing and knowledge about financial risks to the Australian business community.
Furthermore, 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 Click to see email
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 Click to see email for options.