Make service your USP

We are operating in times when everyone expects ultimate value for their cash be it the corporate customer or the man in the street.

It is a paradox that as times become tougher and business harder to win the level of service offered by many Suppliers is falling very short of acceptable standards.

From the frustrations of automated answering (devised surely to test anyone’s patience to the ultimate degree) to the failure to meet agreed delivery schedules Customers are left feeling that their business is not valued.

Little wonder that they choose to vote with their feet. Customer service is not a difficult act to pull off – in reality all that is required is to give the Customer the feeling that their business is important and they are valued not just “one of a number” or even worse a nuisance.

Those businesses that master the art of Customer service will emerge from this current difficult period all the stronger.

 

It pays to get personal

 

Business practises have changed markedly in recent years.

 

Although many operations are completed electronically in this virtual world we should never forget that essentially commerce is about people trading together.

 

The reality of the real world is that goods need to be moved from point of production to point of consumption and obviously the diverse elements which make up this chain cannot be achieved solely via a computer terminal.

 

It makes sound economic sense to foster and maintain good customer relationships as it has been determined that it costs up to five times as much to win a new customer as it does to retain one.

 

There is an old adage “know your customer,” this dictate has never been more important than in these uncertain and challenging times.

 

Don’t be a soft touch

 When asked to review operating systems, I find it surprising that even in these difficult economic times many companies continue to adopt a laissez faire approach to their financial controls.

These companies fail to recognise the need for strict discipline in respect of Stock turn and control but what is even more disturbing in the reaction to the Debtors book.

As more and more Customers seek actively to delay payment to Suppliers this element of business policing is even more critical.

When a Customer exceeds the agreed payment terms, they are in reality using the Supplier as an alternate (unsecured overdraft). I have seen this situation spiral out of control so that in a worst case scenario the Supplier is forced to keep “trading” with the errant Customer for fear of realising a bad debt. Think of the parallel to the ongoing EU debt problems – it is a slippery path.

Take a long hard look at your accounts receivable – are you happy to see 30 days drift into 60 and beyond? What damage is being done to your company’s financial position?

Ask yourself “who is taking advantage of us?”

 

A Spanish bail out looms

The results of independent stress tests of the Spanish banking sector will be published on 28 September.

But previews are already being sent to the country's financial institutions.

It seems likely that the Spanish government has already put in place economic reform plans that would allow it to apply for a bailout immediately.

Spain's banking sector needs recapitalising, and much of the money would come from 100bn euros in European Union funds already pledged by eurozone finance ministers in June.

It seems likely that the bail out would be in the region of 75-80 billion Euros

Time and again we are seeing reports coming from the Banking sector where massive losses have been established and yet it would appear nobody was monitoring these developments.

It is all rather reminiscent of the old variety act where a performer started to spin a sequence of plates as long as he could keep running and adjusting the spinning plates all was well but as soon as he stopped the whole scenario collapsed. So it is with the Banking system.

 

 

Today’s mantra – keep cutting the costs

 

With operating margins being continually squeezed it is imperative that costs are rigorously monitored.

Every sector is seeing the impact e.g.  FedEx the world's second largest package delivery company are seeing their customers moving business from air to slower and less expensive routes.

Manufacturers of electronics and mobile phones are now shipping cargo by sea because competition was eating into their profit margins meaning they needed to cut delivery costs.

Traffic will continue to moving onto the water because moving goods by air is very energy-intensive and the high cost of jet fuel was making air freight too pricey.

Facing marked resistance from consumers to price increases and a greater level of competition those companies who are unable to control costs have an uncertain future.

Time for a Strategic review

The current economic data point to the fact that the coming months will produce difficult challenges for all. As domestic budgets are ever more squeezed this will impact on businesses across the board. The latest results from Money lender Wonga illustrate the strong demand for credit during the downturn.

Net profit more than trebled to £45.8m in 2011, from £12.4m in 2010. Revenue grew at a similar rate, to £185m.

The number of loans made by the company quadrupled to almost 2.5 million. Bear in mind these are short term loans to individuals and small companies struggling with cash-flow issues.

This is the time to conduct a top to tail 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 redefine strategy rather than adopting an ostrich "head in the sand" attitude.

When trying to explain a disastrous set of accounts to your Shareholders or Bankers it will be of little comfort to trot out the tired old defence “it seemed like a good idea at the time”.

 

SME’S still struggling for funding.

Small firms are struggling to raise the money they need to expand, according to a survey by business leaders.

The Federation of Small Businesses (FSB) found that 42% of those who applied for a loan said they were turned down.

The FSB said that while companies were weathering the recession well, business confidence was declining.

The British Bankers' Association said lenders were continuing to provide credit to customers.

They were also helping customers find alternative sources of funding if the banks could not provide it themselves, the association added.

Nearly two thirds of those in the FSB survey said they thought finance was unaffordable.

But the survey suggested the number of refusals had increased - from 40.6% to 42.4% on the previous quarter.

 The FSB said that, while many small firms would like to expand their businesses, access to funding was proving frustrating.

The federation claimed that a lack of credit had contributed to a marked drop in confidence, and said it welcomed the government's plan to set up a state-owned business bank.

The message is clear though - businesses want to grow and invest but they need a helping hand to do so. It is frustrating that bank finance is still difficult to get.

 

Banking disasters - Plus ça change.

Last week a former UBS  trader went on trial for fraud and false accounting having "gambled away" £1.4bn ($2.3bn) of the Bank’s money and caused "chaos and disaster". The trader exceeded his trading limits at UBS in a bid to get a bigger bonus.

He denies two charges each of false accounting and fraud between October 2008 and September 2011.

His actions are said to have threatened the Swiss bank existence and helped its share price fall 10%, by about £2.8bn.

"He faked bookings, he created false accounts and conducted himself as a master fraudster, deliberately and systematically deceiving and defrauding the bank which was employing him,"  said the prosecution..

At one stage he was in danger of losing the bank nearly £7.4bn.

The prosecutor said he failed to "hedge" against failure by placing balancing trades.

It was claimed that Mr Adoboli made false entries to make it seem as if the money he was gambling had been balanced by money coming into the bank.

The trial is set to continue and once again it highlights the basic problems of extremely poor level of Management expertise/control whilst furthermore illustrating the culture of greed which prevailed in the banking community.

As the alleged fraud had been conducted over 3 years it begs the question where the controls both were internally and externally i.e. the Auditors.

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.

 

 

Asleep at the wheel

Recent events have underscored 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 targets 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 disasters 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! It is a truism that recessions catch what the auditors miss

 

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 sometimes a prudent course of action to look under a few stones – just in case.

 

 

Opportunity versus risk - the yin and yang of commerce.

Every business transaction contains an element of risk, yet at the same time how adequate are the mechanics and systems that are in place to manage these risks?

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 jettisoned.

An analysis of the most spectacular flame outs 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.

It is always preferable 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 .

 

Reading the runes

 

How often in life either privately or in a commercial environment do we come across an entirely unique or new situation?

The current backdrop facing the world markets and business has parallels with previous financial crises such as the 18th century South Sea Bubble, the Victorian Banking crisis of Overend & Gurney, the Great Depression which followed the 1929 Wall St Crash, and the Dot Com Crash. In all of these episodes the common denominators were reckless pursuit of profit whilst fundamentals were ignored, the so called “get rich quick” school of business.

Following each of these debacles there was a collective reigning in and return to the principles of sound business.

However memories are short and it is not long before the blurring starts again and risky practices again become more and more the norm.

Complacency has resulted in the demise of numerous organisations. As George Santayana commented “those who cannot remember the past are condemned to repeat it”.

 

Cost effective entry into the UK market

The UK offers a very attractive market for companies wishing to export their products. Counter party risk is identifiable and can be successfully managed.

 

However one barrier may be the perception of high operating costs. 

 

There is no doubt that to commission and run a UK operation can prove a costly commitment. The operating costs such as rent, communications, staffing are daunting, particularly in a start up situation where income streams are lagging far behind these up front out goings. 

This is where we can assist you, as an established independent company, we have experience of representing overseas organisations in marketing products into the UK. 

In addition to opening up new markets for your products and services we can also police the all important areas of logistics and payment of your invoices. 

An introduction to our activities can be seen on our web site www.glbconsulting.co.uk or alternatively why not contact me at gordon.blackburn1@btinternet.com to arrange a meeting to discuss how we assist you in entering the UK market.

 

The danger of pushing it too far

  

The most important component in any business relationship is the question of trust.  

The ultimate demonstration of trust and good faith is when a Supplier delivers goods to a Customer on Credit terms. 

It therefore is incumbent on the Buyer that they acknowledge this act of trust and observe the agreed payment terms. 

With the current pressures it is easy to understand the temptation of “pinching” a few days extra credit but this type of behaviour soon begins to pall. Once a Supplier feels that their Buyer is taking undue advantage the relationship is damaged sometimes irreparably. 

For any relationship to be sustained there has to be mutual benefit. When a Buyer gains a reputation for persistently crossing the line the merit in maintaining the account is called into question.

 

Managing effectively in troubled times

Working with companies over the past months there is a noticeable 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.

 

Storm brewing in the East

 

Since 1978, China's economy has doubled every eight years. Today, the average Chinese person has some ten times the purchasing power they had just a quarter century ago. 

China was the engine room powering the Global boom of the early 21^st century, however there are signs now that the Dragon is catching its breath.  

China's economy has grown at its slowest pace in three years as investment slowed and demand fell in key markets such as the US and Europe.

Several indicators have begun to point to an economic downturn in the country, including  sharp slowdowns in electricity demand and industrial production as well as in factory output and retail sales.

During the last three years, Chinese investors have poured their money into the country's property construction boom.

For example, many firms financed the import of raw materials such as copper, iron ore and aluminium for the building industry.

It also provided a roundabout way for them to speculate on the strength of the yuan.

But it seems they went too far. The unused copper shipments piling up in China's warehouses have become so great that  the overflow is being stored in staff car parks and driveways.

Meanwhile the construction boom seems to have ground to a halt.

Total property sales dropped 12% in the first four months of the year, compared with a year ago. In response, the number of new construction projects fell 15% in April, while purchases of land fell by more than half.

China has already been suffering for several months from the chill wind blowing from Europe - its biggest export market, even bigger than the US.

China accounts for about a fifth of the world's total economic output and any slowdown may hamper a global recovery. 

At the same time, many of Asia's biggest and emerging economies are becoming increasingly reliant on China as a trading partner.

Spot the fault line

The overriding lesson from the calamities in the global financial mess was that the monitoring systems were inherently flawed.

Exotic trading products and programmes were created which like the Frankenstein monster quickly became uncontrollable. Risks were taken on an unprecedented scale and those supposedly monitoring risk were “asleep at the wheel”.

Recklessness was encouraged and became the default position. There were no checks and balances – it became for the participants in the so-called casino bankers a safe bet.

What’s the worst that could happen following a spectacular flame out? Maybe you lost your job and had to move to another bank or institution. Get it “right” and the rewards were sky high.

Whenever there is a bonus culture unless the supervisory systems are rigorous there will be potential for abuse.

It is quite ironic that some years after the onset of the crisis we now have the FSA calling for a clampdown on bank, building society+ insurance company staff being paid commission on sales.

This follows years of obvious laissez faire when for example it was quite normal for people to borrow based on self-certification of earnings, a recipe for disaster if ever there was one.

Whether through greed or stupidity there will always be people willing to take potentially catastrophic chances. What is required is that the senior management spend less time forecasting their own bonus and more time scrutinising the bottom line and understanding how results are achieved. Until this balance is in place disasters in the financial system will continue to occur.

 

 

A true and fair view of the state of the company’s affairs? - or smoke and mirrors?

  

During the recent failures in the global financial system one group of participants have remained largely unscathed for their part in the train wreck, the Auditors.

Now a report published by the Association of Chartered Certified Accountants (ACCA) says the accountancy profession will continue to lose credibility if it fails to convince its stakeholders and the public of its value.
The ACCA said the industry must take steps to rebuild confidence in the accountancy profession after the report found that only 55% of the public trusted their members.

 

Essentially there are many instances of conflict of interest such as taking on consultancy work for Clients and becoming too cosy with management teams.

 

It is all too easy for companies to bully the young staffers sent in to do the grunt work .For example what chance has a newly appointed auditor walking around a factory warehouse to adequate value stock? In reality they have to rely on the company for “valuations” and this can result in a totally inaccurate picture being presented.

 

The validity of a company’s accounts reflects the integrity of the company which is being audited. As was demonstrated with the banking crisis in Spain an unrealistic valuation of the property portfolio either through deviousness or sheer incompetence will ultimately have ddisatrous consequences.

Keeping them happy – keeping them loyal

External factors over which little control can be exerted continue to buffet all business sectors. However, every organisation does have a potentially winning weapon in their armoury namely the opportunity to offer excellent customer service.

 

In these difficult times everyone expects ultimate value for their cash be it the corporate customer or the man in the street.

 

It is a paradox that as trading conditions become tougher and business harder to win the level of service offered by many Suppliers is falling very short of acceptable standards.

 

From the frustrations of automated answering with the intensely irritating muzak accompaniment, to the failure to meet agreed delivery schedules Customers are left feeling that their business is not valued.

One of the best examples of poor customer relations in provided by the banking community, complaints at embattled Barclays in the first half of this year were up 76% on the same period in 2011. Royal Bank of Scotland had 128% more complaints.

 

Little wonder that customers choose to vote with their feet.

 

Customer service is not a difficult act to pull off – in reality all that is required is to give the Customer the feeling that their business is important and they are valued, not just “one of a number” or even worse a nuisance.

 

Those businesses that master the art of Customer service will emerge from this current difficult period all the stronger.

 

 

 

Food price inflation rears its ugly head

The recent hikes in price of key grains such as corn, wheat and soybean have been  described by the World Bank president as "historic".

The bank warned countries importing grains will be particularly vulnerable.

From June to July this year, corn and wheat prices each rose by 25% while soybean prices increased by 17%, the World Bank said. Only rice prices decreased - by 4%.

In the United States, the most severe, widespread drought in half a century has wreaked havoc on the corn and soybean crops while in Russia, Ukraine and Kazakhstan, wheat crops have been badly damaged.

The World Bank said that the use of corn to produce ethanol biofuel - which represents 40% of US corn production - was also a key factor in the sharp rise in the US maize price.

Overall, the World Bank's Food Price Index - which tracks the price of internationally traded food commodities - was six percent higher than in July of last year, and one percent over its previous peak, in February 2011.

Livestock and milk related products will rise in accordance with the higher costs of grain based feedstuffs. 

Food manufactures are caught in a vice; the buying pattern for many has been “just in time” reflecting the need to keep inventories as low as possible. However without the safeguard of a “buffer stock” they are now more than ever exposed to the harsh reality of having to “pay up” in order to secure the raw materials to keep their facilities in production. 

They will continue to face the problem of operating in the current economic background with buyers seeking to delay payment, renegotiate contracts etc.

 

 

The value of Customer service

 

The old adage the Customer is always right has come in for a fair amount of criticism recently and there are many times when plainly the Customer is in the wrong.

Notwithstanding it is of paramount importance to the sustained growth of any business that the Customer is kept onside.

The key requirement that any Customer wants is to feel that his/her business is valued and appreciated.

In business securing the deal is only the start of the process and the repeat order very often stands or falls with the after sales service (or lack thereof).
Simple but effective measures such as ensuring all contracts are performed efficiently and within due time and that any complaints are handled promptly and with courtesy will go a long way to building and maintaining long lasting relationships.

We have all encountered the difficult Customer with whom it would be easier not to deal. However, in these difficult times there are many who would willingly take this “problem” and revenue off of your hands.