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Quality vs Price


I'm a firm believer that the majority of consumers will choose quality over price. I certainly do.

I also believe that people these days often place more emphasis on service rather than product.  For example, if you are at a restaurant for the first time and assessing it for future meals and the food quality has not met your expectations, the customer is still likely to return and give it a second chance. However, if you were to receive substandard service from the wait staff, it is questionable whether you would return.


Nearly 30 years ago I had lunch with a client at a new restaurant that had just opened and was part of a large new hotel in Cairns. Our expectations of quality and service were high, as was the expectation of cost. It took an eternity to get service and when we did the first two meals my client ordered from the menu were unavailable. He left without dining, stating he would never return. To my knowledge he never did. At that point we had not even considered the cost.


As small business owners, we can focus on our pricing often at the expense of quality.  Sometimes it is worth stepping into the shoes of the consumer and considering what is important. I agree that in this ever-changing technological world of internet sales, consumer shopping is changing, and price is important. However, not at the expense of quality.


Let's look at another example of Value. Have you ever had a toothache that needed urgent attention? How much would you be prepared to pay? Assume you were to approach two different dentists for treatment. The first quotes a price but can't fit you in until next week. The second dentist offers to treat you today, but the cost is twice as much as the first dentist. Which are you more likely to choose? Both dentists are running their own businesses. One likes the certainty of having constant business and fills his diary well in advance. The other keeps gaps available in his diary for emergencies with no guarantee they will be filled. Of course, the price will be more.


If you book a last-minute flight to get somewhere, do you expect the price to be more than when there were a greater number of seats available?


My experience in business is that if your product or service is of the highest quality, the consumer will return and price whilst important becomes less of a factor.


Challenging Times - they are a-changing!

I recently read an article written by a Harvard Professor called the "Stockdale Paradox".  It was about an interview with a retired US admiral James Stockdale who was held as a prisoner of war in Vietnam for seven and half years. When asked how he managed to survive for such a long time he replied "I never lost faith in the end of the story. I never doubted not only that I would get out but also that I would prevail in the end and turn the experience into the defining event of my life, which in retrospect, I would not trade." When asked which prisoners did not make it out of the camp's, he responded, "The Optimists". They were the ones who said "We're going to be out of here by Christmas, and Christmas would come and go. Then they'd say, we're going to be out of here by Easter and Easter would come & go and then thanksgiving and then Christmas again. They died of a broken heart"

The lesson – never confuse faith that you will prevail in the end, with the discipline to confront the most brutal facts of your current reality.

In my experience, Accountants, as a profession, are good at this - generally conservative by nature but good at long term goal setting. During these times of Covid-19 we must believe that things will return to a new normal – eventually, but it will be a long road ahead to recovery and the reality is that today and tomorrow may be bad days; they must be planned for, and recognized on this unprecedented journey.

What will be the new normal? Will there ever be a vaccine? Social distancing, regular hand sanitizing, border closures, international travel changes, rising unemployment, secondary health concerns – what will be the impact of these changes? On top of these pandemic issues, we are further confronted with world political instability, perceived social injustices, climate change and extreme economic changes driven in part by technological advancement.

So whilst planning for recovery by all small business is imperative, due to the number of unknown's, it can be a daunting task. Creating an adaptable plan that is flexible enough to allow for change but rigid enough to see through the tough times ahead can be difficult. My advice – keep it simple and seek support from those around you that know the business and can contribute to its success. Think back to what your goals and values were in January 2020 and use this to rebuild the business. Use the Stockdale paradox – have faith whilst confronting reality.  And take advantage of the expertise you have in your corner; your accountant is well placed to assist.

Strengthening your business


In this current situation of 'unknowns', in our world and business environments, we must take specific measures where possible, to ensure a sustainable future beyond unexpected periods of crisis. We have developed some very specific actions you can take to protect and minimise negative impacts on your business:

ü  Ensure your employees are made aware of and kept up to date on the latest government advice and enforce the need for stringent personal hygiene practices in your workplace.   Re-iterate health and safety practices and provide adequate infection control items such as hand sanitiser for all to access.

ü  Revise staff travel plans and consider alternate methods of engagement for these events.  Also review seating arrangements in the workplace to ensure that a safe distance can be maintained between employees.

ü  Contact your insurer to understand your insurances.

ü  Talk to your banker and discuss the possibility for a suspension of loan re-payments in the short-term.

ü  Free up your working capital – access term deposits, increase overdrafts and credit card limits just in case.  Good business planning ensures measures are in place for a rainy day – so now is the time to make sure you can access these funds to continue your operation and delivery of your services where safe and possible to do so.

ü  Implement systems to allow employees to work from home whenever possible for continuity.  Full work-from-home scenarios allow your business to continue operating, your customers to receive a continuity of service, and your employees to feel a sense of security and a positive place to focus their energies.  Of course it's important to assess IT requirements for offsite access to files and records such as cloud based access.  You should also consider alternate means of doing business that allow for interactions that avoid the need for physical transactions, meeting and exchanges.

ü  Talk to your clients. Email them, write a letter, do a post on social media or better still, give your long-standing clients a call.  Let them know you are open for business and check in on them too.  Let them know of any changes that are happening with your business, and how these changes may affect them.   Give them options on how they can continue to use your services.

ü  Review internal communication systems to allow for regular contact with the team. Investigate the use of systems such as Skype, Zoom & Google Meet to ensure your team stay connected, focus and can operate in an autonomous environment.  Consider internet access and bandwidth of your employees at home to deliver these services.  Access security considerations for this way of doing business.  Consider your back-up system and that it is adequate for your alternate working circumstances.  Do employees have access to suitable devices that are approved for network access?

ü  Halt purchases of all non-essential stock.  Look at what you need to do business, ensure you have ample stocks of items that are in high demand and consider alternate arrangement such as home delivery and remote customer payment for purchases.  Consider alternate ways of delivering your services – video conferencing, user pays access to on-line instructional videos and classes or resource packs.

ü  Consider disruptions to your supply chain and adjust your procurement arrangements as necessary. Investigate alternative domestic or international suppliers.  Have them pre-qualified and outsourced in case primary suppliers can no longer provide support.

ü  Negotiate delayed invoice payments to large business customers.

ü  Pay bills to small, local businesses - they need money too! 

ü  Request early payment terms from your large business customers, especially government – you might be surprised at the result.

ü  Check the leave balances for each employee and advise them to take leave where possible, this will not only assist with reducing overheads, it will also allow you to stagger work force availability as needed.

ü  Avoid bill shock. Cut back on discretionary expenses and minimise waste and overhead costs – electricity, water etc.  Consider revised budgets and multiple budgets based on the variety of possible scenarios so you can adapt as needed. 

ü  Ensure premises, stock, vehicles and tools are protected from theft. 

ü  Fill up your essential plant and fleet if you can and secure bulk fuel storage tanks if applicable.

ü  Identify your essential staff, keep them across what is happening and give them a voice; help them to help you keep your business running.

ü  Have you conducted a thorough risk assessment and identified areas of impact across your business?   If not, now is the time to do it!  Consider;

  •       People
  •       Processes
  •       Financials.  

    Measures should be implemented where possible to minimise your exposure to these risks and mitigate them.

ü  Investigate and access available funding packages.  At times such as these, the government often makes available funding packages such as the stimulus package.  The intent is to ensure a certain level of continuity for business and our economy overall so make sure you are aware of these and utilise what you are entitled to.

ü  Talk to your accountant so your business can withstand disruption and find out if your business qualifies for the recently announced Stimulus package. 

Fraud - don't risk it.

No matter what size your business is, you are at risk of fraudulent activity.  In fact, small businesses with fewer than 100 employees, reported 28% of all instances of fraud – a higher rate than for medium and large businesses – and suffered greater losses in relation to their size.  In fact, business reports losing around 5% of total revenue per-annum due to directly to fraud! 

SMEs have specific vulnerabilities that can be easily exploited.  Owners are working excessive hours trying to build their businesses, are pressured by the responsibilities of caring for livelihoods of employees and family and trying to keep their businesses afloat in tougher times.  There is no option but to place trust in the skills and experience of others to take care of back-office administration so you can get on to what you do best – earning income for your business. 

It's devastating when the people you trust are actually betraying you and your business from within.  The cost of fraud and theft goes way beyond the monetary value – it is a wound that can take a long time to heal.  You and your committed employees may feel betrayed – how did we miss that?  There may be a loss of confidence in your staff, and their productivity then declines; because your once cohesive team is now suspicious of everyone and looking over their shoulder; or even looking for a job elsewhere.

So when you consider that small businesses are powered by passionate owners, like you, who invest so much of your time and energy into pursuing your dreams – it is time to look for a reliable solution.  There is no doubting that you work hard, but your focus can be pulled in a thousand different directions at any point of the day.  When you experience the success of growth, you also have to be prepared to face increased challenges, such as monitoring cash flow.  But of course, this may not be what you do best, or where you need to invest your time – and that's where we can help.

Whilst it is imperative that you maintain a high degree of scrutiny over your own financial affairs, we have the expertise to be an integral part of your business and help you minimise your risk.

Here are five of the most common fraudulent practices and scams that can prey on business.

1. Payroll fraud.

Shockingly, payroll fraud is reported in about 27% of businesses, and twice as frequently in small businesses (fewer than 100 employees) than larger ones. The main ways include:

·      Pay themselves more than entitled in tiny increments first

·      Setting up and paying a non-existent person, or

·      Bumping up overtime records and leave balances.

Of course payroll complexities significantly increase as your company grows, especially if overtime is a factor.  We can give you peace of mind with a fraud assessment to spot and close the gaps that make you vulnerable.

2. Cash theft.

Cash has a funny way of disappearing in a small business. Whether through Skimming (when an employee takes cash that hasn't been recorded on the books yet, or there are lots of little discrepancies that add up) or Pilfering (when an employee releases funds that haven't been authorized by the owner – an increase in petty cash usage can be a sign).  Cash theft creates a negatively cumulative impact on the bottom line. Whether you are just setting up your business or looking to improve, our team can help streamline your cash monitoring process, both for an effective financial process and also to maintain essential supervision of cash within your business.

3. Online banking. 

The increased popularity of online banking has also increased the likelihood that funds can be diverted to erroneous accounts, and cyber-crime has never been more sophisticated.  There are a few procedures available that can beef up your defenses against faceless scammers.

Pacifica can diagnose your exposure before the consequences of fraudulent activity become a very real problem.

4. False invoicing.

False invoicing is an increasingly popular fraud method. It often strikes when an employee creates false suppliers or when they pay a legitimate supplier and divert the cash into an alternative account. Using data analysis, there are ways to check if this is a risk, or it's actually happening to you. Pacifica can review your invoicing processes and reporting to make sure that these fraud tactics are avoided.

5. Supplier Invoice scams. 

This scam often involves perpetrators posing as legitimate suppliers.  Scammers cultivate relationships with the people in your organisation that pay out money.  It seems like innocent banter, but the scammer is profiling your team to find the weak link.  Soon enough an email or phone call will come through advising of a change in bank details.  Bogus documents are then sent to you that look very legitimate.  Once you've updated a legitimate supplier's bank details, invoices that look the same as usual start arriving.  You're paying them, and your real supplier is on your tail demanding payment!   You've just lost a healthy sum to scammers, and as a bonus you still have to pay your supplier what's owed!  That's a duplicate cash drain.  Won't happen to us?  We're too small to be of interest to scammers?  Don't we have some firewalls or thing-a-me-jigs that catches this sort of thing? WRONG – Admitting you're at risk is the first step in defending against it.

In recent reports, small businesses that recorded fraud suffered a median loss of $150,000!   That kind of hit can break a business. So whilst it is important to develop a great team and grow your business, it is also vital that you maintain tight controls on your financial activities.  When owners are too busy with what they do best to monitor business financials, the potential for fraud and detrimental loss rises.  Don't fall into this trap.  Our team will not only reduce your risks and identify processes that need tightening, they also provide you peace of mind – and as you know, in business, that's priceless.

The complexity of Australia's tax system

Australia's taxation system is excessively complex for a nation with a relatively small population base. This complicated system is most likely a product of our electoral system, and the reluctance of governments to make

changes, which historically are not well accepted by their constituents.

Our income tax legislation was originally drafted in 1936 and you may be surprised to learn that a large part of this initial legislation is still in place today. Various governments have undertaken reviews of our tax system with the Tax Law Improvement Program introduced in 1997.

Instead of rewriting the legislation and starting with a blank canvas, the 1936 legislation was amended and adapted with clauses inserted to update the law. This process has continued over the years resulting in a bulky volume of information resembling an old piece of furniture covered in plaster and tape with bits of timber nailed onto the sides to hold it together.

I started my career in the mid 1980s and during that decade I saw major taxation changes that substantially affected how businesses handled their accounting processes. We had the introduction of Capital Gains Tax, new substantiation rules to support deductions, the introduction of Fringe Benefits Tax (FBT as we fondly refer to it), plus the implementation of the imputation system; just to name a few. The next big change was the introduction of the Goods and Services Tax (GST) in July 2000. Is your head hurting yet?

This process has created a complicated set of laws that can take years, and sometimes decades, to be tested. The Australian Taxation Office is aware of these issues and will often release public rulings, interpretive decisions and other documents which, in essence, outline their interpretation of the law. It doesn't mean they are correct, but if you follow their guidelines, they won't take action if ultimately the courts rule otherwise.

This brings me to the current problems with our tax system. My experience in dealing with the tax office over many years has highlighted that at times even they become confused in interpreting the law. As well as having a complicated taxation system, we also have a situation whereby governments are constantly under pressure with allocating resources.

So we end up with an overly complicated system being monitored by an under-resourced department in an ever-changing environment. To combat this problem, the Federal Government ensures the penalty regime is sufficiently scary to stop taxpayers pushing boundaries.

In my opinion, this can create an unfair marketplace where taxpayers, either purposely or naively, do not comply with the law as it is interpreted.  It can create a competitive advantage to those who push the boundaries, but only until they get caught.

If you're a punter and you want to test your luck by either doing the wrong thing or testing the law, then the odds of either getting caught or challenged are probably in your favour. But beware, the stick wielded by the Australian Taxation Office is a big one, and if you get caught or lose the argument, it will hurt!


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  • Cairns Office

    First Floor, 280-286 Sheridan Street
    PO Box 993N
    Cairns North QLD 4870

    Phone: 07 4044 5100
    Fax: 07 4044 5199
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    GPO Box 111
    Brisbane, QLD 4001

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