CBM Articles

Collapse of ABC never crossed my mind - Groves

Thu, 13 May 2010 00:55:00 GMT

Eddy Groves says there was never a shadow of doubt in his heart that ABC Learning, the childcare business he co-founded, might not survive.

When ABC Learning’s bankers asked in 2008 for security over the money they had lent the business, Mr Groves said he was not surprised because the global financial crisis had ‘‘changed the world’’.

Mr Groves was giving evidence today in the Federal Court in Sydney at a public examination into events leading up to ABC Learning’s collapse in 2008, owing more than $1 billion.

Michael Cashion, SC, acting for ABC Learning administrator Ferrier Hodgson, asked the now unemployed entrepreneur if the reason the banks required, and were granted, security was because they thought ABC Learning may become insolvent.

Mr Groves said there was ‘‘never a shadow of doubt in my heart’’ that ABC Learning wouldn’t survive.

‘‘I never believed that it would ever be the case,’’ Mr Groves told the court.

Mr Groves said he saw the banks’ request for security in 2008 as a standard procedure during the onset on the global economic downturn.

He said ABC Learning’s disappointing first half financial results, released on February 2008, should not have been a cause of concern for its creditors. On February 25, 2008, ABC Learning reported a 42 per cent fall in first half profit to $37.1 million. The next day its share price tumbled as much as 70 per cent.

‘‘I don’t think ABC’s results were disastrous, they were lower than expected,’’ Mr Groves told the court today.

ABC Learning, then Australia’s largest childcare centre operator, went into administration and receivership in November 2008, owing more than $1 billion.

The examination, which is under privilege and cannot be used to lay criminal charges, is being overseen by ABC administrators Ferrier Hodgson.

Mr Groves also told the court he delayed tax payments in 2008 to ensure the amounts were ‘‘accurate’’. Other creditors had payments go from within 30 days to within 60 days.

Mr Groves said payments were delayed not because of any cash-flow problems but partly to save money on interest.

If the business was going to take advantage of anyone’s balance sheet, it ‘‘sure as hell’’ would be accountants and lawyers, he said.

The examination in Sydney follows a round of examinations in Brisbane late last year. Former chairman David Ryan is expected to take the witness box on Monday.

http://www.smh.com.au/business/collapse-of-abc-never-crossed-my-mind-groves-20100416-sjg3.html

Leverage childcare’s economic value

Thu, 24 Sep 2009 03:08:00 GMT

There is plenty of evidence to suggest that childcare services are a catalyst for business development and a major driver of economies – none moreso than Australia’s.

Many industry watchers have long held that regional business development tracks, or is tracked by, the growth of childcare services.

The way childcare frees parents up to pursue their businesses and careers is clear, but there are other strong economic forces at work.

Recent Australian research published in the September 2009 issue of the Australian Economic Review – based on the paper Children, Labour Supply and Child Care: Challenges for Empirical Analysis by associate professor Guyonne Kalb, the director of the Labour Economics and Social Policy research program at the Melbourne Institute -- found that good childcare services and appropriate pricing releases business potential and benefits the community economically.

“Not surprisingly, those most affected are on low wages and have preschool children,” said Assoc. Prof. Kalb. She said in the economics literature, relatively little attention is paid to the effect of childcare use on child development – although this may be an important factor in the decision to use childcare and is likely to be related to the quality of childcare.

If children’s development is well cared for, then not only is parental time freed up to develop businesses and careers, so are parents released from the strong concerns about providing ‘properly’ for their children’s development.

This has been highlighted in a US study of regional economic development by Mildred E. Warner, an associate professor at the Department of City and Regional Planning at Cornell University, New York.

“Traditionally, childcare has been thought of from an education or welfare perspective,” Prof. Warner reported. “This is primarily because public funding for early care and education has been limited to programs focused at the preschool level … and targeted to poor children (subsidies for low income parents). An interesting shift has happened in the last few years as the early care and education field has begun to measure its importance for families and the broader economy.

“Since 2000, 58 (US) states and localities have completed regional economic analyses of their childcare sector, and 13 more studies are in progress. Childcare is an interesting and unique sector because of its multifaceted role in the regional economy. First, it can be conceived as an economic sector in its own right with establishments, employees, and linkage to other sectors. Second, it plays a critical social infrastructure support role in the regional economy by enabling parents to work. Third, it has a long term economic impact by supporting the human development of children — the next generation of workers.

“This new economic development framing creates a new opportunity for community developers to integrate attention to social welfare in regional economic modelling and economic development planning by considering it as a social infrastructure for economic development,” said Prof. Warner.

BUSINESS PERSPECTIVE

But there is also growing evidence that childcare, early learning facilities and children’s education hubs in general are something of a portal for local business development.

Certain businesses are recognising this and making astute alliances with their local childcare centres.

For example, a major Australian mortgage organisation has come to recognize that shifts in family circumstances – needing to renovate homes or move relocate because of family growth – are events that drive mortgage business.

Families needing to change their finances are likely to seek out someone they already know – and why not someone who is clearly supporting their childcare centre and helping to provide better facilities for their children?

One of the best ways this financial group has found of staying in touch with those potential opportunities is to sponsor local childcare centres and, in some circumstances, offer regular donations to the centre in return for leads, interviews and, increasingly, new mortgages that are written as a result of introductions through the childcare centre.

It is an entirely logical alliance that benefits all parties. Yet it is the kind of alliance that has been a very long time coming as business has generally considered childcare centres in isolation rather than as a conduit for business.

The benefits of these types of alliances are not well understood or very well leveraged in the childcare industry at present. They go way beyond an occasional donation or a community services advert in a newsletter or on a bulletin board.

If well managed and well matched, strategic business alliances can act as a conduit for local business growth while providing a regular revenue stream for childcare centres. That has to be good for developing better services and facilities for children.

The most successful childcare businesses in the future will be those that seek out these strategic business alliances.

If your centre is pro-active – and careful – in making local business alliances, you can drive long-term financial success for both your centre and provide better facilities and experiences for the children in your care.

By Mike Sullivan

Cut the time spent on your super contributions in half

Thu, 24 Sep 2009 03:11:00 GMT

Running a child care centre involves keeping on top of a range of business management issues and day-to-day administration in your centre. Paying your Superannuation Guarantee (SG) contributions is just one of these regular activities which can take a considerable amount of time. New online superannuation capabilities can improve the efficiency of your SG contributions process meaning you can spend a fraction of the time you did previously.

How can online superannuation payments help you meet your super employer obligations faster and easier?

Some superannuation funds are now providing online services to help reduce the amount of time taken to process SG contributions. For example, the Australian Child Care Super Fund offer a free Super PaySmart Solutions Service including both an online contribution and a clearing house facility. These provide a number of benefits that have already freed up a considerable amount of time for many childcare centre owners.

No more paperwork

Paper files no longer need to be filled in as all information and receipts are delivered electronically, creating more reliable record-keeping. Keeping track of your contribution history can be as simple as logging into your account.

Less time-consuming data entry

Writing dozens of cheques manually every month to pay SG contributions can be a long winded exercise. Online you can update the contributions list yourself or upload a file from your payroll software. Either way, updating details and adding or removing employees is easy.

Never forget a super payment again

An online solution helps to avoid penalties for late payments. Registering online for quarterly SMS reminders is an ideal way to help pay your employees’ contributions. Employers using the Australian Child Care Super Fund can register by visiting www.childcaresuper.com.au and clicking on the ‘contribution reminders’ tab.

Easier payments

You control when and how much is deducted from your account by either direct debit or BPay. These secure payment methods leave less room for error.

Paying different employee funds in one payment

When you have a number of employees with a number of different funds, paying to each

can be time-consuming. There is an option to reduce the time spent by using a clearing house service.

What is a clearing house?

A clearing house is an electronic service that helps employers make super contributions to multiple funds in one hassle-free payment. This means you can reduce the processing of all your contributions down to one batch, no matter how many super funds your employees choose. You make a single payment and the administrator makes the necessary contributions to all of your employees’ chosen super funds.

As a business owner, time is precious, and as you can see there are a range of ways that dramatically improve the efficiency of your super administration as an employer, cutting down your time spent and reducing your paperwork.

The Australian Child Care Super Fund’s two online payment options for employers suit different needs. The clearing house service, provides the ability to upload files from your payroll, and manage your payments through direct debit. This service can dramatically reduce your time spent on super administration.Sergio Agresti, Financial Manager for Child Care’s Kindy Patch Pty Ltd, has been using the clearing house service provided through Super PaySmart Solutions for the past nine months. He spoke of his experience.

“The work from the administrator to get us up and running so we could load contributions electronically was superb. We have been using the system for nine months now and haven’t looked back. It’s an accountant’s every dream to streamline payments, and not having to sign 30 cheques a month is a blessing”, said Mr Agresti.

Ask yourself how long it is taking you to make SG contributions. Could you be using that time more effectively?

To find out more, call the Customer Service Team on 1800 060 215 between 8am and 7pm Monday to Friday for more information, or go to www.childcaresuper.com.au and click on the Employer tab.

The Australian Child Care Super Fund’s Clearing House solution is provided through MercerSpectrum. MercerSpectrum is a product issued by Mercer Investment Nominees Limited (MINL) ABN 79 004 717 538 AFSL 235906.

This document contains information of a general nature only. It is not intended to constitute the provision of advice. Before acting on any information you should consider its appropriateness having regard to your objectives, financial situation and needs. Prior to making a decision in relation to any financial product, you should consider the relevant Product Disclosure Statement (PDS) in deciding whether to acquire, or continue to hold the product. You can obtain PDSs by contacting Guild Trustee Services. Guild Trustee Services Pty Limited ABN 84 068 826 728 AFS Licence No. 233815, RSE Licence No L0000611, as Trustee for the Australian Child Care Super Fund. Fund Registration No R1001617. ABN 19 022 138 786. The ACCSF Clearing House Solution is provided through MercerSpectrum. MercerSpectrum is a product issued by Mercer Investment Nominees Limited (MINL) ABN 79 004 717 538. AFSL No. 235906.

By Jason Trevathan, Financial Consultant, Australian Child Care Super Fund