Autumn is upon us. For me, the best season of the year. Beautiful days with cooler nights (& less bugs). A change from cricket, swimming and water skiing to rugby, soccer & netball.
Many of our clients seem to be in season-changing mode too. There are strong hints of optimism floating around, but they are readily tempered with memories of events past. Floods on crops and retreating share markets, combined with tighter finance requirements by banks weigh heavily on future plans. "Play for the win" is an adage we subscribe to. But it comes with the corollary "be prepared" - have a strategic plan for your business.
I have been lucky enough to help out with kids cricket over the summer. It's good to watch them play and enjoy the game. It's great to see the little fellas who go through most of the season, trying hard but struggle. And then...out of the blue they hit a 4! Oh, to see the excitement in their eyes.
Now for my political plug: get rid of the party that spends a lot, does little and makes business difficult. According to Treasury figures, our total State liabilities have blown out from $30 billion to over $120 billion in the last 15 years. What have we got to show for this? It can be a challenge to be positive and/or keep your political feelings to yourself!
In this edition, Alinna Butler looks at the benefits and issues associated with trade credit. Katrina Lloyd, our in-house social media queen, explains how social media can be used to help your business. The side article gives some background to the research & development (R&D) tax incentives.
Enjoy the read.
Joke for the election. This one might be considered harsh (unless you're Campbell Newman)
Anna Bligh and her driver were going to Goondiwindi and were passing a farm. As they went around a sharp bend, they came across a cow in the middle of the road. The driver did his best, but the ensuing crash was inevitable.
The driver was instructed to go up to the farmhouse to explain what had happened. The farmer came out with a beer, a cigar, and a hearty cheer.
Bligh saw this and asked her driver, "My God, what did you tell him?" The driver replied, "I told him that I'm Anna Bligh's driver and I just killed the cow."
Accelerating Cash Flow using Trade Credit
by Alinna Butler
Ph: 07 46710711
If cash is King, then credit must be a Prince! Credit can help a business to grow, but if it is poorly managed then it can send even the best business into insolvency.
One of the most common forms of credit is trade credit. Trade credit is an arrangement to buy or sell goods or services on account rather than for immediate cash payment. It can work both ways, that is you can purchase stock on credit, sell the stock to your clients and once you have the cash, you can pay the supplier for your own purchase. However, if you sell that stock to your clients on credit, then you must juggle the timing of the cash you receive with the cash that you pay to ensure that you aren’t left short.
This juggling act has caught out many businesses, large and small. Following-up on the collection of debts has spawned an industry in itself, including specialty software firms, debt consultancy firms, trade credit insurers, trade credit financiers, and of course debt collectors.
Trade credit may complicate things to some extent, but there’s a lot of upside as well. Extending credit may bring in clients you might not otherwise have. For any business that operates on an accrual basis (and that is the majority), you get to post a sale immediately which makes the profit look good.
Here are a few tips that may seem obvious, but are seldom applied.
Get your invoices to your clients quickly
The sooner a client receives their invoice the sooner they can pay.
Make your invoices simple and easy to understand
Find the best and clearest invoices you have received and copy them if necessary. Remember, invoices are documents that are made after the sale has happened; save any advertising for elsewhere
Make it easy for the client to pay
Technology has given us a multitude of options for exchanging cash. There is of course hard currency, direct deposits into bank accounts, cheques, BPay, credit cards, etc. These payment methods are often integrated into the ordering process; website, email, fax and telephone orders are commonplace.
Check the creditworthiness of your clients
If you are extending credit yourself, and not via a third party like VISA or Mastercard then it is up to you to know your client’s ability to pay their debts. This doesn’t have to be a long winded process, it comes down to knowing your client. Ask why they want the terms they have asked for, or how long they expect it will take for them to repay. General conversation may reveal whether they are struggling for cash or just want credit for the sake of convenience.
Don’t be scared to follow-up on debts
If you give a client 30-days to pay and 31 days have passed, get on the phone and find out why they haven’t paid. It may be as simple as the client not receiving the invoice, or sending the cheque to the wrong address. It may be more serious and the client will need to renegotiate payment terms with you. The point is, you just don’t know until you talk to them.
If you do extend credit from your business then be prepared for bad debts. Sometimes, whether intentional or not, a client may not pay what they owe. Preparing for bad debts involves more than just bookkeeping. It is important to know how much a bad debt will cost your business. For example, say that your business sells widgets on credit for $10,000 each and makes $1,000 profit on each widget. If one of those sales had to be written off as a bad debt, then your business must sell another nine widgets just to make enough profit to cover the cost of that one bad debt.
Credit can be a friend or it can be a foe. It is up to you which it will be. So check your invoices, your ordering and payments systems, your client's creditworthiness and follow-up on each of them. Insight can help you get things in order, contact us on 07 4671 0711 (Goondiwindi) or 07 4613 0311 (Toowoomba).
The Times They Are a-Changin'
by Katrina Lloyd
Ph: 07 46710711
The way we communicate with each other is changing...rapidly. This applies not only to how we communicate with each other, but also to the way government and business communicates with society. Social media is not just for chatting with your friends, it is also useful as a business platform. As more people adopt social media into their everyday lives, business must also adapt the way they interact with their clients.
Ever forgotten an appointment? Using SMS (text messaging) helps your clients feel as though you are genuinely interested in them and that you are a well organised business. It shows that you are considering their schedules by reminding them of their appointments.
Another way businesses can go above and beyond the ordinary methods is to use the most popular social platform, Facebook.
Facebook, once set up appropriately can serve as a central RSVP point for events and functions. Events may be set-up to send invitations to clients, rather than sending invitations through the mail in order to receive quick responses and feedback from the prospective invitees. This allows for the business to gather numbers for catering purposes. Some events for which Facebook events work well are dinners to express the businesses gratitude to their client’s ongoing support, informal meet-and-greet parties, and promotional campaigns. Facebook events are no good if no-one sees them.
Clients and prospects may be motivated to respond to events and refer their friends with a little incentive. An example of an incentive may be a competition where the one who refers the most friends to the business’s page will receive a prize such as a gift certificate to the business or discounts on their next purchase.
Not only is Facebook useful for advertising events, it is a useful tool for recruitment.
Facebook offers search facilities (for a modest fee) so that particular advertising will be seen by particular demographics. For a business that needs a lot of people for short-term employment, Facebook may be cheaper and more direct than a newspaper advertisement. This is most relevant to the younger generation who tend to turn to the internet before the conventional media.
With a similar delivery style, a businesses website offers many advantages. A business can give a prospect or an existing client an overview of the company, its employees, its mission and vision, a summary of services, and most importantly a contact directory. Allowing your clients to interact directly with you via your website can smooth the business relationship. For example, www.insightcpa.com has a page dedicated to clients where they may upload their cashbook files straight to the accountant. This is one way that Insight goes above and beyond to help reduce the time it takes for us to send our clients their final product.
More personal than a Facebook page, email is an essential tool for a modern business. Email is a cost and time effective way to send files, documents and other messages to an individual client. Email is cheaper than Australia Post, and it saves having your USB stick crushed in the back of a mail truck.
SMS, Facebook, the Web and email are just a few examples of what communication platforms are available to attract new clients and to strengthen the relationships with existing clients. Businesses cannot move forward if they do not adapt to the modern ways we communicate.