Kevin Rudd should appoint a "Lord Beaverbrook" to make sure that the stimulus package gets spent quickly.

The weekend newspapers were full of the problems facing the Government spending our money to the best effect in order to keep the economy moving and reduce the impact of the financial meltdown.
"Oh dearie me!" as my late Grandmother Wilson used to say.
You see, while it is that Kevin 747 has announced many initiatives totalling a huge amount (some $36 billion) the hard facts are that only about 50% of this amount will be in the pipeline and pushing out cash this year.
These projects require quite a lot of planning.
Let's look at one example;The Transport infrastructure portion of the National Building Package consists of $1.9 billion of fast-tracked road and new road money over 2 years reports the Weekend AFR (Jan 31- Feb 1). But civil engineering resources are already overstretched and this industry faces skills shortages.
Then there is the $1.6 billion earmarked for education.The AFR reports that possibly none of it will be spent this year because, although the Universities have good projects there is the 'risk of waste and delays' and bureaucrats have told them that no money will be available 'until July because of red tape'.
Let me say that 'Kevvy', the PM who has a reputation for working monster hours maybe should work a little smarter rather than harder.
That is because he cant let this one get away from him. This only happens once in a lifetime and we don't want him to fluff it because bureaucrats cant get their backsides into gear.
Now while it is that Kevvy has recently been consulting state premiers about their problems and priorities it would not hurt to consult some small business people about the experiences they are having and the help they need.
Maybe we need him to appoint a no-nonsense Minister for Getting Things Moving. This person needs to be an astute 'bastard' who can not only see through gobbledy-gook and bullshit but be a veteran head-kicker and strategist.
Winston Churchill appointed Lord Beaverbrook during World War 2 to speed up fighter production and he had a massive impact and probably saved the day.
In many ways the same urgency applies to these endeavours as for the British during the Battle of Britain.
Let us hope that the thrust of the stimulus does not wither on the vine because politicians and bureaucrats cant get their acts together.

A blowfly's perspective on the Prime Minister's thoughts on solutions to the financial crisis

Imagine for a moment that you are a common blowfly with a 'strong' relationship to the Prime Minister, Mr Rudd. You have managed to position yourself on his shoulder during the day.You are considered to be his 'official' fly. At night you sit atop his bedside light-- in whatever country you may be!

Your relationship is quite intimate, and, over your relatively short life you have managed, on occasions, to be able to read his thoughts.

Today is Sunday he is having some quiet time in his study. He is reading the weekend edition of the Financial Review. On the front page are the headlines for the included features. These include "Why the financial crisis wont go away", "Obama clears decks for action" and "Rudd Bank ready to act".

You can see the little wheels turning in his mind. He is an inveterate systems thinker and you know that he knows that these 3 headlines are connected.

Having told his electorate that he will spend whatever of taxpayers' money he needs to support the Australian economy you detect a thought in his head that he hopes he has done the right thing by proposing to put $5 billion into a special purpose vehicle to make up for the funds that foreign banks have, or a likely to, withdraw from the Australian economy.

Suddenly another thought comes into his head! "Gee, I hope I am not doing too much to help the banks. That deposit guarantee scheme I put in place gave them the best break they've had for decades. I didn't really anticipate that it would work that well. I was just doing what other countries did. It seemed like a good idea at the time!I didn't realise it was going to stuff all those property trusts.I must be more suspicious when Treasury gives me advice next time."

You see him turn the pages and he stops when he comes to the Obama article. A smile appears on his face and you have to take evasive action when he reaches to scratch his ear. The thought of Obama being President has been one of sheer joy for him. "Bush was such a fuddy-duddy", you hear him think,"and totally devoid of humour. That's probably why John Howard and Bush got on so well".

You detect him moving onto his next series of thoughts."I hope Obama can get a move on. The quicker he can fix the US economy the less I will have to spend propping our economy up. What will happen if we run out of taxpayers' money to fund this economy? Will we have to borrow more from overseas? Which country could we borrow from? Treasury told me I could just print more money. Could that be right? The Americans are doing that apparently!How can the US dollar stay up when they are just printing more of it?"

You see him become a little bleary-eyed and you think he might be about to fall asleep. You do a quick buzz around his ear to wake him up again. "No rest for the wicked", you think to yourself.
Another thought comes into his head. "I hope the Americans are tackling the cause of the problem.What are derivatives?I'll bet that smart-alec Malcolm Turnbull knows more than I do about derivatives.I wish I'd worked for Goldman Sachs for a few years after Uni. I'm just so dependent on what the boffins in Treasury tell me....................zzzz..............zzzzz."
You then realise you have lost him to the Sandman. Your heart sinks a little but you resign yourself to the notion that "a week is a long time in politics"(especially in Queensland where the Premier cant even have a botox treatment without it being mentioned in Parliament) and he deserves a little snooze." "So many questions", you think to yourself as your eyes slowly glaze over as well.

We simply must help our clients to adjust to the new economic environment

Down at the pointy end of our existence is the necessity for business advisers to deliver assistance to their clients adapting to the new economic climate.
There are 2 matters that we need to discuss with them:

1. How has the financial crisis affected them to date ?
2. How do they anticipate that the financial crisis will affect them in the future?

Not only do we need to help them adjust to what has happened but we also need to have them consider how the ongoing developments may effect their businesses in the future.

Usually we will find that our clients are in one of 2 situations:

1. They will be on the defensive because there will already be some impacts they are dealing with and with a few more to come.
2. They will be well-positioned because they are cashed up, or possibly they will be in an area that grows during a recession or down-turn, and will be able to take advantage of the situation.

If they are on the defensive then we can wheel out the normal product range that now has excruciating meaning for them:

• help them to prepare cash flow budgets to understand the scope of the problem they are likely to experience and whether they need to cut down , refinance or whatever
• undertake a profit planning exercise by product line or enterprise to help them understand how they will fare with reducing sales and possibly margins
• help them to review their staffing
• help them to review all their costs and planned capital expenditure
• help them to review their margins in the light of a falling dollar
• help them to review their debts and their servicing capacity
• help them to review their business strategy going forward and fine-tune or totally revamp it to align it with the circumstances
• get them to an investment adviser to have their investments and superannuation funds reviewed

If however they are well-positioned then we can help them to consider further their plans of attack:

• how can they exploit the falling real estate and house prices?
• replacing their vehicles or fleets whilst there is downward pressure on new vehicle prices
• reviewing their loan facilities whilst interest rates are falling
• adopting a vulture strategy on their competitors' businesses and snapping them up for reasonable prices now that the private equity players are scarce
• building up their share portfolios whilst p/e ratios are low and there are some real bargains around
• having them consider upgrading their residences whilst there are record numbers of mansions on the market in the fancier suburbs( remembering that private residences are exempt from capital gains tax)
• developing plans for import-replacement businesses now that the dollar has fallen and the cost of imports has risen
• having them consider lifting their prices and increasing their margins if their main competitors were importers

The critical matter is to recognise that whilst many clients are facing difficult times many of our clients also have been presented with new opportunities.Maintaining the vibrance of our business advisory practices requires that we concentrate on both sides of the coin.

It is also critical that we apply the 80/20 principle.We need to be very vigilant about the 20% of our clients who contribute the 80% of our fees. If we do a good job helping them survive and prosper or helping them to capture new opprtunities then we will come through this period of economic change unscathed and with more robust practices.

That is because we will have stretched ourselves to engage our clients about the matters which are critical to them.And they will repay us handsomely!

Entrepreneurs need our support and encouragement

During these testing times we should not underestimate the contribution that entrepreneurs are making to the recovery of our economies.

This was rammed home to me on Saturday when , after our morning coffee, we visited a new supermarket in Bentleigh.

Run by a little Chinese lady this shop, CK Food Store in Centre Road (near the new Richies IGA store), is absolutely groaning with fresh fruit and vegetables, an attractive spread of fish and meats and food treats from all over the world.

As I wandered around viewing the enterprise through the eyes of an accountant, I pondered the difficulties she must have encountered.

Firstly the Australian dollar has dropped over the last few months and quite a bit of her stock would've been imported. Her margins would be under pressure and she would need to get her turnover higher to compensate.Tough times for retailers to increase turnover!

Secondly she would have needed to finance the set-up and the stock. No easy task in today's environment.

And then selection of staff!

But the place was packed and it was not hard to see why. There was simply an amazing selection of the most interesting foods, drinks etc. Most of the fruit and vegetables were local, but there were foods from Asia ,Dutch sweets and other goodies.

I was heartened because it took me away from my current thinking rut associated with the crisis.

We need to encourage entrepreneurs.


Update: 21 May 2011:
In reference to the comments regarding this store that have been left below I would like to make further comment.
This blog post was written when the store was first opened.
It is a salutary lesson that entrepreneurs should never take consumers for granted.
Entrepreneurs might be full of good ideas but they need to execute them in an effective way in order to sustain their businesses. As well it is imperative that the fundamentals of business models are respected. For instance a business model involving food will need to pay heed to hygiene and proper storage of vulnerable foods. In addition a simple thing like the smell of a food-selling premise needs to be addressed because , frankly, many consumers will take their purchasing signals from these subtle presentation aspects.
Consumers are fussy and will vote with their feet. It will be interesting to see how the owners respond to the adverse publicity.

It is critical that you review how your customers/clients are affected by the financial crisis

The hard part for professional advisors going into the future will be allocating their time between clients who are cot-cases and clients who are moving to screw the most out of the opportunities that confront them.
You see, many clients are going to need our help coming to grips with tight cash flows, reduced credit availability, reduced margins and reduced sales. this should be our bread and butter but of course it is a two-edged sword because their capacity to pay will in many cases be limited.
But in other cases we will find that some clients are going to be going gang-busters keeping up with the increased sales and new opportunities they will be evaluating.
We must keep our heads screwed on carefully and allocate our limited resources carefully between these 2 areas .
Because the worst thing that could happen is that we spend all our professional time on the ones that are doing it tough at the expense of those who will increase our fee base substantially in the near future.
Having said that this will be a concern for professional advisors it will also be a concern for most businesses.
All businesses need to consider what industries their clients are in and whether they are likely to reduce their orders.
Lets say that you were a major supplier to ABC Learning Centres, by way of example, you would need to be looking carefully at their impact on you if they do end up going under. What should you be doing to cover the risk to your business?
Don't delay this exercise whatever you do!

Now is the time to review your affairs----and those of your clients!

There are times in our lives when we simply need to take stock of the situation before us.



So often we are simply driven by daily events and we are consumed by them during the course of our days. These are likely to develop into 'ruts' of the deepest kind. I remember reading about the sign at the turn of the last century which was displayed on a road outside New York which had been used by horse-drawn buggies. It was full of ruts associated with the buggies. The sign read--"Choose your rut carefully. You'll be in it for the next 5 miles!"



And so it goes with life! But this is as good a time as any to review your circumstances and re-focus your energies. That is because some things have changed forever. In NZ 25 finance companies have bitten the dust. Several well-known investment banks in the US have gone or been swallowed up. ABC Learning Centres has gone into administration. There is a new American president who is 'African-American'. Kevin 07 is starting to hit his straps. We have a new opposition leader. Interest rates have gone down. Need I go on?



And because of this we should look at the possibilities that we may need to change some things in our lives too?



Do we need to re-orientate our business direction? Do we need to re-think our career strategies?Do we need to change some of our investments around to capture new opportunities? Do we need to re-finance our mortgages?Do we need to look more at exports ?



The analysis should start real soon I reckon.That is because the opportunities of the next decade are starting to take shape before our very eyes.



For professional advisors it is a great time of opportunity because our clients are wanting us to stick our bibs into their affairs and alert them to new things they should be considering.



Dearie me! So much to do and so little time!

The financial crisis---quick and dirty evaluation techniques

Although this crisis may be an opportunity for some there are many who will be adversely affected.

Those who rely on their income from shares sitting in their super funds will be rightly concerned. Although their dividend income will not be immediately reduced if they have shares in the major retail players clients will be impacted as retail profits drop. Steve Keen an associate professor at the University of Western Sydney says that households cant shed children like businesses can and they will simply tighten their belts. This will lead to a contraction in retail sales.

As well, those who have been using margin loans to bolster their portfolios will need to liquidate some of their portfolios.

Businesses who are importers will need to be particularly vigilant to maintain their margins in an economic environment not hospitable to price increases.

The technique I have used to come to grips with the impacts on clients' affairs is good old-fashioned Mind-mapping. Go to this site if you are not familiar with mind-mapping and view some of the examples as to how it work.

In the middle of the page you draw a small circle entitled 'Financial Crisis'. The you move away from the circle noting the major features of the crisis (eg Falling dollar, lower interest rates, credit harder to get, share values reduced, falling retail sales).

As you develop this out you will start to get a good feel for the implications for your clients' businesses.

But then the hard work is still to come-----VALIDATION WITH YOUR CLIENTS!

This is the part where you engage with your client and understand the realities rather than proceeding on the basis of your random thoughts down dry gulches.

Challenging times for mere mortals

The world-wide financial crisis has presented a very difficult nettle patch for professional advisors to traverse.



All of our clients are going to be affected in one way or another. And it will pay us to be attentive to their emerging needs because in their needs are a plethora of opportunities.



The real question is as to how we go about identifying these needs. In a recent staff meeting at Davenports we concluded that every staff member had a role to play listening to clients about the impact that the crisis had had , and was likely to have, on them and their businesses and their affairs generally.



We agreed that between then and next week's meeting each staff member would initiate at least 5 conversations with clients regarding the crisis. then next week we would feed this back into the discussion and make some decisions about strategies and actions we could initiate as a firm to help our clients through this.



Even our receptionist and pa's have opportunities to engage clients in this endeavour. In some ways their feedback may even be more valuable because I have this sneeking suspicion that they will simplify the messages and extract the real esence of clients concerns.



After the meeting I rang a client to meet with them about their year end financials and took the opportunity to canvass his views. They are importers and the first impact on them has been the fall of the Australian dollar. This will reduce their profits. And at a time when they are trying to sell their business! So the prospective purchasers will not be too impressed. In a ddition if the purchasers are borrowing we can expect that their credit facility may come with moe strings attached----if it comes at all!



So next week I have some more phone calls to make. And a very interesting staff meeting to attend!



How are other accountants responding to the crisis? I would welcome your views.