Avoid the slippery path

When asked to review operating systems and strategic plans, 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 “supporting” the errant Customer for fear of realising a bad debt. Think of the parallel to the current Greek situation – 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? Have you considered the damage that is being done to your company’s financial position?

Ask yourself “who is picking our pocket?”

It may well be that you conclude that an overall appraisal of your business is overdue - this is where I can help.

Why not get in touch with me at gordon.blackburn1@btinternet.com and together we'll get back the control

Today’s Doomsayers yesterday’s Financial architects

It is a well known fact that history is written by the victors,one of the spoils of war.

I’m not sure however how the current Doomsayers be they high profile members of the international Banking world or senior politicians can justify their pronouncements when the problems we now face were created on “their watch”.

 It is the ultimate irony that politicians with the so called “light touch” and institutions such as the Bank of England/ US Fed were all too willing not to look too closely into the ways that the markets and sovereign economies were being structured for fear of rocking the boat.

There is a certain black humour that these very architects of disaster now turn round and pontificate about the dangers that the world faces. These were the same people who were lauding and applauding the likes of Sir Fred Goodwin. There also were a number of high profile cheer leaders for the Euro who are now conspicuous by their silence on the matter

Now the man in the street is told to prepare for more belt tightening whilst businesses find themselves desperate for funding as Banks are reluctant lenders as they look to repair their damaged balance sheets.

Plus ça change

Learning from past mistakes

Rarely in life either privately or in a commercial environment do we come across an entirely unique or new situation.

The current situation facing the world markets and business has parallels with previous financial crises such as the 18^th century South Sea Bubble, the Victorian Banking crisis of Overend & Gurney, the Great Depression which followed the 1929 Wall St Crash, 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.

When managing a company it is always worth remembering if something sounds too good to be true it generally is.

As George Santayana commented “those who cannot remember the past are condemned to repeat it”.

Riding out the Storm

Viewing the general air of gloom they now prevails in the current climate it is hard to remember the halcyon days of easy money (credit) and the all pervading feeling that the party would never stop.

There is no doubt the world and his wife embarked upon a collective spree for which we are now picking up the bill. With the benefit of hindsight the warning signs were there to see but these were readily ignored. One quotation springs to mind “They that sow the wind, shall reap the whirlwind"

The problem now is that as always there is an over-reaction and just as we never saw the top there is also the certainty that we will not see the bottom.

What is needed is a clear and unemotional assessment of the current climate, whilst few would dispute that difficult times lie ahead we are far from a financial Armageddon.

As always the markets are driven by fear and greed but the importance of sentiment should not be overlooked. Until and unless the Doomsayers gain a sense of perspective it will be hard to imagine business and markets on a sustained stable footing

 

Stay ahead of the game

If you are running a business in today’s environment you obviously relish a challenge, have you ever thought about taking up 3D 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 most crises 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 questions that need to be answered initially – are we positioned comfortably? Or are we in denial?

Some business deals are best left to your competitors!

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

Against the current competitive background it is very difficult to contemplate turning away business especially from a customer of long standing.

However, there are times when subsequent events show that on occasion the best business decision was to leave it to your competitors.

When stricter controls are in place over such elements as payment terms and credit limits the result is likely to be a reduction in turnover.

The upside of such fiscal discipline carries its own rewards. Avoiding defaults by customers is the surest way to protect the company’s bottom line at a time when profits are hard won and losses easy to establish.

Time to lighten up

Daily we are seeing clear cut evidence 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.

One of the first areas for scrutiny is the level of inventory which you are carrying. Make sure you are achieving the best level of Stock Turn and that you are not carrying any obsolete Stock. Rather than face a “fire sale” it may well be prudent to lighten up now with some innovative marketing strategies.

How is your Company’s 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 in the final weeks of 2011 – now is the time to do everything you can to ensure your Company doesn’t become part of these statistics