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Hudson & Young Blog

The cheque is not in the mail

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The Bibby Barometer Small Business Survey has been released which shows that eighty-three per cent of small and medium sized enterprises (SMEs) experienced cash flow issues in the past year.

As a result, in the last year 23% of SMEs wrote off a bad debt, 32% had customers negotiate to pay in monthly instalments, and 21% had difficulty meeting tax payments on time. 

Gary Green, Director, Bibby Financial Services Australia, said, “It is good news that, in response to their gloomy business expectations, 84% of the surveyed SME business owners put strategies in place to help manage their cash flow. Thirty nine per cent spent more time chasing invoices, and 21% delayed payments to their own suppliers or refused to take on more work until invoices were paid (21%). Not surprisingly, 17% of SMEs outsourced their debt collections to a lawyer or debt collection company. 

“Some businesses put in place advance warning systems, including conducting cash flow forecasts (27%) or periodic cash flow health checks with their accountants or advisers (19%). We would like to see all SMEs using forecasts or cash flow checks to warn of danger ahead,” said Mr Green. 

“Only 17% of companies are doing credit checks on new customers, which is a concern. Credit checks are an inexpensive way of reducing the chance of bad debts,” he said. 

When an SME discovers a gap in its projected cash flow, the range of potential solutions can be somewhat limited in these difficult times. Twenty seven per cent say they would get an overdraft, or increase their existing overdraft (21%), but 27% would have to resort to dipping into their personal finances or access deposits (20%). 

Remember that H&Y can help with a number of aspects of customer debtor relations including your credit application forms, your invoice wording, credit checks and debt collection.

How to strike business export gold

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There are a number of resources available to business wanting to break into the export market. H&Y consultants have assisted a number of clients. Claire Heaney outlines the basics:

YOUR bags are packed and you're ready to go. You've got a world-beating product and you've decided to go global, start exporting and make some big bucks.

But sure-fire success is far from guaranteed.

Those who have struck export gold have only achieved success after doing plenty of homework, which includes tapping into the plethora of government and private services available to make the journey a success.


Austrade, the Federal Government's export arm, runs comprehensive programs to assist would-be exporters. Its website is a great place to start, offering online tools so you can learn what is required.

Austrade experts also can help navigate cultural issues and assist with business contacts. They can arrange translators or advice on etiquette and other nuances that could derail your push.

Austrade's international readiness indicator is a good guide for businesses thinking of dipping their toe into the export market.


Austrade's Export Market Development Grants are aimed at encouraging small and medium businesses to spread their wings. It reimburses up to 50 per cent of eligible export promotion expenses above $10,000, provided that the total expenses are at least $20,000.

Trade missions and shows

Some of these are led by governments, and others by independent companies such as Fairlab Exhibition Management.

There also are several joint chambers of commerce with countries such as China that are specifically designed to further business relationships.


The internet has been a game-changer for many businesses, and it has also influenced the way people export.

The benefits of search engine optimisation, good keywords and a sound e-commerce mentality means the world is your oyster.


Filer says that was able to sign up distributors through its website.

She says web optimisation resulted in plenty of hits and before the pair knew it, their baby goods were being reviewed by popular online sites such as Babyology.

"People just started to find us," she says.

One big distributor even came on board after they made contact via microblogging service Twitter one evening.

"We were amazed by the power of social media. We are represented in 25 countries," Filer says.

Finally, ask yourself these questions to see if you are ready to take the trip:

  • Have you got time, resources and the energy to pursue export?
  • If you are not the owner of the business, do the owners support the export push?
  • Can your product/service be modified to meet your desired export market?
  • Are you successful in Australia with a proven track record?
  • Do you have the flexibility and capacity to expand should your orders increase?
  • Have you got the money and resources to fund the expansion?
  • Do you have the skills and expertise to develop export markets?

Lawyers squander a fortune

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We mentioned in a recent H&Y Newsletter that our licensed financial planner specialises in Divorce Planning. She is a practitioner of the collaborative method of divorce settlement, aimed at ensuring that the finances of both sides are considered throughout the process and the legal costs are kept to a minimum.

Maybe this UK couple, ironically, both Lawyers, should have tried the collaborative method:

Judge Clive Million slammed Anna-Marie Harvey Kavanagh, 47, and her ex-husband Giles Kavanagh, 52, who - despite both being practicing solicitors - have "spent almost all their assets in litigation".

The couple were criticised for "wrecking the ship of their marriage, then turning their attention to the lifeboats."

"The ship of marriage may founder, but this couple have driven theirs full tilt onto the rocks," he said.

The couple who lived in a £3.2m seven-bedroom matrimonial home set in half an acre of Surrey countryside until they split in 2008 after ten years of marriage, were left with just over £90,000 between them, after years of acrimonious scrapping over money and their three children.

Despite Mr Kavanagh earning over £485,000 a year as a partner in a law firm specialising in aerospace litigation and insurance, he was left with "net debts" after the matrimonial home was ordered to be sold and split between the couple.

Make sure everything checks out

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So, a new customer or maybe a business partner – will your business be effected if they don’t pay.

Before you sign on the dotted line, take a little time to investigate whether your potential partner - customer, supplier or business partner - stacks up.

It seems an obvious step but Roger Mendelson, chief executive of debt collection agency Prushka, says businesses often overlook it.

"The enticement of having a potential customer outweighs caution - and it's not just small business," he says.

The best time to get information is before the deal is done, when businesses are willing to open records to secure it....

... Checks won't flush out everyone's dark secrets, but they will give you a little more information before you jump in at the deep end.

The Basics

ASIC has a number of registers that can be searched and a full company extract can be purchased (including history.)

A list of directors can also reveal who is running the company. If they have changed relatively recently, ask whether this ties in with your knowledge of the company? If they change on a regular basis, this may not be the stable partner.

A good working knowledge of how to use internet search engines can reveal much about your new partner or customer.

Legal Checks

There are a number of databases that can be used to check court records.

Not all court decisions will be published. A company may face a winding up application for a valid claim, but it is settled out of court. The case might also be thrown out on a technicality and no record published.

Credible on Credit

There are also credit reporting databases that can be checked including the National Personal Insolvency Index. H&Y is able to arrange these checks for our customers.

In addition, there are two key measures businesses can take to reduce their risk:

  1. Have a robust customer credit application form. H&Y has designed a form used by a number of our clients (it is tailored for each business but the fundamentals are common.)
  2. Ask us if you can secure your interest using the Person Properties Securities Register (PPSR again!!!) This may need a change to your invoice wording.

Tennis Players Do It. Why Not Business Owners

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Food for thought for business owners with this comment from US super business coach, Jay Abraham:

Interestingly, my wife plays tennis. My son plays football and lacrosse. My other son plays guitar and piano. Still another sails. Still another is preparing for college. All five take lessons, classes, tutoring, class-specific instruction to improve their game, correct their weaknesses, and grow their skill/mastery. My friend, "uber-famous" author Harvey Mackay STILL has a speaking coach. He STILL uses a skiing coach. The man is remarkably vibrant still, and "steel-trap" minded at nearly 80!

If everyone else continually works with instructors, tutors, coaches, why shouldn't/couldn't you?

He suggests coaching for business, particularly small entrepreneurs to:

“gain meaningful improvement, in whichever individuals areas of marketing strategy, business building or belief systems you may be struggling with most, right now. “

Ahead in the clouds

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More on "Cloud Computing" (reported by News Ltd):

Small and medium-sized businesses that use cloud computing are more profitable than their non-cloud rivals, research has found.

The survey by software firm Mind Your Own Business found 55 per cent of users of remote data storage had more work than usual for the next three months, compared with 25 per cent of non-users.

However, only 14 per cent of respondents said they were using the technology.

Talk to us at H&Y about cloud computing - it is a perfect solution for many SME's.

Franchises firm in turbulent times

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Franchisee Bec Arriola. Picture : Matt Turner

H&Y offers consulting services to both franchisors and franchisees at a time that the sector is shown to be doing particularly well, despite the uncertain economic outlook.

PwC's Franchise Sector Indicator, released today, says revenue and profits for franchisors grew 10 per cent last financial year, while franchisee revenue rose 6 per cent.

Its survey of owners and executives at 101 franchise systems found non-retail groups - such as home and personal services, mortgage brokers and business-to-business franchises - performed better than retail groups for the first time in the research's four-year history.

Revenue growth for franchisees is forecast at 9 per cent for the next 12 months and 28 per cent in the next three years, while profits are expected to grow 10 per cent and 30 per cent respectively.

PwC partner Greg Hodson lists the four key factors he believes contributes to the success of franchises:

  1. It's a proven system that's been rolled out a number of times and has worked well.
  2. They get a lot of support from the head office.
  3. By being part of a bigger system there's more marketing dollars to be spent on brand awareness.
  4. Strength in numbers. The franchisor can normally negotiate better prices.

The PwC research found the biggest challenges facing franchise groups this year are finding suitable franchisees and the economic conditions.

It also found that despite the sluggish economy and consumers cutting back their purchases, spending per customer has remained the same or increased for three-quarters of franchise business groups.

Hodson says it typically costs $350,000-$450,000 to buy a retail franchise, while for service-based franchises it's closer to $50,000-$100,000.

Anyone thinking about buying a franchise needs to find a franchisor they believe provides strong leadership, a definite strategy and adequate support, he says.

"All say they will support the franchisee, but is it real support?" Hodson says.

"Look at the track record of franchise success. A franchisor will provide this or has to, by legislation, provide a list of franchisees you can ring to speak to and find out how successful and happy they are."

Franchise Council of Australia executive director Steve Wright says before buying a franchise, people should think carefully about what will work best for them.

"Once you have decided the type of franchise you would like to be part of, compare what is on offer in that industry and market segment," he says.

"Make sure you are joining a franchise that is a member of the FCA - that way, you know that business is willing to abide by the member standards for fair and ethical business conduct."

Franchisees also work best with support from their family, Wright says.

"Small businesses are hard going, so you want to be sure you have a supportive team around you. Hopefully they will be the ones who support you through the tough bits and join with you to celebrate success."

Bec Arriola and husband Tim have just opened their fourth Hairhouse Warehouse store, and their businesses have experienced annual revenue growth of 15-20 per cent in recent years.

"Marketing is one of the biggest benefits, and so are the tools they give you," Bec Arriola says.

"Buying margins are also a lot better. I pay a lot less for some brands than when I was just a small salon."

If you would like more information on franchising, contact us at Hudson & Young.

Text your way into consumers' hearts

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Communication with your customers has always been an effective way to increase revenue for most businesses. SMS is one of the most effective methods.

Emails can go unopened, leaflets go straight to the recycling bin, and telephone sales people get hung up on. But people can’t resist a text message.

But 97 per cent of SMSs, or phone text messages, get opened. Most are opened within four minutes of receipt, with 83 per cent opened within the hour, according to research by US technology and strategy consultants Chetan Sharma

It’s a trend that businesses - including gyms, beauty salons, clothing stores, cafes and dance schools - are increasingly tapping into to try to drive better results for their marketing efforts.

“It really blows every other medium away in terms of response rates and open rates,” says Lauri Lassila, director of digital marketing agency of SL Interative. “It’s such a personal and direct medium and at the same time it’s very fast and immediate, so that’s why you’re getting a good response.”

SMS marketing can be used by retailers to make special offers and by other businesses to remind customers to book appointments. Response rates to SMS marketing messages are typically in the double digits, says Lassila, although this can be as high as 30 per cent depending on the offer.

Lassila says if companies don’t already have a database of customers’ mobile numbers they can do something like hold a competition and ask customers to text them to win or get a special offer. “That’s using inbound SMS to either update your database or create a completely new database,” he says. This is also important because according to rules set down by the Australian Communications and Media Authority (ACMA), markers need the consent of mobile phone users before they can send SMS messages to them.

Lassila says text marketing only works if a business’ database is up to date and it’s sending out genuine offers that customers would want.  “It can go horribly wrong if you try and abuse your customer contact with something that they have no interest in receiving,” he says.

The marketing men seem to all agree that communication – any communication helps:

“The loyalty element and the ability to get the customer back in the store can only come from actual communication,” he says. “It can be about offers but it doesn’t always have to be. It can be updates about product lines or services.”

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