What's New At Credit Matters?

At last, we have our new newsletter format ready. We hope you like this new version.

By the way, do not forget, an audio version of each newsletter is available about a week after the email version.

There are always advertising opportunities for those businesses working in the B2B financial risk management area. We are always focused on helping people become better business people by providing information on business risks. If you are interested in advertising, please contact Kim on kim@creditmatters.com.au or via telephone for a no obligation discussion on possibilities.

This month we are featuring brochures from Investor Upgrade, Jan Reeves, CreditorWatch and FinTech Australia/ASBFEO/Bank Doctor, . If you would like to have your advertising brochure attached and mentioned in our newsletter, contact kim@creditmatters.com.au for a no obligation chat on possibilities.

Quote Of The Month

Western society would do well to remember the wisdom of Ayn Rand (author of Atlas Shrugged): ‘You can avoid reality, but you cannot avoid the consequences of avoiding reality.’

Monthly Business Observation

Avoidance of reality is all too often a large part of business failure, or failing to maximise your business opportunities.

Nowhere do we see this situation occur more often than when we review the credit management and accounts receivable functions. A good example is when credit managers complete their due diligence on a new customer and advise against taking on the potential customer.

The credit manager achieves no kudos for rejecting every customer where there are a few potential flaws which may lead to a loss. When the credit manager does see a situation fraught with danger and declines a customer's application for credit, they are often overruled by senior management and salespeople. The fact is, in these situations the credit manager has discovered a number of negative issues with few benefits for doing business on credit with that customer. Meanwhile, senior management and salespeople only see a sale and personal rewards.

Likewise when accounts receivable employees note a reduction in a customer's payments and points out there is also a decline in cooperation from the customer. Again, their observations and concerns can be marginalised or ignored by management and salespeople who are afraid they may offend a customer.

The introduction of the PPSA (Personal Properties Security Act) here in Australia was another perfect example. Senior management in a number of companies refused to accept the benefits of the new legislation. As a result, they would not spend the money to protect their assets, or thought the new legislation was just another passing fad. Unfortunately, many of these senior managers found out all too late that their businesses lost many thousands of dollars unnecessarily when their customers became insolvent.

The same situation occurs when a large-dollar valued customer is slow to pay. Instead of fronting the situation when the payments first slow down, or there are visible signs of ineffective business processes, management and sales actively avoid taking action. At times, they will even avoid picking up the telephone and talking with the customer about these issues. Aa a result, many dollars are lost by these avoidance actions. In the end, much more extra work has to be completed to try and restore the relationship or repair the cashflow deficiencies and expense overruns which could have been avoided if contact had been made.

Risk management and due diligence issues are other areas of the business which are also often overlooked because of management short-sightedness and avoidance of the potential damage. Too often, management is willing to take a risk rather than spend money. A good example is the discovery of fraud and the loss of many dollars because management avoided the possibility of fraud occurring.

At the end of day, avoidance practices in relation to managing risks within the business environment, is one the leading causes of why businesses fail or lose money.

This Month's Business Inconvenient Truth

When in business, you will always make some bad decisions. It is simply unavoidable and comes with the territory of owning or managing a business. The secret in business is to avoid making too many bad decisions and learning from those that are made before they prove fatal for your business. Some of the worst mistakes can easily be avoided simply by listening to experienced businesspeople and in applying a little common sense.

In order to avoid making as many other mistakes as possible, it is wise to take heed of the lessons of history. In addition, you can look to employ risk management professionals which understand the worst mistakes of other businesspeople.  A few simple bad decisions for example include, failing to complete due diligence on new customers, employing unqualified employees, failing to make contact for unpaid invoices, etc.

If you can avoid making bad decisions which are known to others and for which there are many examples, this goes a long way towards helping your business survive and grow.