Deal With Credit Issues

Stagnation and dynamism in credit

admin — Mon, 24 May 2010 18:01:58 +0000

Stagnation vs. Dynamism. Stagnation occurs when there is no infusion of new energy into the organization or relationship. In a closed organization with no partnerships (past orientation), change is undesirable and suppressed. Dynamism results from the infusion of new energy and ideas (future orientation), and it is essential if a business is to successfully change with the demands of its customers and markets. How stagnant or dynamic is your organization’s culture?

Alienation vs. Collaboration. Organizations that isolate themselves cannot form partnerships with others. There is a lack of trust toward people both inside and outside the organization, which results in alienation (past orientation). Collaboration (future orientation), on the other hand, involves the give and take of information and a degree of self-disclosure, which results in building trust between people. How would you rate your organization on the alienation–collaboration scale?

The role of individual loan preferences

admin — Sun, 25 Apr 2010 20:04:40 +0000

Some organizations develop patterns of thought that enable partnerships to produce the outcomes desired. Others choose to operate with attitudes that preclude any chance of success. Reflect on your own organization using the Past/Future Orientation Assessment (Assessment 7).What is its orientation: past or future?

Win-Lose vs.Win-Win Style of Conflict Resolution. A win-lose conflict resolution style (past orientation) creates losers. Losers are neither happy, self-satisfied, nor proud. They want to get even. A win-win conflict resolution and problem-solving style (future orientation) works toward achieving a mutually agreeable plan. In terms of its conflict resolution style, is your organization closer to a past orientation or a future orientation?

Individual Performance vs. Teamwork. A team spirit requires a certain amount of trust between members (future orientation). Without trust and openness, teams cannot perform well.Without appreciable teamwork, an organization won’t achieve potential synergies, nor will it encourage creativity and innovation (past orientation). How would you rate your organization’s ability to support the concept of teamwork?

Know your weaknesses before you take a loan

admin — Tue, 23 Mar 2010 17:32:16 +0000

One of the most important aspects of creating successful partnerships is to know yourself first. It’s essential to understand your own weaknesses, biases, and prejudices. Knowing these things does not make you weaker. In fact, it makes you much stronger. Knowing where you are vulnerable enables you to seek out those people who can reinforce and strengthen those areas. Keeping your weaknesses hidden from yourself does not ensure that others won’t spot them immediately and exploit them readily.

Knowing yourself also relates to business. An organization must have a realistic assessment of its own culture, its way of viewing the world. Understanding the organization’s strengths and weaknesses is as critical to a business partnership as understanding your personal pluses and minuses is to a personal partnership.

How to adapt your credit capability to your income

admin — Wed, 17 Mar 2010 10:48:15 +0000

Income and corporation taxes are levied on income or profit. In the disposal of a business, proceeds from the sale of trading assets such as stock are included in the trading income of the business for the year in which they are sold and corporation tax might be payable on any profit resulting from the sale.

Income tax could apply to a business vendor in many other areas too numerous to mention in a book such as this. You should, as a part of your exit planning, review with your advisors the likely impact the sale of your business will have on your personal income tax, particularly with regard to the proposed timing of the sale. Early advice will give you the time to plan for the optimum outcomes. Also, it is difficult, and often illegal, to backtrack on transactions after they have been processed, so it is necessary to get it right the first time.

The very basics of inheriting a credit debt

admin — Wed, 03 Mar 2010 19:02:39 +0000

Where a person transfers anything of value either on death or during his lifetime, Inheritance Tax (IHT) may be payable. This fact could have a dramatic impact on the way a business owner structures a family succession plan.

IHT law, like most tax laws, is complex and an understanding of its implications requires careful study. Business owners contemplating a family succession as an exit route should obtain early advice on IHT law from their tax advisors.

On death the transfer of an estate of a UK resident up to a certain value is tax-free.

For the tax year 2005/2006 the tax free amount is £275 000.

Transfers to your spouse of any property either in life or after death, if both spouses are resident in the UK, are also free of tax.

Gifts can be tax free if certain conditions are met. These conditions include that the transferor lives for seven years after making the gift, or that the gift does not exceed a certain (relatively small) value, or that the total value of gifts does not exceed a specified amount in any single year.

Besides the exemptions for transfers after death and for gifts made in life, there is also significant business property relief under the IHT legislation, which could be crucial for business owners wishing to dispose of their business assets to family members, either through a sale at less than arm’s length, or through a gift, or a combination of both.

Sharing some of the payday loan risk

admin — Wed, 24 Feb 2010 14:50:11 +0000

Springfield Remanufacturing might be a perfect example of how an open paradigm works. In 1993, when the company was International Harvester’s engine-rebuilding plant, management decided to close the facility. But the general manager, Jack Stack, knew the business could succeed by creating a partnership with the employees. By passing the hat among the employees and borrowing money from a bank, he had enough to buy the firm.He was able to bring Springfield Remanufacturing back from the dead by using an open management system. In 1995 this company generated $104 million in revenue and at least $2.8 million in net profits. The company has experienced strong growth ever since. Stack listed these positive components:

Employee involvement and ownership
Sharing of rewards and risks
Invaluable employee input
A self-managed organization
Increased worker education
A rapidly growing business incubator

Contrast the experiences of the open paradigm used by Springfield with the telephone company’s closed paradigm. Organizations that share appropriate information, financial data, and the planning process with their workers and customers are proving to be more efficient and creative organizations with higher quality, higher profits, and higher employee morale.

A credit depends on your total income

admin — Wed, 17 Feb 2010 18:57:28 +0000

Once you have calculated the ‘amount liable to CGT’ you still need to know how much tax to pay the IR. The rate at which CGT is payable depends on the individual taxpayer’s income tax rate for the year in question. The amount liable to tax is treated as the ‘top slice’ of your income (i.e. it is added to your income for the year) and charged to CGT at the rate applicable (sometimes known as the ‘marginal rate’).

Depending on your total income for the year, the rate could be at the basic rate or the higher rate, or some at the basic rate and the balance at the higher rate.

It is obviously useful if you can estimate in advance what the likely CGT consequences of your asset disposals it will be. You should get expert taxation advice on this and will help if you have kept your business records in an orderly fashion.

Points to consider before you take a loan

admin — Wed, 03 Feb 2010 15:34:20 +0000

One way of receiving the full benefit of taper relief even though the business assets have not been owned for two years, could be to delay payment through instruments like bank guaranteed loan notes (or corporate bonds). These are cashable sometime in the future with the result that CGT could be payable only at the future date when full taper relief could apply, because for CGT purposes the date of disposal is calculated from the date of payment and not when the agreement to sell is entered into. However, you need to be careful that the right kinds of notes have been issued and it is prudent in all cases to receive prior IR clearance.

Other schemes for avoiding tax include giving up your UK residence and being paid in a qualifying overseas country, because non-UK residents do not pay CGT. However, besides the question of whether the saving is worth this inconvenience, you would need to be careful about how soon you return to the UK and whether this loophole has not been closed.

Payment of a capital sum over time is still treated as capital (and not income) for CGT purposes, unless something in the sales agreement affects the amount of the selling price.

Goodwill is a business asset for CGT purposes and is subject to the same rules and allowances and reliefs as other business assets. However, it will be important to both vendor and purchaser to establish clearly what portion, if any, of the price being paid can be allocated to a goodwill component.

Competitive credit issues

admin — Mon, 26 Oct 2009 10:58:25 +0000

The competitiveness of the market affects pricing decisions. Where few direct competitors exist there may be a greater
degree of latitude for pricing decisions. The nature of the competition also has an influence, as some competitors may be vulnerable to lower prices, chiefly if their costs prevent them lowering prices any further.

Other competitors may be open to claims of poor value or quality. In this case, a higher price accompanied by appropriate advertising could reinforce perceptions of premium value and quality. An important rule is to target one competitor or a group of competitors, attacking them with the most appropriate pricing strategy.

Credit perceptions and behaviour

admin — Fri, 23 Oct 2009 12:19:15 +0000

Customer perceptions and behaviour – what the customer wants and expects – are among the biggest influences on pricing. Successful pricing is based on a clear understanding of the needs and nature of the target market. The culture of the market affects pricing decisions. If there is an acceptance of a particular type of pricing structure or approach, strategies will often follow this. The maturity of the market is also important. If the market is mature with few new customers, pricing decisions should focus on taking customers from competitors as well as retaining market share. But if the market is new and growing, the aim is to build and gain market share as rapidly as possible.

These two approaches may or may not lead to the same result. Lastly, if the market is in decline, prices may need to be cut simply to compete for a dwindling number of customers.