Where's the money gone?

Particularly in these difficult times, it is staggering that so many companies be they large or small fail to keep a control of their inventories. Whilst Management consistently push for increased sales performance, the question of housekeeping is often put on the back burner or it would appear totally neglected.

This laissez faire attitude is in evidence across the board, recently the National Audit Office having investigated the UK Ministry of Defence flagged up a lack of evidence about the existence and value of some £6.3bn of assets - including £752m of military equipment, which includes firearms and £184m of Bowman radios. The scale of this ineptitude beggars belief.

As far back as 2008-9, auditors had raised concerns about inventory accounts and warehouse systems and checks had been improved, but they had found that the inventory recorded did not match the stock count at 29% of locations. 

This begs the question: how comfortable are you with your Stock and Debtors controls?

 It might be timely to conduct a pre-emptive review of your operating systems now rather than wait for the post mortem results.  

It seemed like a good idea at the time

All current economic data underscores the fact that the last quarter of 2011 is going to be a difficult time for all. As domestic budgets are ever more squeezed this will impact on businesses across the board.

The recent meeting of US Bankers at the Jackson Hole Summit concluded that debt problems facing advanced economies were even worse than previously thought and that even the drastic action taken so far to reduce the debt mountain may not be sufficient to head off another wave of crisis in the global banking world.

At the same time The European Commission continue their battle to stave off further crisis in the Euro zone as the risk of debt contagion spreads.

There has rarely been a more crucial time to conduct a root and branch analysis of your business. Undoubtedly there are areas which would benefit from some radical adjustments/ change of direction. The consequence is not acting now could have very negative effects in the next few months.

Now is the opportunity to prepare for increasingly difficult times rather than adopting an ostrich “head in the sand” approach.

When trying to explain a disastrous strategy to your Shareholders or Bankers it will serve little purpose to trot out the well worn defence “it seemed like a good idea at the time”. 

Fiddling whilst Rome burns?

How often do we ignore the obvious and subsequently ask ourselves “why did that go wrong?”

A large number of companies fail to address problem issues early enough to avoid an oncoming crisis.

The signs of a troubled business are all too apparent – these include lack of controls, lack of strategic vision, a demotivated workforce and obsolete or valueless stocks etc

Instead of grasping these nettles, often the preferred option is to engage in a totally pointless exercise such as a rebranding campaign or the launch of another product range destined to fail for the above reasons.

The operating style of many doomed companies can be likened to Nero’s pastime of fiddling whilst Rome burns.

Managing in troubled times

Working with companies over the past months I have noticed that there is an increasing sense of demoralisation amongst many sectors of the work force.

The causes for this are readily identifiable, many people are struggling with their own domestic finances whilst at the same time the need for increased levels of performance and efficiencies at work have rarely been as intense.

It is the responsibility of the Management to ensure that during these times Staff members are encouraged to give of their best.

Too many Managers are remote from the day to day activities of their Staff and appear to have the attitude that the people who report to them are lucky to have a job.

This mentality is counterproductive. Staff need motivating and incentives do not necessarily have to come solely in the form of financial rewards.

Some of the best run and therefore by definition most successful commercial entities are those where the workforce is engaged and feels part and parcel of the organisation rather than merely there to make up the numbers.       

Are you postioned for the Stress Test

Following the weekend announcement from IMF Chief Christine Lagarde that although the global lender can meet its current obligations this could change if the crisis worsens are heightening concerns that more European Banks are in danger of failing the stress test.

This comes as a timely reminder that all businesses operating in today’s climate need to have constant and rigorous focus on their commercial exposure.

Against the current competitive background it is very difficult to contemplate turning away business especially from a customer of long standing. Many times however, the best business is that which is left to competitors.

It may well be that turnover suffers when stricter controls are in place over such elements as payment terms and credit limits.

However, the reward for such fiscal discipline is obvious. Avoiding defaults by customers not only protects the company’s bottom line but considerably reduces the stress in your own life!

Time to lift a few stones?

Events of the past week have shown just how vital it is that Senior Management set clear defined operational and reporting procedures.

In many companies the Directors simply do not have the understanding of the mechanics or the day to day activities of the business which they purport to run.

For example I have worked in trading environments where totally unrealistic profit target have been passed from Board level to trading departments. No cognisance having been given to the disproportionate risks which need to be taken to achieve these targets.

Some of the most spectacular financial flame outs have followed a period of ostensibly highly successful trading. In their desire to recognise these “profits” no thought were given as to how they were being made. In such times it would be well to take note of the old adage that is something looks to be too good it usually is!

If your company is bucking the trend in these difficult times it may well be that you are implementing a winning formula.

However history tells us that it is often a prudent course of action to look under a few stones – just in case.

A Spectator always sees more of the game

During my various assignments one observation holds true – whilst there are very few truly bad businesses, there are many that benefit from a fresh input.

 When you are personally involved it is not always easy to change direction or take appropriate remedial action.

This is where an “outsider” can be of assistance – an objective appraisal can very often mean the difference between merely drifting as opposed to decisively moving forward

Time to circle the Wagons

All markets are driven by 2 factors – fear and greed.

Currently with all the talk of gloom and doom in the financial markets, fear is the overriding factor with a sense of panic gripping many operators. The latest overnight pronouncements from the IMF that global economies are entering “a dangerous new phase” will further add to the sense of unease felt by many.

 Now is the time to remain focussed and consider the implications for your business.

Just as was evidenced in the Summer of 2008 there is a question mark over the manner in which the Banks will respond to the current inputs. The problem for the Banks is that because of the legacies of their previous mistakes they are effectively stifling their customers businesses as they look to batten down the hatches.

It will become increasingly difficult to gain support from the Banks in the coming months therefore it must be the absolute priority to keep a strict rein on your finances – make sure that your Debtors Book is strictly controlled and ensure that Stock turn and inventory levels are well policed.

With their own houses far from in order (think UBS), the Banks will undoubtedly become even more negative in their approach to lending, so the order of the day is work within your current limits and maximise returns.

How well do you know your Customer?

Recent rapid advances in technology have transformed the way we do business. Our everyday business tools would have been regarded as flights of fancy not so long ago.

With the unstoppable rise of e-commerce come challenges. Perhaps the biggest danger is the lack of personal contact between a company and its customers. Obviously this is not an issue for an online retailers selling products over the net and being paid via a Debit Card or Pay Pal etc.

However, there is an increasing tendency for B2B sales to be concluded by email or even SMS. The personal element has been lost and so has the identity and customer relationship. The surest way to avoid problems is by knowing your customer and understanding their business. This relationship and mutual understanding is not possible to maintain thru a key pad and email ordering system.

Is your Company in need of fresh input?

I have an extensive business background in sales and business development. In addition to working at senior/ main board level in the UK I also have worked in both North/South America and the Far East.

Currently I am working as an independent business consultant but am looking for a hands on managerial role where I could more fully utilise my business background and contacts. I would be particularly interested in hearing from companies wishing to diversify or looking to turnaround failing business units.

If you are looking to strengthen your management team then I would invite you to look at my profile at http://uk.linkedin.com/in/gordonblackburn or alternatively email me at gordon.blackburn1@btinternet.com and I will send you a copy of my current CV.

Bank losses - haven't we been here before?

Yesterday’s announcement by UBS of the discovery of a “rogue trade” reported to have cost US$2 billion has once again put the Banks under the spotlight.

It is incomprehensible that despite all the evidence to the contrary the Banks still behave with a staggering arrogance towards their Shareholders (in the case of some UK institutions the Tax Payer) and their Customers alike.

The level of incompetence demonstrated by these self styled “Masters of the Universe” is almost unbelievable. Small wonder that we find ourselves once again staring into the abyss when the calibre of these Bankers is so poor.

The basic problem comes down to an extremely poor level of Management expertise and control.

Before this latest black hole was discovered at UBS you can be assured that the trader responsible for this latest flame out was being lauded and applauded and the only calculations which were being scrutinised by the Bank’s management was the size of their forthcoming bonus payments.

It is one of the great ironies that is that despite all the evidence of their incompetence and sheer recklessness we once again find ourselves in thrall to the very architects of the disaster – the Bankers

Accepted Commercial Practice or Subliminal Warning?

The traditional response from recalcitrant Debtors was “the cheque is in the post”. This generally bought some time as generally Suppliers met this response with a weary resignation.

Times have moved on and the latest mantra is “its set up for next week’s payment run”.

Basically the name of the game remains the same, buy some time - achieve a payment extension thereby effectively squeezing the Supplier’s margin.

Obviously it is a difficult balancing act between keeping the customer happy and managing your own company’s cash-flow.

However, all the signs are that the last months of 2011 will be a particularly difficult period across all sectors – it will be vital to keep full control of receivables.

Delays in payment will impact on the bottom line, however the worst scenario is that neglecting to strictly monitor a failing company could result in a total write off.

Don't get blind sided

From a company Manager’s perspective the recent market gyrations and latest pronouncements from politicians and economists alike have done little to calm nerves and now more than ever is the time for good housekeeping and firm controls. Constant monitoring of counter party risk is the order of the day combined with disciplined inventory control.

Just because a customer has always being reliable in the past is unfortunately no guide as to future performance. Look out for tell tale signs such as unusual ordering patterns, delays in payments etc.

The coming months will continue to test but undoubtedly there will also be opportunities for those placed to take advantage of less efficiently organised companies.  Make sure that when the dust eventually settles that your company emerges in a stronger position.

I can assist you in this objective – view my profile http://uk.linkedin.com/in/gordonblackburn

Time to grasp the nettle

Every business transaction contains an element of risk, yet at the same time how satisfactory are the mechanics for managing risk?

In recent years we have witnessed just how costly the laissez faire attitude to risk was in many institutions be they large corporations or smaller SME’s.

In the never ending quest for larger profits many of the saner measures of business were abandoned. An analysis of recent disasters all have one common denominator – the architects of these calamities went hurtling over the cliff like lemmings.

There has never been a more pressing need to examine all areas of exposure.

A forensic analysis of the current Debtors Book might make for uncomfortable reading but like most unpleasant tasks it should not be ducked. Better to take remedial action such as a write down whilst you are in control of your own destiny rather than have a 3^rd Party appointed to do it for you 

Tomorrow the world!

The staple of the Hollywood B movie was the Mad Scientist working away in his laboratory desperately trying to engineer a monster or come up with a powerful formula which would lead to world domination. Inevitably all these grandiose plans ended in failure and the world carried on as before.

Fast forward to today’s world and the threat comes a different source what can be described as the Mad Banker. Working away not in laboratories but behind banks of computer screens these would be Masters of the Universe were also trying to control the world through their own form of financial engineering. By developing trading instruments and programmes of ever increasing complexity they created monsters which just like Dr Frankenstein they could not control.

The results of this spectacularly flawed experiment are now all too visible. As companies and countries alike experience a sense of unease about the world’s economic future.

The greatest irony of all is that despite all the evidence of their incompetence and sheer recklessness we once again find ourselves in thrall to the very architects of the disaster – the Bankers.   

Failing to act - Acting to fail

The macho mantra “failure is not an option” is widely heard these days. A more appropriate maxim for these times would be, “Inertia is not an option”.

Very few companies implode like a supernova. The distress signals are visible for some time before the flame out.

When faced with mounting problems it is obvious that the solutions will of necessity be painful. However, radical and decisive surgery is often the only way to ensure a patient’s survival.

Many companies adopt the Mr Micawber attitude that “something will turn up”. In the overwhelming majority of such cases the only people likely to turn up are the administrators/liquidators.

Be it merely inertia or fear of addressing the issue the outcome will remain the same.

Go for Growth

How do we boost the bottom line? – without doubt the most hackneyed question in business. There are 2 obvious solutions, (a) Cut operating costs and (b) Boost Revenue. If you’re the FD you’ll probably aim for the double.

The Sales Director only has one shot in his/her armoury namely increase sales. Sales targets can always be raised but a sense of commercial realism also needs to be applied.

If you are marketing a totally unique product or service the task is easier but for the most part there are many companies offering a similar range of products in a broadly similar price range.

Keep ahead of the game

Running a business in today’s environment is a complex affair – it has been likened to playing 3 D Chess.

Particularly for the owners of SME’s it has never been harder to keep track of the various elements which are buffeting the business.

Now might be an appropriate time to run a check over those areas of the business most likely to cause problems in the coming months.

It is a self evident truth that many a crisis could have been averted by timely intervention. This is where an independent appraisal can identify areas of potential concern but more importantly the ways and means by which to address them.

The question that needs to be answered initially is – am I sitting comfortably?

Sometimes the best business deals are those you turn down

All businesses operating in today’s climate need to have constant and rigorous focus on their commercial exposure.

Against the current competitive background it is very difficult to contemplate turning away business especially from a customer of long standing. Many times however, the best business is that which is left to competitors.

It may well be that turnover suffers when stricter controls are in place over such elements as payment terms and credit limits.

The reward for such fiscal discipline is obvious. Avoiding defaults by customers not only protects the company’s bottom line but also removes the stress from your own life

The old truism - Money makes money

There is no shortage of ammunition for the gloom merchants at present. However, these current market conditions underscore the old adage that “cash is king”.

Just as was seen during the Great Depression of the 1930’s there are opportunities for those individuals and companies who find themselves in the enviable position of being positioned to operate in a cash-starved market.

There will be opportunities to acquire shares at very attractive levels whilst failing companies will be up for grabs at drastically reduced prices with the prospects for consolidation or spinning their assets for more cash.

 It sounds like a pretty simple model, but then, so are many of the best ideas.  

Time to tighten up

The holiday season is now behind us and as businesses start gearing up again, a general sense of reality will start to take its place.

The signs are that the last quarter of 2011 will be a difficult time for business as Consumers further reign in their spending. Without doubt now is the time to tackle potential problem areas with some effective housekeeping.

How much inventory are you carrying? Rather than face a “fire sale” it may well be prudent to lighten up now with some innovative marketing strategies.

How is your cash position? With the ominous backdrop surrounding financial institutions and Governments alike, don’t expect the Banks to readily provide additional finance- it is an absolute priority to maintain positive cash-flow and this can only be achieved by keeping Debtors under control.

Undoubtedly, the casualty rate will climb as we head towards the end of 2011 – make sure your Company doesn’t become part of these statistics

Are we about to hit the buffers?

Current economic data illustrates the very real danger that the fragile economic recovery could be derailed.

It is vital to maximise your profits whilst avoiding locking your company into increased overheads

This is a time for a root and branch analysis of your business. As an independent Consultant I can give your business a full evaluation and provide you with a range of successful sales strategies and cost saving efficiencies.

Why not check out my profile at http://uk.linkedin.com/in/gordonblackburn