Crossing the line

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 questionable.    

Commercial post mortem – have we learnt anything?

All too often in the course of commercial post mortems, the Management and Shareholders of troubled organisations end up asking “how did that go wrong?”

It is an incontrovertible fact that many companies fail to address problem issues early enough to avoid an oncoming crisis. When in reality the causes of the problems were all too readily visible.

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 variety of exercises ranging from ill judged acquisitions (think RBS/ABN), totally pointless projects such as rebranding or the launch of another product range destined to fail for the above reasons.

Inevitably the harsh realities come into play but for many companies it is at that stage too late in the day.

The merit of a Pre-emptive strike

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.

This is an appropriate 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 tackle difficult issues rather than adopting an ostrich "head in the sand" attitude.

When trying to explain the outcome of a disastrous strategy 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”.

The pain is Spain – it’s the Banks who are to blame (3)

Over the weekend the Spanish Economy Minister announced that Spain would seek a cash injection of 100 billion Euros to bail out its beleaguered banking system.

In the past 3 years this is the fourth member of the EU (following Greece, Ireland and Portugal) who have had to go cap in hand seeking financial support.

The ill conceived strategy by the Spanish banks of putting all their energies into fuelling a speculative property boom has come home to roost.

However as with any “club” the action of its members can have far reaching consequences. The UK Chancellor George Osborne has been quick to point out the dangers faced by Britain by the ongoing Eurozone crisis. He commented “our recovery already facing powerful headwinds from high oil prices and the debt burden left behind by the boom years – is being killed off by the crisis on our doorstep.”

These ongoing developments will make it increasingly hard for companies to get funding support from the banks. Never has there been a greater need for good housekeeping. Debtors must be strictly monitored whilst stock holding is kept to a minimum.

Expect greater scrutiny from Auditors as more and more people are nervous about signing off any accounts. These challenging times require a robust approach from management to each and every element of the business.

Master of your own destiny

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 (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.

Cheques and balances?

Cheques and balances?

Executives at FROB Spain’s bank rescue fund are about to appoint PWC, Ernst & Young, Deloitte and KPMG to run a “health check” on its banking systems.

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

In these difficult times the “hard nose” approach has merit

 As funding issues continue to bite more and more Customers are 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. In a worst case scenario the Supplier is in reality forced to keep “trading” with the errant Customer for fear of realising a bad debt.

Think of the parallel to the ongoing Greek situation – 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 – are you happy to see 30 days drift into 60 and beyond?

Consider the damage that is being done to your company’s financial position?

Ask yourself “who is taking advantage of us?”