Gilding the lily

There is no doubt that against the current economic background that some companies are camouflaging their poor performance with some suspect off-balance sheet shenanigans other dubious activities. 

The current storm engulfing the Banking community over the “fixing” of the LIBOR rate is not an isolated event. However it highlights 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.

In trading environments it is not uncommon that 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 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.

Shark infested waters – don’t fall overboard

As the economic downturn continues to bite all businesses and organisations must 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.

 

It is vital to have systems in place to monitor all the company’s finances in a clear and concise format. After all it is never comfortable experience to find that someone is holding your wallet.

However all businesses be they independent or large corporations are vulnerable.

As the story of fraudulent LIBOR rate fixing at the Banks unfolds so the call for those responsible to face criminal charges gathers momentum.

Last week a senior potato buyer at J.Sainsbury Plc was found guilty of orchestrating a fraud whereby a four-year police investigation revealed that £4.9m was paid out of a fund created by the overcharging of Sainsbury's. The total amount the supermarket says it was overcharged by was £8.7m.

It is an undeniable fact that there will always be people trying a variety of ways to “scam” your organisation; it is a problem that will not go away so vigilance is the order of the day.

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 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.

The Banking community – it’s getting to be a bad habit

The Banking community – it’s getting to be a bad habit

Last week we witnessed the fiasco brought about by the outsourcing of IT systems to the sub-continent. The rationale being the cost savings.

The damage caused by last week’s collapse in online banking services of RBS/Nat West is incalculable.

There is little comfort to had from the Governor of the Bank of England calling for a full investigation. Even the most casual observer could identify the cause – forget about providing an efficient service the mantra is cut costs by all means possible.

Now we find the Banks embroiled in yet another fiasco namely the rigging of LIBOR rates. This action is both morally indefensible with the added element of illegality yet still the Banking community 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 managerial incompetence demonstrated by these self styled “Masters of the Universe” beggars belief.

It is small wonder that we find ourselves again staring into the abyss.

To an outsider it appears that despite all the rhetoric, nothing has been learnt and little has changed. The only calculations which are being rigorously scrutinised by the Bank’s management are 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 global financial disaster – the Bankers.

In the words of Henry Ford “If people understood the banking system they would revolt”.

Finding the philosopher’s stone.

In trying to boost the bottom line, there are 2 obvious solutions, (a) Cut operating costs and (b) Increase 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.

As such for most companies it is about getting back to the basics – ensuring orders are processed efficiently and in a timely fashion. Following up on customer satisfaction, in short providing what in old fashioned terms was called “service”.

Looking to improve your Sales / Business Performance?

I have an extensive business background in sales and business management across a wide range of business sectors and products ranging from commodities to FMCG.

In addition to working at senior/ main board level in the UK I also have worked on assignments in both North/South America and the Far East.

Currently I am working as an independent business consultant and am always on the lookout for companies where I could “add value” by fully utilising my business background and contacts.

If you are looking to diversify your activities or 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.

Don't get caught out

A combination of recent market volatility coupled with latest pronouncements from politicians and economists alike have done little to restore confidence 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. Very few businesses fail overnight and there are usually enough warning signals which should enable a supplier to reduce its risk

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.