Money is a complex commodity. Our use of money has the power to do great good or great evil. It should be remembered that money has extremely powerful, symbolic and psychological connotations and implications that can lead people to behave unexpectedly. In business, money should be used like any other tool – to help achieve your business objectives. An excess of money should not become a goal in itself.
14. Investments
Advice
Think carefully how you invest any surplus funds not immediately needed. Whilst these funds are being invested, someone else is making use of them. Is that use something you would approve of?
Seek to invest in activities or enterprises that contribute positively to the local or global economy, and which raise the quality and standard of living.
Consider the conditions under which the income is produced and the effect which the investment may have on the welfare of all.
Queries
Does your company invest in, or earn revenue from, activities that are unethical or harmful to life and the environment? These may include alcohol, drugs, tobacco, firearms or military weapons and supplies, or gambling.
When you have surplus funds, do you keep some back for when your business will need them?
Do you look after your reserve funds properly, or could they be used more effectively? Do you consider ethical investments, even if the return might be slightly less?
Do you use money entrusted to you with prudence, discretion and responsibility?
If you lend money, is the loan properly recorded? Do you charge a higher rate of interest than you could earn on the money if you invested it elsewhere?
15. Prompt payment
Advice
Remember that payment is owed when the job is completed. Many small businesses may experience serious cash flow problems and even become bankrupt because they do not have sufficient cash to pay their own bills. Often this is because other companies – larger or with more trading influence – have not paid them on a timely basis, not because they are unprofitably managed. Make sure you pay your bills on time.
Queries
Do you know and honour your suppliers’ terms? Do you delay payment at the expense of your supplier?
Do you make your own terms clear and do you deal fairly and consistently with those who do not honour them?
16. Financial accounts
Advice
Accounts are important statements about your business. They should accurately reflect your business position. The information they contain should be appropriately available to those who trade with you so that they can assess any risk.
Unless you keep careful accounts and review them each month it is difficult to manage the business properly. Do not rely solely on historic figures. It is important to consider the future and to try to forecast likely events.
Ensure that people handling money are competent, that they are honest and that they are not presented with undue temptation.
Queries
Do you ensure that you keep true and accurate accounts? Are your annual accounts produced in a timely manner?
Do you have your accounts audited and do you get assurance on the adequacy of your controls? Are your auditors truly independent and not tempted to be less than rigorous in their auditing? Are you vigilant against fraud, honest mistakes and intended deceit?
Do you provide your accounts to those who need to know about your business for their well-being, including your staff?
17. Taxes
Advice
Good organisation of your financial affairs in order to pay not more than the tax you legally owe is good management. Evading tax by arranging your affairs in order to escape paying taxes which are properly due is theft. It is important to consider carefully the line separating the two. Not all professional advisers are clear on the distinction. Be wary of complex, apparently legal, tax advice.
Queries
When a way of avoiding tax is suggested, do you consider carefully whether this is avoidance and not evasion, even if it appears to be within the letter of the law? Do you allow these opportunities to influence the organisation of your business’ finances?
Do you deal honestly with the tax authorities? Do you consider paying tax as part of the duty of your business to society?
Do you keep careful records to prevent evasion of taxes and other state tariffs that are legally payable?
Do you keep adequate records of benefits in kind so that the state is not defrauded or your staff penalised?
Do you take steps to ensure that cash transactions are accurately reported for tax purposes?
18. Remuneration
Advice
Remuneration is not just about pay. It may also include bonuses, company pension contributions, privileged share purchases and services (including cars) provided by the company. It is a return for work done, responsibility and good management.
Rates of remuneration are subject to market forces. Be aware that excessive remuneration can cause envy, which is dangerous to a free society.
Any differences in pay between people doing similar jobs should be logical and understood by all concerned.
Queries
If you award yourself high remuneration, does the same principle apply throughout the company? Do you have a fixed ratio within the company comparing the highest to the lowest paid?
Is your remuneration linked to performance and profitability, even when this has been achieved by making others redundant?
Do you ensure that your wages and salaries are adequate so that employees do not depend on benefits or other means to supplement their pay? Do you pay only the least salary and other benefits you can get away with?
Do you ensure that part-time staff receive the same benefits as full-time staff, on a proportionate scale?
Do you provide a pension for your employees? Is it fully portable (including your contributions) when the employee leaves your employment?
If your staff have to work overtime, do you give them fair recompense?
If staff live in accommodation which is tied to the job, is provision being made by either the employee or yourself (the employer) for their accommodation after they retire?
Do you have a profit sharing plan, to which all (including part-time employees) belong?
19. Gifts and donations
Advice
Encourage a spirit of generosity in your company. Set aside a portion of your profit for charitable purposes. Consider providing an amount of company time for employees to use in support of a worthy cause.
Sometimes gifts can be acceptable as a sign of appreciation, but be careful that this is not seen as a bribe. A gift imposes no obligation on the recipient.
Where bribery is in general use, giving gifts may be used as a form of bribery (see 31. Corrupt practices).
If you donate to political parties or pressure groups, be open about it in your accounts.
Queries
Do you set aside some money for charitable purposes each year? Do you give your employees the opportunity to decide how some of this should be allocated?
Do you encourage your staff to give to charities personally and do you provide procedures and mechanisms for helping them to do so?
If you give gifts - without expectation of favours in return - are you sure that the receiver is not taking on an obligation?
If a business colleague invites you out, do you pay on at least half of the occasions?
Do you have a policy on giving and accepting gifts?