Seven Deadly Sins of Business

The following was originally published in the Sydney Morning Herald but we think it applies to every business no matter where it is located.

Sins – every business owner is guilty of them now and again. But which deadly sins could bring your business down?

If there was a small business bible, these would surely be the seven deadly sins to avoid.

 

Gluttony

Dr Lara Moroko, a lecturer at the Macquarie Graduate School of Management, says business owners who take too much cash out of their business risk losing everything.

“Taking too much salary out of the business is like sucking the air out of the business,” she says.

“So many people don’t budget and haven’t got enough money to live off. Problem is, the business needs cash to keep going.”

 

Pride

Those with an over-inflated sense of skill may consider themselves above the business planning tasks most managers deem essential. But such pride is a curse. Xero Australia managing director Chris Ridd recommends developing a clear vision to steer a business in the right direction.

“It’s crucial for business owners to set goals, because otherwise they’ll just get caught up in the day-to-day running of their business instead of taking control and driving growth,” he says.

“Firstly, you need to set concrete goals and a deadline that you can measure your progress against. Secondly, just setting goals doesn’t make them happen. You need to map out how you’re going to achieve their goals.”

 

Wrath

Controlling your temper when it comes to irate and irrational customers is a difficult task for even the most patient business owners. Before you commit this deadly sin, remember that it takes years to cultivate a good reputation and just one unsatisfied customer to ruin it.

“Instead of losing it with complaining customers, hear them out,” Moroko says.

“Ask them what they would like you to do to fix the problem. They may have suggestions on how to improve customer service.”

 

Lust

Lust for the latest mod cons in the business world is a trap many fall into. Elephant Property owner Kirsty Dunphey says it’s a sure-fire way to kill off cash reserves and with it, the future of the business.

“I’ve seen so many small businesses go under because they were insistent they had to have the $10,000 photocopier to start, or the huge shiny office space, or the important looking cars,” she says.

“I’m a big believer in bootstrapping at the beginning and keeping an eye on costs all the time. It should be an ongoing process regardless of the size of your company.”

 

Envy

Green-eyed business owners who are envious of their competition can easily sacrifice their own goals. No matter how successful the competition appears, Moroko says business leaders should march to the beat of their own drum.

“When you let envy of another business set your strategy instead of setting your own goals, you lose focus,” she says.

“You’re keeping too close an eye on the competition and losing track of where you’re going. And when that happens your resources are stretched too far and it’s just a disaster.”

 

Sloth

This is perhaps the most common deadly sin of them all. Slothful business owners who fail to perform the difficult, yet important, tasks such as keeping their financial records up to date, face going under.

Nicole Jones, owner of marketing solutions business Market Me Marketing, says a basic but often ignored responsibility is keeping in contact with customers through building an email database.

“The rise of social media took the focus off email marketing as a way of communicating with potential customers and a way to keep people informed,” she says.

“Many business owners thought that email marketing was dead.  But it isn’t, and it’s still one of the most effective ways to get your brand back in front of customers and potential customers.”

 

Greed

Greed can destroy small and big, new and old companies alike. It all starts to unravel when greed dictates pricing and customer service, Moroko says.

“Greed is thinking you can charge or do what you want to loyal customers, thinking they’ll never leave you,” she says.

“The truth is there is always going to be another business out there who is hungrier than you, ready to snatch your customers away.”

 

– Sydney Morning Herald

Child Support reform changes are coming

IRD have announced that major changes are being made to the child support scheme, starting next year. These changes are the first major overhaul of the child support scheme in 20 years. They reflect that life has changed a lot for families during this time.

Currently child support payments are based on the paying parent’s income and living circumstances. Shared care is only recognised when a parent or carer looks after children for at least 40% of nights in a year.

Key changes at a glance

From 1 April 2015, child support will be based on the following:

  • The incomes of both parents will be used.
  • More account will be taken of the amount of care provided by both parents and carers. Currently most child support only takes into account whether you care for a child for 40% of the time. After 1 April 2015 this threshold will lower to 28% (103 nights or more a year, or two nights a week).
  • Both parents will receive assessments, which may include allowances for any other children of their own who live with them. This allowance will be based on the children’s ages and the estimated average costs of raising children in New Zealand.
  • Parents will receive assessments that may include an allowance for any of their own children living with them, but not for a new partner, or any children who aren’t their own.

This means in some cases the amount of child support parents or carers pay or receive may change.

IRD will be contacting child support customers between July and December this year to either confirm the information they already have or to ask for more information if they need it.

Find out more

What happens if you don’t pay IRD?

You are likely to have seen the recent news coverage about the arrest, at the airport, of Terry Seripisos when he arrived back in New Zealand after being overseas for a number of months.

It appears his arrest was for unpaid Child Support payments he was supposed to pay several years ago.

While most people may not like paying tax this is the main source of income for the government to pay for things like hospitals, schools and everything else the government does; we may not like or agree with some of the things they spend our tax money on but we still have an obligation to pay our fair share.

At Savage & Savage our job is to make sure you account for the correct amount of tax without paying too much or too little.

If you owe IRD money it is important (as Terry Seripisos found out) that you pay it. If you can’t afford to pay it when due you can enter into an arrangement with IRD to pay it off but they will most likely add interest and then if you don’t keep to the arrangement they will add penalties as well as compounding interest. The amount owing can compound very quickly into a large sum of money, often many times the amount of the original debt.

And as Terry Seripisos found out you can be arrested at IRD’s request if you owe the tax man money. IRD have more powers than the police when it comes to tax matters.

Hot tips for increasing productivity

 With Barbican Training Centre 

Increasing productivity is what keeps you

ahead of the pack. It’s what keeps you afloat when the others are sinking. But staying productive can be a real challenge. At the end of the day, there’s a good chance that you are not satisfied with what’s been accomplished. If that’s the case, then here are some pointers that could help you and your business:

  • Take stock—identify obstacles

This is the first thing you need to do—if you don’t know what’s wrong, how can you fix it? Look around your business and see what’s stopping the work being quick and efficient. Is your equipment outdated? Or is it simply not being used properly? Assess where your team is at the moment—do they have the right equipment, the right authority, the right training? Look at all parts of your business; figure out what works, find out what doesn’t need to be done, what can be done more cheaply and what can be done better.

  • Seek help and delegate tasks accordingly

Nobody is an expert at everything; make sure that the right members of your team are in the right positions, doing the right jobs—you wouldn’t have a rugby first five-eighth (fly half) as the main line out receiver if you wanted to win. If you haven’t got the right talent, then hire it when it’s needed.

  • Avoid unnecessary meetings

Most meetings are quite simply unnecessary for many of the participants—only people who are directly involved need attend. Parties interested in what happened receive notes of the most important details, leaving them to get on with their work, instead of abandoning this for a meeting.

  • Keep administration to a minimum

Administration, whilst absolutely necessary, is a cost centre, not a profit centre—it doesn’t bring in the money, it spends. Examine what your administration department does and

figure out how to do it better. Be prepared for howls of protest from your administration department, as they won’t appreciate your “help”, and will see you as the enemy.

  • Use technology

Automate tasks wherever possible to get the job done more quickly and more accurately—taking the human element out of a task usually results in greater accuracy. Accuracy means that jobs only need to be done once; it’s that old chestnut—do it once, do it right.

  • Ask the team

Team members often know better than management how things can be done more quickly, more cheaply, or improving quality—so ask. You can also offer monetary rewards— a

percentage of money saved to encourage participation.

  • Train the team

Conduct training sessions to upgrade employee performance. Training helps employees to handle new equipment and perform jobs more efficiently. Make sure new employees have a proper induction process, so that they know what needs to be done and how.

  • Weed out distractions

Staff may have Facebook, Twitter, LinkedIn, YouTube, Instagram, Hootsuite, Tumblr, Pinterest, Google Chat, accounts plus many others you’ve never heard of. If they are not using these, they may be checking their email on their smartphones or reading random facts on Wikipedia every 5 minutes. Disconnect! In the U.S., this is estimated to cost companies roughly $6,000 per year per worker. Ouch!!!

 

 

 

Is it OK to become a Trustee or Director?

Obviously it is fine for you to become a director of a company you own. Becoming a director does come with responsibilities but as long as you operate within the law and meet your obligations as a director everything should run quite smoothly.

Do note however that the responsibility for a company trading within the law rests with the Directors not the Shareholders and if the company does not operate within the law then many of the protections offered by a limited liability company disappear. If you are asked to become a Director of a friends company tread with extreme caution, especially if your good friend is running the business and isn’t a Director – you will be taking on the legal liability for your good friend’s deeds and the end result may not always be a happy one.

People are often flattered if they are asked to become a Trustee of a trust or want to help a family member or friend by becoming a Trustee of a family trust. Again, tread with caution because there are significant personal liabilities you can be exposed to. If something goes wrong a Trustee can (and often is) held to account on behalf of the trust.

Several years ago a client of ours did a good deed by becoming a Trustee of a good friend’s family trust. The trust owned some property and seemed quite straight forward until the property was sold. It turned out the trust was developing property and IRD deemed there was tax owing by the Trust. The ‘friends’ were both made bankrupt and had no money to pay the tax so the tax man knocked on the door of the other Trustee (our client) and demanded he pay up. The good deed our client carried out by agreeing to be a Trustee ended up personally costing him tens of thousands of dollars in GST, Income Tax and penalties.

Many people are Trustees and Directors but the job is often best left to professionals rather than good friends. If you do become a Trustee or Director make sure you take on this legal responsibility with your eyes wide open and know what the worst case scenario may be.

Recruitment & Misrepresentation – Buyer Beware

Employment matters with thanks to Chapman Employment Relations

Misrepresentation by a job applicant is a serious matter, but you still need to get the procedure right when managing the situation.

Mr Richardson was employed by Fonterra as a Tanker Driver.  Prior to employment Mr Richardson was asked if he had any previous criminal convictions, he advised he did not. Further Mr Richardson was advised a criminal record check would be carried out, he agreed to this prior to employment, the vetting was completed after his employment began.

On being offered employment Mr Richardson was provided, in effect, a new set of conditions, including the requirement of a Criminal Record Check.  The employer did not advise what would happen if he failed that test even though this is stated in the previous recruitment process.  The letter of offer pointed to a Collective Agreement that had a completeness clause which had the effect of wiping all previous conditions and undertakings, including those within the recruitment process.

There is a great deal of trust and confidence required by the employer in their drivers, in being able to undertake their duties largely autonomously with sound judgement and professionalism.

On receipt of the criminal record check it was discovered Mr Richardson had driving offences including, drink driving, and theft and dishonesty convictions which resulted in fines disqualifications and imprisonment.

Fonterra determined to undertake an Employment investigation for a failure to disclose his convictions and advised Mr Richardson that the matter was considered serious, and that termination may follow.

Through the employer’s investigation Mr Richardson stated he understood his previous convictions were covered by the Clean Slate Act so wasn’t required to submit the convictions.  In his case this was not correct.

Whilst Mr Richardson’s last conviction was in 2004 he did not meet the criteria for coverage under the Clean Slate Act, at the very least convictions including imprisonment are excluded.  He formed his view that he did not need to disclose his convictions, it seems, from discussions with his wife who had apparently checked the Ministry of Justice website.

After an initial investigation Fonterra advised Mr Richardson, in a letter of dismissal:

You have misrepresented yourself to the Company by failing to disclose all of your previous traffic and criminal convictions and as such we are terminating your contract with immediate effect.

When Mr Richardson appealed the decision internally, Fonterra went further and advised:

Given the conclusion that Mr Richardson had deliberately withheld information material to Fonterra’s decision to employ him, Mr Rogers decided that dismissal without notice was the appropriate outcome and advised Mr Richardson of this.

Firstly let’s be clear about the Criminal Records (Clean Slate) Act 2004, if an employee or prospective employee has convictions covered by the Clean Slate Act then that person is not required to advise of the convictions, it is as if an invisibility blanket has been cast across the convictions and no one need know, speak, or hear of them in the future, well at least not in an employment setting.

When Mr Richardson appealed the decision internally, Fonterra went further and drew a conclusion that Mr Richardson had “deliberately” misled the employer.

Late in the piece Fonterra did attempt to use Contract law and misrepresentation forming a breach to justify dismissal, however it does not appear it advised Mr Richardson it intended to use this aspect of the law prior to the matter going to the Authority. In any case the Authority ruled the employer could not rely on this legislation in any regard even before testing the breach of good faith in not advising Mr Richardson earlier in the process it intended to rely on this legislation.

The Authority found the previous stipulations in the recruitment process did not have any weight, that the unconditional offer of employment, and the Employment Agreement, did not cover this situation.  Further the Authority found that the reliance Fonterra placed on wilful or deliberate misrepresentation was not correct. The Authority concluded Mr Richardson did not intend to mislead, and reference was made to Mr Richardson’s wife’s evidence and that he had agreed to a criminal record check being undertaken.  The Authority determined Fonterra had not been clear on this allegation of deliberate misrepresentation through its investigation process, so again Fonterra was found wanting on its conclusions.

The Authority found the dismissal unjustified and provided remedies in the employee’s favour, including lost wages and hurt and humiliation of around $20,000, plus costs.

The Authority did not reinstate Mr Richardson’s employment through a mixture of considerations including Mr Richardson’s desire to not return given his negative experience and apparently more importantly that had the employer been aware of the criminal convictions the employer would not have employed Mr Richardson, to which the Authority member agreed.

It would seem to be another case of get your initial allegation right, run a thorough process, and ensure your decisions reflect the allegations and findings made through the investigation. Further it is important to create a connection between an offer of employment and employment agreement that covers misrepresentation, or facts discovered after employment, otherwise buyer beware.

 

Lessons,

  • When requiring Criminal Record Checks for employment purposes wherever possible undertake these prior to employment.
  • Review process and supporting documentation to cover the transition from recruitment to employment process.
  • If you are in a position whereby you still would want a criminal record check done but time has not allowed:
  • have a clause in the offer letter stipulating the offer of employment, and employment itself, is subject to a Criminal Record Check satisfactory to the employer, and
  • that any issues discovered that had not been raised or represented prior may lead to an employment investigation, and that this may lead to termination of employment.

We recommend reviewing your employment agreement and consider including such a clause.

 

Employment reference no longer confidential

Employment matters with thanks to Chapman Employment Relations

An interesting (in our view disturbing) case from the Human Rights Review Tribunal which suggests references and the details of other candidates in a recruitment process are not as confidential as we all thought.

Kevin Waters, aged 62, unsuccessfully applied for two positions with Alpine Energy, a company he previously worked for 21 years until 2008.

Mr Waters believes he was not successful because he was discriminated against on the grounds of his age, and has taken the issue to the Human Rights Tribunal. As part of this process Mr Waters required Alpine Energy to disclose all information relating to the recruitment process, including the CV’s, interview notes and references of the other candidates. Alpine Energy refused, saying the information was confidential (as per the Privacy Act) and could not be released. Mr Waters challenged this at the Tribunal, seeking an order to compel Alpine Energy to release the information.

At the tribunal one of the referees gave evidence they would not have provided the information if he had known the information could be released to other parties. As Alpine Energy had used a recruitment agency they also said they did not believe they had to provide the information that was held by the recruitment agency, and had not been provided to Alpine Energy.

The Tribunal disagreed, ordering the documents to be released to Mr Waters, although with the applicant’s names removed.

This decision has caused consternation. What was thought to be sacrosanct is no longer the case. This case demonstrates that when litigation has commenced, the discovery process (where the parties seek all information relevant to the case) is far reaching.

It is important to remember that the case does not mean employers can release candidate details to third parties. There remains a duty to maintain privacy of candidate details under the Privacy Act. It requires an order from a judicial authority to allow release of the information. However ultimately it may be released and therefore be cautious with everything you record, always mindful of the interpretation a third party could place on the scribbling’s you thought were confidential.

You may also want to consider your policy on providing references, in the knowledge these may ultimately be released. An alternative is to only provide a statement of service, confirming dates of employment and position.

When the full case is heard we will let you know the outcome.

 

Parental leave payment increase

From the 1st July 2014, the maximum parental leave payment for eligible employees and self-employed people is now $504.10 gross per week, while the minimum payment is $142.50.

To learn about parental leave in more detail or to find out more information visit the Department of Labour website.