Goodmoney CIC - Part Two (FB 11th June 2015)

A question arose. I researched and concluded thus:

It is my opinion that Goodmoney Community Interest Company (Goodmoney CIC) is only good by name and their Goodmoney Voucher business is profoundly detrimental to any local economy that engages with it. I cannot advise anyone to buy Goodmoney Vouchers or to accept them as payment.

Part two – Statements and Sums (fewer words but loads more numbers)

For Goodmoney CIC, Goodmoney Vouchers is a low risk business model with high return potential over a short to medium trading period. No loss will be suffered by Goodmoney CIC when the scheme burns out.

For givers, Goodmoney Vouchers are a stupidly expensive way to give spendable gifts.

For suppliers of goods or services, Goodmoney Vouchers are a stupidly expensive way to receive payments, being both short of sales value and delayed from the date of sale, adversely impacting profit margins, cashflow and VAT accounts. A retailer achieving modest margins on cash and card sales could have their business collapsed by this scheme if they accepted too many of these vouchers over a busy Christmas period.

Interestingly, buried deep in Goodmoney CIC’s T&C is a clear acknowledgement that operating their once-a-month payment run is detrimental to a business’s cashflow.

Is the Goodmoney Voucher scheme illegal? Not as a business but the way it is promoted might be and its qualification for CIC status might be questionable if viewed very closely

Is the Goodmoney Voucher scheme ethical? I don’t think so.

Would the Goodmoney Voucher scheme benefit the community or boost the local economy? No.

As it is both the Givers of the gifts and the Sellers of the goods who make up The Community and both groups lose out compared to giving the same gift value in cash the scheme is clearly not a boost to the economy of The Community. The scheme appears designed to do the opposite and to siphon cash out of the economy of The Community
______

If you want some arithmetical proof of the above, read on.

I use the giving of a single Voucher with a “£20” face value in this example:

To buy a Goodmoney Voucher with a face value of £20.00 will cost £23.75 if you include in your order the £1.00 for a gift card and envelope and the £2.75 for signed-for delivery of the voucher to you.

The current standard price of 1st Class Signed-For Delivery by Royal Mail of a 100g letter is £1.73 and if a business can’t buy gift cards with envelopes for less than 50 pence a time they should replace their buyer.

At first glance, this appears as if Royal mail have earned £1.73, the gift card supplier has earned 50p and Goodmoney CIC have made 50p on the card and £1.02 on the delivery to you of the voucher, a profit of £1.52 from your purchase of a “£20” Goodmoney Voucher.

For those who really enjoy figures, 6.4% of your outlay has gone straight to Goodmoney CIC.

There will be some costs incurred in processing the Voucher orders but if we assume success for Goodmoney CIC such that 1000 sales of “£20” vouchers to have taken place in a period their gross profit from the sale of the Vouchers in this same period will have been £1520 and I would expect their net profit to still exceed £1000 if they are running their business efficiently.

Goodmoney CIC would suggest this additional cost to you is worthwhile to ensure your present is spent locally and benefits local businesses. If you believe them you will buy into their scheme and the £20 worth of goods the recipient of your gift buys will have cost you £23.75, 18% more than it would have cost you to give cash.

When you are mulling this over in your head, you will probably be thinking that the £20 worth of goods the person you gave the Voucher to spends it on represents £20 worth of revenue for the local business supplying the goods and that’s that, but it doesn’t.

The local business supplying the goods only receives £19 when they redeem the “£20” Voucher, even though they have handed over the full £20 worth of goods and still have to pay a VAT bill as if they had received the full £20. The missing £1 stays with Goodmoney CIC as their 5% fee to businesses.
______

I’ll come back to the effects on businesses in a moment. For now I will stick to the transaction as viewed by the buyers of the Vouchers, for it is only their money that funds the scheme.

If you wanted someone to be able to buy £20 worth of goods in a local shop and you gave them a £20 note that they then spent in a local shop, you would be down £20, the person you gave the cash to would have £20 worth of goods from the shop and the shop would have £20.

Introducing a Goodmoney Voucher into the transaction doesn’t affect the person who received the gift from you as a Voucher instead of cash, they still get £20 worth of goods from the shop, but this time you are down by £23.75 and the shop only gets £19, the other £1 having being retained by Goodmoney CIC. The shop also has to wait until Goodmoney CIC’s monthly pay run before they get their £19 which leaves them out of pocket in the meanwhile.

Updating the model now you have seen the second part of the transaction, Goodmoney CIC actually take another £1.00 to add the £1.52 of net profit you already knew they were taking. Goodmoney CIC now has £2.52 of your £23.75 and the shop you thought you were supporting has not done as well as you imagined they would. In which case you have been misled.

In the end, 10.6% of what you gave to Goodmoney CIC would stay with Goodmoney CIC, not just the 6.4% of it that showed up originally.
______

Wind this up to the 1000 customer model:

Giving Cash.
Gift givers give £20k, gift receivers get £20k worth of goods and the businesses supplying them get £20k of revenue to pop in the bank straight away to pay their bills.

Giving Goodmoney Vouchers.
Gift givers pay out £23.75k, gift receivers get £20k worth of goods but the businesses supplying them get only £19k of revenue and they have to wait up to a month before they can use it to pay any bills.

I can’t be sure about the detail but I would be very surprised if Goodmoney CIC hadn’t managed to hang on to at least £2.5k of your investment by the end of it, to which they would add the interest accrued on the £19k that sat in a bank from the moment the Vouchers were purchased until they were redeemed.

The sale of all subsequently lost or otherwise unspent vouchers would still earn immediate profit at the time of sale and ongoing interest on their redemption value indefinitely for Goodmoney CIC while never contributing to other business turnover locally.

[Radio debate from Goddamn Radio 8th June 2015 

https://www.spreaker.com/user/countessofbrightonandhackney/better-money-for-brighton ]

Goodmoney CIC - Part One (FB 11th June 2015)

A question arose. I researched and concluded thus:

It is my opinion that Goodmoney Community Interest Company (Goodmoney CIC) is only good by name and their Goodmoney Voucher business is profoundly detrimental to any local economy that engages with it. I cannot advise anyone to buy Goodmoney Vouchers or to accept them as payment.

If you want to see my professional background find me on LinkedIn, just drop the Po when you search.

I would, of course, be very interested to hear from anyone who thinks they can explain how a scheme that removes money from the collective economy of any local community at the rate of £4.75 per "£20" Gift Voucher transaction is beneficial to that community's economy.

Perhaps Dr Caroline Lucas MP, a Director of Goodmoney CIC, might like to have a go.

Part one – The Narrative (loads of words and fewer numbers)

On Monday I was involved in a debate that was broadcast live on the internet and can still be listened to via the www.goddammnradio.comwebsite. Proposed as a debate about alternative currency models, it became apparent quite soon that the visitors to the studio were simply using the current mood of general distrust in banks to promote a commercial gift voucher scheme as if it were a fledgling alternative currency that would benefit the local economy.

I was somewhat surprised when, before we went live, Matthew Slater, a self-titled "Community Currency Engineer", picked up an unused toothbrush that was among the art and music bits n bobs in the studio and asked if he could have it. He was promptly and firmly told, No.

I had read Matthew's website in preparation for the debate and was interested to discuss his philosophy of "Radical giving" with him as it seemed to involve everyone else giving their stuff away while he lived on gifts from everyone else, his only return contribution being the apparently priceless advice that giving stuff away so you own as little as possible is in some way spiritually beneficial.

Even having read his page and understanding him to be content to freeload off other people, I wasn't expecting Matthew Slater to be a straightforward beggar, I wasn't expecting him to ask to be given stuff as he saw it and wanted it.

Following the toothbrush incident I was not surprised when, after the broadcast was over and I was on the way outside for a smoke, Mathew wanted a free cigarette from me.

"Give me a cigarette." He said, with a tone suggesting it was my duty to provide one for him.
I told him, "No. You can buy your own."
To which he shot back, "I don't smoke." as if to give an illogical response was in some way clever. Moments later, he came outside rolling a cigarette he had more successfully blagged from someone on his own team.

You can listen for yourself how well he fared in the "debate" if you wish but I wouldn't advise taking any kind of financial advice at any time from any guru who apparently can't afford a toothbrush and who relies on handouts from disciples to get by from day to day.
______

Before he started telling people to give their stuff away, Matthew made his living writing software. One of his programs, he told us, sits behind the Goodmoney CIC gift voucher scheme. CIC stands for Community Interest Company, a form of Limited Company that must be run as a profitable enterprise and its activity must benefit the community. A CIC is not a Charity and cannot be run as "not for profit" or at a loss.

Having spoken in echo of Matthew's emotive terms of the evil of banks and that money as we know it should be replaced with something better, Dr Mick Taylor, a Director representing Goodmoney CIC, introduced his company's scheme as if it were a fledgling alternative local currency that would boost the local economy. At least, that's how it came across to me. Listen for yourself if you wish.

When quizzed, Dr Taylor, a mathematician whose PHD is in Network Science, had to concede the scheme is not a currency at all and never could become one. It is nothing more than a pre-paid gift voucher for local use with participating local traders. Dr Taylor was careful to describe the 5% fee deducted from the face value of the vouchers when redeemed by a business as an admin fee for inclusion in an online directory of participating businesses.

As he is a mathematician and on the Board of Directors of Goodmoney CIC, I was very surprised that Dr Taylor claimed not to know, when asked the question directly, what would happen to the interest on all the money that would sit in Goodmoney CIC's bank account in the period between any voucher being purchased and it being redeemed.

The debate on alternative currencies / gift voucher pitch drew to a close after its allotted broadcast hour and continued for a short while outside in the sun on the back deck until the Goodmoney sales team went off into the afternoon and I went home for a kip, my usual nocturnal routine having been interrupted by another engagement earlier in the day.

Perhaps energised by the debate, I didn't sleep straight away. Instead, I started doing sums and reading the Terms & Conditions published across a number of pages on the Goodmoney CIC website. If the T&C were outsourced I suggest someone asks for their money back. I was not impressed to find inconsistencies between similar terms on different pages, typos, use of incorrect words and reference to a non-existent Act.

I read Goodmoney CIC's T&C from start to finish, because I am like that. I would have looked at their accounts but the company is too new to have published any so I looked at the legislation covering CICs. All this is standard practice for anyone properly evaluating any contract and is what I have been paid to do for years.

Though in this instance I am giving my advice free of charge it is exactly the same advice as I would give were I commissioned as a professional consultant.

I cannot see how such a plainly parasitic business can call itself a Community Interest Company in any sense other than by Goodmoney CIC's registered office being in New England House, an address within the community. Everyone else in the community who interacts with it seems to lose out by doing so. I note Goodmoney CIC requests volunteer help with its commercial operation.
______
My considered advice to anyone wanting to give someone else £20 to spend locally is to make your gift of £20 in cash and hang on to the extra £3.75 it would have cost you to add a gift card, envelope and delivery to the purchase of a "£20" Goodmoney Voucher.

Most people spend cash locally in shops and pubs anyway and you can spend locally the £3.75 you have saved, too. How about supporting your local pub or café with a drink or a bun to celebrate being smarter than Goodmoney CIC and actually supporting your local traders and businesses without going through a middleman?

My considered advice to traders and businesses is to not participate in this voucher scheme unless you have fully understood the detrimental effect it would have on your cashflow, your profit margins and your VAT account when compared to equivalent cash sales.

Accepting payment in the form of a credit voucher still leaves you liable to pay VAT as if you had received the full sale value at the time of the sale even though by redeeming the voucher you will receive less than the full sale value and will receive the reduced sum at a later date, according to whenever Goodmoney CIC programme their monthly payment run.

It would be less damaging to your business to offer a 5% discount to local customers who pay there and then by cash than to accept a voucher under this scheme.

The 5% of face value retained by Goodmoney on redemption of vouchers was described to me during the debate as a fee for inclusion in an online directory. That all sales resulting from this directory in the fashion intended by the publishers of the directory will be of less benefit to your business than any other sales should be seriously considered before signing up for inclusion.

Signing up also gives away more intellectual property rights than seems necessary, especially as these rights are to be given over to Goodmoney CIC for all time and for any purpose and for everything submitted to their website. This would include their use of your logo without your further permission even if you left the scheme.

My advice to Goodmoney CIC is to stop promoting yourself under a banner of proclamation that the existing monetary and banking system is evil and stop claiming that your scheme is a fledgling alternative when your business model seemingly relies upon earning bank interest on sums held as security against unredeemed gift vouchers and taking a cut from "both ends" of the local transaction.

Though it could be said there is a bit of smoke and mirrors stuff going on here, the key to clearing it away is to ignore the person who receives the Voucher with a face value of "£20" and who gets £20 worth of goods from the local trader.

If someone were fool enough to buy a "£20" Goodmoney Voucher with gift card and delivery and the voucher got spent in their own shop they would have laid out £23.75 to enable them to claim back only £19.00, representing a straight cash loss to that someone of £4.75 having resulted directly from the involvement of Goodmoney CIC as middlemen in the transaction rather than dealing in cash.

It follows that:

If a member of the community buys a "£20" Goodmoney Voucher.... that gets spent in a shop in the community .... a straight cash loss to the community of £4.75 …. directly from the involvement of Goodmoney CIC in the transaction rather than dealing in cash.

If 1000 members of the community each buy "£20" Goodmoney Vouchers and they are spent in the community the community suffers a straight cash loss of £4750. Additional losses would also be incurred by businesses not being paid by Goodmoney CIC until their once-monthly payment run.

As I said at the beginning, I would be very interested to hear from anyone who thinks they can explain how any scheme that removes money from the collective economy of any local community at the rate of £4.75 per "£20" Gift Voucher transaction is supposed to be beneficial to that community's economy.

[Radio debate from Goddamn Radio 8th June 2015 

https://www.spreaker.com/user/countessofbrightonandhackney/better-money-for-brighton ]