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Cash flow crisis

SHOULD anyone be surprised that business is delaying paying bills, extending the time it has taken to meet creditors’ demands by 10 per cent in two years?

Perhaps it is just coincidence that such practices have come increasingly the vogue as GST has bitten into business cash flows.

Paying your debts in a just-in-time fashion can be good cash management and, let’s face it, what easier way is there to effectively get a free loan from someone you do business with?

Smart consumers use credit cards in this fashion, using the full interest free period before paying off the full amount.

Bean counters in accounts departments are simply applying the same tactics. If the creditor is prepared to wear it, so be it.

Of course, business is not as simple as that, and both sides of the equation need to be careful of just how much this practice can blow out of control.

From the creditor’s point of view, they need to weigh up just how much they need the business from someone who is prepared to use them like a bank without paying the fees involved.

There is a big danger that the longer the terms of trade, the greater risk of an account defaulting. If bills get paid later and later, it becomes more and more difficult to see the warning signs.

Circumstances can change rapidly. Two months ago the economic picture was very different to what it is now.

And, after all, it is your money.

From the debtor’s point of view, it is possible to ask whether it really is good business practice?

Does it make sense to keep your suppliers hanging on? Your delays may even send them over the edge. In tough times perhaps you can play hard ball but suppliers are just another stakeholder. You might need them later as much as they need you now.

It is a shame to see business relationships stretched to cover the ever-increasing demands of the tax man.

Getting the message out

GOOD to see we can go out on the high seas, perform a successful operation and no-one is bleating about the cost.

When the Australian Fisheries Service pursued and caught a pirate fishing vessel creaming off one of our lucrative fisheries everyone can see the economic rationale.

But when the navy goes and rescues a lone yachtsman everyone complains about how much it impacts on the taxpayers hip pocket.

I reckon both actions send the same message. We are in command of our oceans, and it is in our strategic interest to let the world know that. Rescuing yachtsman is simply good practice and good PR.

Bringing in an illegal fishing vessel puts all that practice to use.

Australia has a reputation for being a breadbasket for Asia but the reality is, this continent is largely desert and only our small population ensures we have plenty of goods to export.

Similarly, our seas are sparsely stocked compared with those of the Northern Hemisphere before their fishing techniques destroyed many a critical spawning ground. The Grand Banks off Canada is one example where once teeming fishing spots have been left without the critical mass of fish required to perpetuate commercial exploitation.

Writers like Tim Flannery have warned of this for years, and Australian fishing authorities have become experts at sustainable use of resources.

If we are to benefit from this expertise we have to keep sending the message out to fishing nations that they can’t come here and destroy our assets like they have done to their own.

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