Speak softly and carry a big stick

 

Funding issues continue to impact on businesses with more and more customers actively employing various tactics to delay payment to suppliers.

Credit control and the monitoring of payments is an increasingly critical element of every business.

When a customer exceeds the agreed payment terms, they are in reality using the supplier as an alternate (unsecured overdraft).

This situation if left unchecked can spiral out of control. As the situation deteriorates the supplier can find themselves in the invidious position whereby they are forced to keep “trading” with the errant customer for fear of realising a bad debt.

Think of the parallel to the Euro zone bail out situations – it is a slippery path.

Slack policing of accounts receivable will have serious consequences. At best tardy payments damage cash-flow and at worst can often be the precursor of a company failing with the end result of a total write off.

Take a long hard look at your accounts receivable. Undoubtedly there will be examples of aged invoices where 30 day terms have drifted into 60 and beyond.

Consider the damage that is being done to your company’s financial position and ask the question “who is taking advantage of us?”

When gamekeeper turns poacher

 

A former head of Oxfam's counter-fraud unit has been jailed for defrauding the charity out of nearly £65,000.

Edward McKenzie-Green, 34, of Chipping Norton, Oxfordshire, was handed two years and five months imprisonment for making payments to fictitious firms.

The Old Bailey heard McKenzie-Green had made £64,612.58 in payments from Oxfam to fictitious firms between February and December 2011.

One of the lessons of the recent economic downturn was the need for all businesses and organisations to remain alert to the potential for fraud.

Entrepreneurial owners of SME’s are a prime target for fraud as overseeing finances doesn’t always come naturally to them. If a founder is focusing mainly on the product or service being sold, and only minimally on administration, it leaves a business vulnerable to fraud.

In smaller organisations fraud can take many forms e.g. invoice scams, to suppliers providing kickbacks for inflated purchases, theft of stock, fictitious expenses etc.

For larger organisations the potential for various fraud activities exists but the numbers involved are far greater.

It is vital that all organisations have systems in place to monitor all of the company’s finances and commitments in a clear and concise format.

Simple but effective systems of checks and balances can go a long way to limiting if not removing the risks.

It is all but impossible to ensure that any organisation is “fraud proof” but by establishing robust and efficient systems some measures of comfort can be introduced.

 

 

Where's the family silver?

It is incomprehensible that so many companies be they large or small fail to keep an adequate control of their inventory levels and stock turn. Similarly companies adopt a less than rigorous approach in respect of their receivables.

The focus of many managers’ remains firmly fixed on achieving increased sales performance. As a result the question of housekeeping is often put on the back burner or it would appear totally neglected.

It is a truism that no business deal is complete until the invoiced funds are in the seller’s bank account.

This begs the question: how comfortable are you with your stock and debtors controls?

A worthwhile exercise would be to review operating systems now rather than adopt the let’s hope for the best style of management.

 

Complacency can be costly

It is all too easy to become complacent particularly when the business relationship is long established. Accordingly when companies fail the usual reaction is one of surprise.

However very few companies fail overnight and in the majority of instances there are numerous warning signals of a company’s demise.

When dealing with any company always rate their efficiency levels. If your dealings leave you with the impression that the company is muddled in its thinking or lethargic in its dealings then these are early indicators that the company is languishing.

If the staff shows a marked lack of commitment this is also an indication of a demotivated workforce who clearly sees the writing on the wall.

A company who is failing in its obligations to either suppliers or customers will lose business to competitors. A declining market share can rapidly become a slippery path.

Companies that ignore changing market trends and technical innovations are doomed to fail. Companies need to be responsive to market developments and changing patterns.

Be alive to high levels of staff turnover, a continuous exodus of staff is a sure indicator that all is not well and normally a precursor of a more substantial problem surfacing.

 

Adding value

 

Essentially there are two courses of action when attempting to boost the bottom line, cut operating costs and generate additional revenue.

The first action that many organisations take is to reduce staffing numbers, seeing this as a quick fix.

It is a tool by which management perceive they can demonstrate that they are getting to grips with the problem.

However, there is a danger that in line with reduced personnel there is an accompanying decline in operating standards. In such circumstances customers often choose to vote with their feet.

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

In many instances companies would be advised to make customer service their USP but this requires the commitment of a dedicated work force not one that is pre-occupied with the spectre of further redundancies.

 

KYC - know your customer

 

 

In the US this basically refers to a due diligence process undertaken by banks and financial institutions to combat fraud, identity theft and general scams.

It is a procedure that most organisations would do well to follow.

Rapid advances in technology continue to transform the way we do business. Everyday business tools would have been regarded as flights of fancy not so long ago. With the unstoppable rise of e-commerce come challenges.

One of the biggest dangers is the lack of personal contact between a company and its customers. Obviously this is not an issue for online retailers selling product over the net and being paid via a Debit card or Pay Pal etc.

However their is an increasing trend for B2B sales to be concluded by email and even SMS. With the loss of the personal contact the identity and customer relationship suffers.

The surest way to avoid problems is by knowing your customer and understanding their business.

This relationship and mutual understanding cannot be achieved via a key pad and electronic ordering system.

 

Cheques and balances

In light of recent “Black Holes” banks have been rigorously running health checks on their operating and reporting systems.

Events have underscored how vital it is that clearly defined operational and reporting procedures are in place.

In many organisations the senior management 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 in trading environments it has not been uncommon for totally unrealistic profit targets to be 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.

People are only too ready to accept that spectacular profits are being made without bothering to ask the question “how?”

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 the accuracy and integrity of the reporting. In such times it would be well to remember the old truism that is something looks to be too good it usually is!

Companies that are bucking the trend in these difficult times may well be 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.

 

Achieving better sales performance

There are some basic tactics which you can employ to increase your sales.

Companies that are increasing their sales turnover usually have an attractive staff incentive programme in place. Make sure you keep track of what type of “carrot” your competitors are offering to their sales force.

Upselling is a cost effective way to boost bottom line returns. Essentially, upselling involves adding related products and/or services to your sales portfolio and making it convenient and necessary for customer to buy them. Crucially when upselling the customer has to be persuaded of the benefit.

Give your customers the inside track. Try to stay ahead of the competition by having up to date brand and market information combined with technical back-up. For example if a new product launch is imminent it is better to keep the customer’s interest “warm” rather than push them into a purchase which they shortly will become dissatisfied with.

Differentiate your customers. There should be a clear and obvious difference between your regular customers and others – a difference that your regular customers perceive as showing that you recognise and appreciate their value.

Repeat business is the life blood of any sales force.

Loyalty cuts both ways and becomes meaningless if all customers are treated as “someone off the street”.

 

Sometimes even the best sat nav malfunctions

 

 

One of the most valuable assets available to any organisation is local knowledge.

How many times has a venture ended badly owing to a basic failure to understand and deal with local market conditions?

The UK is a mature and sophisticated market and though offering different challenges to operating in a 3rd World destination there are still obstacles in trying to establish a presence.

Operating overheads present a crucial challenge and this is where we can assist you to achieve a cost-effective solution to marketing your products in the UK.

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

Master of your own destiny

External factors over which little control can be exerted will always 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, 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 be the stronger for it.

Effective management principles

In order to achieve success all organisations must have effective leadership. It is the responsibility of management to lay down a set of ideas and objectives that are articulated, understood and supported by the workforce .Good people do not like working for organisations whose values are muddled.

Managers have to take difficult and unpleasant decisions. These often need to be made swiftly balanced against conflicting demands. It is not always possible to access cast-iron evidence to support the decision making process. This is one of the tests of strong management.

A clear and defined vision are essential requirements. Managing a large company, and dealing swiftly with a variety of challenges and issues is a complex task.

The desire to succeed which provides the drive and focus on excellence is one of the hallmarks of a good manager.

The workforce is the company’s most precious asset. Accordingly the ability to judge people and value their contribution is an essential prerequisite for any manager.

To build a talented team requires working with people who may be better at their job than you are at yours, and to guide and motivate them. People learn far more about the art of leadership from a good mentor than from any course or training exercise.

The ability to respond quickly will prove invaluable when things go wrong. Surviving a reverse and changing direction is the utmost test of resilience and flexibility.

 

The bullies are at it again

 

During recent years many companies focussed on the element of supplier’s credit as they sought to improve their own bottom lines.

By virtue of their purchasing power large corporations such as the supermarkets are able to squeeze their suppliers.

It is the SME’s who are feeling the pressure most acutely. The average small business is owed £31,000 in overdue payments, amounting to over £30 billion across the UK economy.

The UK has late-payment laws that give small businesses the right to charge interest, but many avoid doing so for fear of upsetting customers.

The EU issued a directive in 2013 which aimed to enforce similar measures across the union, with public bodies given 30 days to pay and businesses 60.

Cash flow is a vital element for any business and timely payments are crucial for small businesses trying to grow.

Over the past couple of years many companies have lengthened payment terms seeing the suppliers as a soft target.

With suppliers consistently facing a declining return it should come as no surprise when they conclude that the game is not worth the candle.

The value of the human touch

Traditionally customer service has been viewed by companies as a cost centre, which made it a ripe target for cuts during the downturn. That has contributed to increasing frustration among consumers who have suffered with poor service 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 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 “value your customer,” this dictate has never been more important than in these uncertain and challenging times.

The Banks - more black holes than "Star Trek"

 

Bank of America has become the latest financial institution to “fess up” in respect of misreporting of its financial position joining the likes of RBS and the Co-op Bank who recently issued  similar mea culpas.

The mistake, which had gone undetected for several years, led the bank to report recently that it had $4 billion more capital than it actually had. After Bank of America reported its error to the Federal Reserve, the regulator required the bank to suspend a share buyback and a planned increase in its quarterly dividend.

The regulators still believe Bank of America has sufficient capital, however the disclosure of the accounting error will most likely add fuel to the debate over whether the largest banks are too big and complicated to manage.

The error brings into focus the quality of the Banks own accounting employees who are to supposed to produce accurate reports of the bank’s sprawling operations to the public and regulators each quarter. The audit committee of the bank’s board and PricewaterhouseCoopers, its external auditor, also allowed the error to slip by for so long.

The acknowledgement by a senior Bank official that “there are signs that controls are not as tight as they need to be” is a classic under statement”.

No doubt similar “errors” will surface from the financial community in the months ahead

Early warning signals

 

Few companies explode like a super-nova, the warning signs are usually visible for some time ahead.

The following is a basic check list which should help to determine whether the problems are of a temporary nature or have more serious implications for the future of the company:

The most important element in any business is maintaining a healthy cash flow. It is imperative that a strict control is maintained on all outstanding invoiced amounts.

The value of an efficient credit control system cannot be over emphasised.

Do not focus on generating sales with little margin in the belief that over time things will improve. Being the “cheapest supplier” will not provide an automatic route to more satisfactory profits in the long term. It is often better to keep your powder dry.

If you are constantly in danger of breaching your credit arrangements with the banks or suppliers this is a clear indication that the company is not trading satisfactorily.

As conditions deteriorate more and more time is spent focussing on the problems and not enough on to how to position the business for the future.

Particularly for owners of SME’s it is not easy to take the necessary remedial actions and very often this is where an outsider can be of assistance in repositioning the business before it is too late.

 

Fraud the enemy within

 

Irrespective of the size of the company all businesses and organisations should be alive to the potential for fraud.

Entrepreneurial owners of SME’s are a prime target for fraud as overseeing finances doesn’t always come naturally to them. If a founder is focusing mainly on the product or service being sold, and only minimally on administration, it leaves a business vulnerable to fraud.

In smaller organisations fraud can take many forms e.g. invoice scams, to suppliers providing kickbacks for inflated purchases, theft of stock, fictitious expenses etc.

For larger organisations the potential for various fraud activities exists but the numbers involved are far greater.

It is vital that all organisations have systems in place to monitor all of the company’s finances and commitments in a clear and concise format.

Simple but effective systems of checks and balances can go a long way to limiting if not removing the risks.

It is all but impossible to ensure that any organisation is “fraud proof” but by establishing robust and efficient systems some measures of comfort can be introduced.

After all it is never comfortable experience to discover that someone else is holding your wallet.

 

Time well spent

As business practices change and external factors come into play a regular review of the company’s business plan will ensure that the company stays ahead of the game.

The review if done correctly should result a realistic, objective and clinical appraisal of the business.

Following an analysis of the business plan it should be easier to communicate objectives and strategies to those funding the operation and also to the company’s employees.

The review will serve as a reference point when determining the effects of alternative courses of action on business operations.

A clear assessment of current working practices should highlight areas where the company may require outside assistance.

At the same time an analysis of the current inventory levels and receivables will provide the answer to the future growth and capital requirements of the business.

 

Morale is the lynchpin of efficiency

 

Figures from the Office of National Statistics show that 582,935 UK workers were on zero hours contracts in 2013.

Whilst employers cite this as a tool to enable flexibility in the workplace there is no doubt that this particular “employment contract” does have a negative impact on the morale of the workforce.

This seems not to have percolated into the mainstream of management thinking.

All too often the attitude of the management seems to be that the current backdrop will of itself be the motivating factor.

Obviously as companies struggle with their profitability, it is not a question of throwing money at the workforce but what is required is more of an attitudinal change.

Bringing the staff on board may well be as simple as communicating the company’s situation in a clear and concise manner rather than the heavy handed “if you don’t like it there are plenty of others ready to take the job”.

There is no better motivation than a clearly thought through strategy which is well communicated and executed.

It is no coincidence that the companies who emerge stronger from challenging times have been able to do so largely as a result of the efforts of a committed and diligent workforce.

 

Revving up the bottom line

When attempting to boost the bottom line there are two obvious courses of action, cut operating costs and generate additional revenue.

Many organisations opt to reduce staffing numbers as a quick fix but there is a danger that in line with reduced personnel there is an accompanying decline in operating standards. In such circumstances customers often choose to vote with their feet.

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.

In many instances companies would be advised to make customer service their USP but this requires the commitment of a dedicated work force not one that is pre-occupied with the spectre of further redundancies.

Customer service- a question of balance

The time honoured mantra the customer is always right has come in for a fair amount of scrutiny recently and in truth 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 increasingly competitive times there are many who would willingly take this “problem” and accompanying revenue off of your hands.