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How do I know about the effect of business ideologies, and am I qualified to talk about them? I have owned and operated various businesses for more than 30 years. In that time, I too have often made decisions based on my own ideological beliefs. Due to the changes in the business environment however, I have had to make changes and abandon certain of my ideologies in order to survive. Making such personal changes was never easy, and probably will never be. It is however, an essential factor of owning and managing a business. The core reason for change is that not all ideologies are effective over the long term. If that is the case for your business, this will negatively affect your business’s ability to pay its bills into the future. |
A business built on personal ideologies of management and owners rather than practicalities and long-term successful strategies, is often destined to fail. This outcome can occur fairly quickly, or perhaps more slowly over the long term.
It is not necessarily wrong to bring business ideologies you believe are valid into your business. The most important factor is to understand and identify whether these ideologies are working for or against the long-term benefit of your business. After all, as change is ever present in the business world, what may have worked in the past my not work today or into the future.
As circumstances change, due to any outdated ideologies, you may lose customers and sales, expose your business and its customers to increased fraud and other criminal actions, plus create negative market and customer responses. The last thing you need in these tough economic times is to lose customers and profitable sales because of your business’s fixation to a particular ideology or ideologies which may no longer be valid.
Several examples come to mind and are obvious to your business’s stakeholders and will affect their decisions on whether to do business with you depending on their reactions.
Credit and accounts receivable - From the world of credit and accounts receivable, one obvious example the following up of unpaid invoices. The modern approach often entails a number of emails, then a demand letter. If there is still no response, the file is sent for debt collection. Only then do you find out y to find that there is a problem with the invoice(s).
It appears there has been no thought for somebody in the creditor’s business to pick up a telephone to find out the cause of the nonpayment.
Four other obvious examples are:
- due diligence is just a waste of time and an unnecessary expense,
- anybody can work in accounts receivable because they are just de facto debt collectors or only hinder the sales team from achieving positive results,
- taking legal action or sending unpaid invoices to debt collectors is just a waste of time and is throwing good money after paid,
- we must sell on credit and cash sales don’t count.
The reality is the current business environment dictates these outdate ideologies are no longer valid. Your business will need a far more sophisticated credit and accounts receivable set of ideologies than the ones which were evident in the past. Only then will your business be in a position to find the strategies to help your business survive and grow into the future.
The cash and digital payment discussion - In today’s world, there is the current cash verses digital payment discussion. One outcome of this discussion, show the banks and big business are now finding the cost of trying to force their customers away from cash to digital payments has become a costly and embarrassing exercise.
Furthermore, as much as the banks hate to admit it, branches are the safest way for your customers to make digital payments and reduce fraud. This reality is particularly evident with the elderly, those that lack computer skills or lack confidence with technology, or the risk adverse. Hence their continued preference for the use of cash. The branch environment with helpful bank employees however, is more likely to give them the confidence to pay their bills by digitally.
People are also increasingly finding the ability to make digital payments can be put at risk without warning. As people become more aware that cash may be the only means of payment in specific situations, they are now hoarding cash.
Due to the hoarding of cash, the RBA’s research found that billions of dollars are now no longer available for either the banks or their customers to earn an income. The evidence of this state of affairs is explained below.
“It is estimated that, “In value terms, the hoarding component of banknote demand accounted for between $56 billion and $81 billion. This share has grown since the onset of the pandemic by around 5 percentage points, which indicates that much of the increase in banknote demand over this period was for hoarding purposes.” ➀
The digital enthusiasts – These enthusiasts at times, lose all sense of reality. For instance, when there is a denial of service, or a major disaster, the ability to pay for goods or services digitally or complete other business operations is impossible.
When businesspeople don’t believe in cash, and worse still advertise that fact, four important negative responses are apparent as follows:
- a loud complaint by an aggrieved customer who wants to pay for their purchases in cash and/ or then storms out of the building, is not a good look for the business,
- a customer lists their complaint about the lack of cash payment option on the internet and/or on the business’s website, which again is not good look for any business,
- the customer leaves and buys from a competitor,
- businesspeople become so angry about having to take cash in payment, they are unable to make a rational decision and can therefore waste time and dollars unnecessarily. The following story is a typical example.
Recently it was reported that a businessperson in a regional town where the bank had closed the branch, complained about the fact they had to accept cash from their customers. This caused them all sorts of problems. One of these problems they claimed was it forced the business owner to occasionally have to make a two-hour trip to their bank to deposit cash into their bank account. Obviously, of course, they then had to make another two-hour trip back to their business premises.
That businessperson was so enraged about this situation, it never occurred to them that perhaps their suppliers in their town or immediate region, might like to be paid in cash. Perhaps these same suppliers might have even offered a discount for the cash payment. ➁
The advocates which often make silly claims – All too often marketing and sales professionals, plus digital enthusiasts and their arguments make silly claims against the use of cash or when extolling the benefits of using technology. Their arguments at times can be rather sloppy which gives their detractors a chance to refute these claims. Six examples of this situation follow.
1 It is said that cash facilitates crime, and this is true. Digital payments however are the preferred choice of criminals and fraudsters, particularly those from overseas. Furthermore, the reality is that more money is lost via cybercrime than has been lost by cash.
When criminals are caught and convicted with cash, it is seized then and there at no further cost to the authorities. The cost of recovering funds via cybercrime is far greater, even if it can be located. Often however, the money is lost forever and cannot be recovered.
2 It is said that cash is not free, and this is also true. The cost of offering digital payment facilities isn’t free either.
3 At the end of the day, cash in the pocket, wallet or purse can be used when there is no power, or service or when disaster strikes.
In these later situations, the business which normally doesn’t accept cash cannot sell their goods or services, unless the potential buyer also has cash. Rarely do these digitally enthusiastic customers carry cash. After all, they do not need or see the necessity of carrying any cash. Both the buyer and the seller lose as a consequence.
4 It is not unusual these days to find many businesses in regional Australia ask for payments to be made in cash. On occasions, these businesses may even offer a discount for cash payments.
5 The banks are a business which advertises, “You can bank anywhere and anytime.” One problem with this theory, is that you cannot complete your banking at a branch which has closed, or is only operating on restricted hours, or if the bank’s own systems are inoperative.
6 We also know that technology is only a means of doing business and comprises of a set of tools. As is the case, if the tool is not suited for the work required, or the operator is untrained in its proper use, then the tool is going to be a problem.
Like a tradies drill or other electric tool, if there is no power, then the tool will not work. A tradie is able to carry around a number of batteries, which can be recharged, when the first battery runs out. Many businesses can rarely access any suitable type of battery, or other power source, at a moment’s notice when power is not available.
AI is not always the solution – There is so much hype these days about what AI can do.
Indeed, in many situations it has proven to be a wonderful assistance in certain endeavours.
Unfortunately, there are several aspects where AI is not suitable, and many of these situations, have been highlighted. It appears that where a negative or incorrect outcome occurred, it was found that it was because there was no audit required to ascertain the source or veracity of the sourced information.
It appears even today, rarely is an audit completed satisfactorily, especially when interactions with human beings are involved. One day, AI will be a great addition to many tasks, but for superior outcomes, it appears a human-to-human interaction will still be required for many years to come.
In conclusion, it is essential to understand whether specific business ideologies are either adding value to your business or reducing its value. Your passionate advocation of a particular business ideology may also negatively affect the intended outcome of your actions and/or reputation.
These conflicting outcomes may occur simultaneously in that the positive outcomes sought may become evident in the short term, only to be compromised shortly thereafter or over the long term.
The important aspect to consider is whether your preferred business ideologies are appropriate for the current business environment. It is unlikely however, that even if these ideologies add value today, they may not in the future. If not, your ideologies will then need to be corrected to add value to your business for the future business environment.
Notes
➀ Understanding the Post-pandemic Demand for Australia's Banknotes, https://www.rba.gov.au/publications/bulletin/2024/jan/understanding-the-post-pandemic-demand-for-australias-banknotes.html
➁ I have deliberately chosen not to embarrass this businessperson, as they may have already changed their processes and thinking about how to deal with cash. I can however clearly identify them from their location and business type if I thought it would add value. In addition, I no longer have the reference details of the actual reference.
