Courier Mail

July 11, 2008 02:22pm

NEARLY half of Australian businesses have been affected by the fallout from the global crunch but the worst could still around the corner, a credit insurance company says.

Atradius Australia and New Zealand managing director David Huey said payment defaults and insurance claims reported to his firm had doubled since last year.

“Our enquiry rate for new business has also doubled, in part due to the high-profile insolvencies like Beechwood Homes, which has meant that industry segments like construction have been looking at insuring themselves against non payment,” Mr Huey said.

Companies in United States had the highest response in a 14-country survey.

About 68 per cent of US firms said they had been affected by the credit crunch, followed by Mexico, at 60 per cent.

Other nations where companies said the credit crisis had a high impact were Italy with 58 per cent, the UK, 46 per cent, Spain, 44 per cent and Australia/New Zealand, 43 per cent.

The Atradius credit crisis survey analysed comments from 2,500 respondents about their company’s experiences and the likely effect of tougher financial conditions.

“Factors that may be contributing to these reports include reliance on the building and construction or the financial services industry for GDP growth, a relatively large percentage of GDP tied to trade with the United States or heavy use of receivable securitisation,” Mr Huey said.

Restrictive credit and increased default payments would dampen growth and raise business defaults globally for the rest of 2008 and into 2009, the survey said.

Some 71 per cent of companies said an increase in payment defaults was their biggest concern, 67 per cent worried about restrictions in sales growth and 65 per cent feared increased capital costs.

Mr Huey said it was essential for a healthy company to be aware of how to protect themselves from risk exposure.

“The credit crisis is highlighting the importance of protecting your cashflow,” he said.

“The reality is that without good cashflow your business will be in jeopardy.” 

 Like bad hair, how long can you afford to let things go? If your fringe stopped you from seeing properly & you nearly had an accident as a result of it getting in the way or distracting you, would do something about it & get it cut!

In terms of your cash flow is it starting to go grey and thinning? Just like my hair!? Perhaps it’s time for a new finance hairstyle. One that will help with the working environment! Bottom line -improve the amount of cash you have, to do what you need to do, when it’s required.

Hairstyles can go out of fashion, but for now perhaps the number 4 is required with a few highlights. Keeping it simple, but works for the foreseeable future until it grows a little and then it can be developed into another style.

Some instances where you may be able to adopt the Number 4 could be:

            Self employed – who have taken on a ‘Lo Doc home loan’ in the last few years. No doubt the debt had been capped to a % of the value of a residential property. That was great before because you didn’t have to provide financial statements and alike. The down side is you are likely to be carrying a lot of ancillary debt on top of this. Like credit cards, car & equipment loans etc etc. All of which drain your cash flow resources.

There are lenders that can role several debts into one. In a lot of instances there will be a requirement for financial statements to be provided however there are others that will consider the situation without profit & loss statements. The end result being that perhaps hundreds or even thousands of $$ can be saved on a monthly basis.

            The structure of your debt may need to be looked at, are there commercial assets that could be structured over longer periods?

            What sort of debtors do you have? Is there an opportunity to have those funds quicker?

            Can you gain discounts for quick payment?

All these sorts of questions need to be asked of you when looking in the financial mirror. Could you need a new finance hairstyle?

What have you got to loose in asking the question? Ask Finance Know how!

Courier Mail April 07, 2008 12:52pm

SMALL businesses that deal mainly with householders are now finding it harder to be paid because of rising interest rates.

Plumbers, electricians, accountants, architects, builders, mechanics and even schools have to use tough tactics if they want to extract from householders what is owed to them, said debt collection agency Prushka.

“An air of nervousness has afflicted the business-to-homeowner sector as we have witnessed a marked increase in organisations taking a much tougher, almost relentless attitude to recovering overdue debts,” Prushka CEO Roger Mendelson said.

“The trend has become quite noticeable. Prushka is receiving accounts from this sector at a much earlier stage in the cycle than previously, with businesses less open to negotiate terms directly with their customers.”

“Now for the first time we have tangible signs that the last interest rate rise has started to bite.”

He said the signs came from the company’s existing clients who have businesses that deal with householders.

“Our best test of the changing environment is in tracking our existing clients,” said Mr Mendelson.

“Their debts are fresher, which means that they are under pressure for the money that is owed to them.

“The feedback is that it is becoming harder to collect the money that’s owed.

“But this isn’t happening with business-to-business clients,” he said.

“The household budget is now under more pressure, while business cash flows are still reasonably strong.”

He believes, however, business-to-business arrangements will be affected soon, that there will be a flow-on effect when one business’s cash flow is affected because of the non-payment of bills by householders.

He said small businesses used to be lenient with their payment terms but, as things have tightened up, this has changing.

“They are now tightening up on the credit they allow,” Mr Mendelson said.

“They are not concerned if they upset a client. Instead they are putting pressure on them.

One option for business owners was to offer an instalment payment plan but, if that failed, the next step was to take legal action, he explained.

Demanding the money upfront before the job began was not an option for small businesses, said Mr Mendelson.

“This would be difficult to do in a competitive market.

“All they can do is take more care in allowing the credit they used to offer.”

A big concern of small businesses was dealing with householders in the mortgage belts because, as well as having difficulty meeting their obligations, many are also losing the equity they have in their homes.

“By the time the banks sell them up, it’s too late for businesses. There’s nothing left. Two years ago if the bank sold up, there would still be some money left to pay outstanding bills.”

Mr Mendelson said he believed things would tighten up more before they got better.

How to ensure you are paid

- Make sure you have only quality credit

- Do more credit checks on new clients

- Be more concerned about who you deal with

- Act more quickly to retrieve debt

By Patricia Karvelas

June 11, 2008 12:00am

SMALL business owners could be given the option of being taxed as individuals instead of as companies to cut compliance costs and red tape under a proposal the Rudd Government is considering.

Small Business Minister Craig Emerson said the Government would consider new measures designed to spare small businesses the tax paperwork burdens faced by big companies, The Australian reported.

The Institute of Chartered Accountants and Deloitte have proposed that small businesses go through the same tax process as individuals, and have their tax rate based on how much they earn.

“The Government has decided to refer the flow-through proposal to the review of Australia’s Future Tax System headed by Treasury secretary Ken Henry,” Dr Emerson said.

“The flow-through regime is proposed as an option for small companies and unit trusts with five or fewer shareholders wanting to reduce their compliance costs associated with understanding and accounting for different types of financial flows from the entity to its owners.

“I know the institute believes this regime will reduce the tax compliance burden associated with incorporation and unit trusts while maintaining the non-tax benefits of company and trust structures.”

The Government has also decided to refer the BAS Easy option for simplifying GST book-keeping for small business to the Board of Taxation chaired by Dick Warburton as part of the board’s review of the legal framework for the GST.

Dr Emerson said compliance with GST requirements remained the greatest administrative burden for small business.

“This is yet another example of the Government getting out of the way and restoring incentive by pulling away unnecessary red tape that is choking small businesses,” he said.

“Responsible tax reform proposals must maintain the integrity of the system and meet theprinciples of economic efficiency”.

Council of Small Business of Australia chairman Bob Stanton last night warned that the Government must listen to small business or face its wrath, as the Howard government did.

“The now Opposition have seen first hand what can happen to a sitting government when they ignore the might of small business,” he said in a speech at the opening dinner of The National Small Business Summit.

“Fran Bailey, the immediate past minister for small business, must be wondering how many small business owners in her electorate did not vote for her. And why didn’t they vote for the sitting minister for small business? Because the government failed to listen to them.

Because the government failed to recognise they were individuals wanting the respect they so richly deserve.”

Ms Bailey went from having a 6.5 per cent margin in McEwen before last November’s election to retaining it by just 12 votes after a recount.

Mr Stanton called on Kevin Rudd to set a new level of government support for small business and include the Small Business Minister in cabinet.

“He can then have his Government undertake a substantive study into laws from other countries that protect the rights of their small business communities,” he said. “He can have a decent discussion on the future of small business.”

It is that time of year again! Tax Time! Are you one of the ones that absolutely dread this time of year! Have you already had thoughts around “If I get a tax bill, I don’t know where I am going to get the money to pay for it?”

So what’s the best way to handle the situation?

Firstly, see your accountant and get an idea of what the $$ maybe. Secondly, if you are not an owner of residential property, your best option will be to contact the ATO and seek out repayment options. However if you are an owner of residential property, there are lenders that will enable you to refinance this debt into your mortgage if you have suitable equity.

Best to be on the front foot however! Contact Howard at Finance Know How about your Tax Debt and discuss your options today! Howard has specialised in the area of refinancing taxation debt for nearly 10 years!

Tax Debt can be overcome! Finance Know How - We Know How!