I have had some positive feedback on my recent blog, in which I suggested a few Solutions to Barbados’ foreign Exchange Problem. Having only recently joined the retail business myself through Honda, I received feedback that the larger buying agencies can leak foreign currency abroad by inflating the cost of imports. Unlike cars that have rigid price controls, other consumables are left to the purchaser’s discretion for the most part to declare prices. If the purchaser is technically purchasing from himself in a foreign country then it is possible to put any price on the invoice.
If prices are artificially inflated then companies have seemingly valid reasons to send more than needed sums of money abroad. This is one area then that needs to be considered urgently if this is indeed being practiced because not only the economy suffers but the consumer as well.
Why should our consumers pay up to 500% or more for an artificially inflated item? Inflated pricing practices not only drains our foreign reserves but further inflates our already high cost of living.
I had the recent experience of looking for a 5-gallon container of a wood sealant. The local Barbados price was $375.00. The US retail price with taxes was BDS$110.00. I am sure cost of shipping, local import taxes and the retailer’s markup cannot add up to almost 300% above the US retail price.
I am not advocating price control of any type. I am merely suggesting that, in the same way that under-invoicing is policed by customs, over invoicing should also be monitored.
The Barbados economy is at an all-time low, at least based on what the rating agencies are saying.
Although Barbados still enjoys high ratings for its standard of living, Barbadians are more and more hanging their heads in shame at our country’s poor credit rating and our diminishing middle class. The general argument is that this problem has been created by our low foreign exchange earnings and our high government debt and expenditure.
The Guru’s will guide us on the debt restructuring of our local debt, that we simply have to do.
For me, however, Barbados does not have a problem with earning foreign exchange. What we have is a problem recording or collecting it into the banking system.
One of the ways that this could be improved is by allowing Barbadians to have US accounts like what is being done in other Caribbean territories. This has been suggested by many.
This would encourage more persons to keep their US dollars on the island instead of in foreign accounts.
There is a saying in Barbados that “too far East is West.” The government has tried to protect and prop up the tourism industry so much that it is not as viable as it should be especially in earning foreign exchange for the country.
The biggest single earner of foreign exchange in this country is the tourism sector, and too many tourism operations are allowed to collect their US dollars internationally and only generally bring what they need for their expenses to Barbados.
In my opinion, none of these companies should get any VAT, tax clearance or concessions unless they bank their US dollars or a minimum 90% of the US dollars that they earn into the Barbadian banking system.
This measure would solve the demand that we have for US dollars. I am NOT just targeting the hotels alone, but tour operators, villa rentals and all tourism industry actors that have booking systems that allow them to collect their revenue off shore.
Budgeting is very important in running a business. There is no secret there, and on face value this statement looks obvious but do you know that there are some entrepreneurs and small business owners that from month to month have no idea of their expenses or income.
Continue reading “Business Budgeting”