There are times to hold and times to fold

In business as in poker there are times when discretion is the better part of valour. Put simply, some of the best business deals are those you turn away.

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

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

However an objective assessment may well lead to the conclusion that in this instance the business would be left to others.

Obviously turnover may well suffer when stricter controls are in place over such elements as payment terms and credit limits.

The reward or such fiscal discipline is obvious. Avoiding defaults by customers not only protects the company’s bottom line but allows focus to be placed on more
profitable activities.

 

Everyman for himself

 

There is a growing pressure on Suppliers to accept extended payment terms if they wish to retain the business.

Companies who previously had accepted 30 day payment terms are now requesting periods of up to 90 days.

Such terms can only be served by larger organisations with adequate cash reserves. For the small to medium supplier it further ratchets up the pressure as Banks are unwilling to increase their credit lines.

It has been general commercial practise for companies to try to stretch the length of their payment terms by all manner of means both fair and foul.

However as profit margins are further squeezed by increased operating costs the importance of maintaining cash flow is vital.

Business is hard-won in the current climate, but above all there has to be a commercial raison d’être for any transaction.

Mutual reciprocity has to be the basis for the Customer/Supplier relationship for it to remain worthwhile.

 

Today’s mantra – focus on cutting costs

 

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

 

Every sector is seeing the impact e.g. FedEx the world's second largest package delivery company have seen 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 face an uncertain future.

 

Commercial post mortem – could we have done better?

 

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.

 

 

Keeping the tills ringing

During the past week we have seen Retailers posting the results of their Christmas trading. The first High St casualty has been the photographic group Jessop’s who ceased trading last week and others such as the beleaguered HMV chain who went in administration yesterday, remain firmly under the spot light.  

 

Much talk in recent times has focussed on the demise of the traditional British High St. with 30 shops a day closing down. There is a tendency to feel that all would be well if instead of the plethora of Charity shops, Discount Retailers and Pay Day Loan outlets they were to be replaced by Butchers, Bakers & Candlestick Makers.

In reality there is no going back to this perceived “Golden Age”. The new buzz word in retailing is "multichannel", loosely defined as a strategy that involves selling through stores, websites, mobile phones, catalogues, social networking sites, et cetera. Basically it is an all encompassing process designed to maximise sales revenues.

Not all business models can embrace this system but there has rarely been a time when the old adage of “work smarter” has been more relevant. As more and more obstacles are thrown up to threaten operating margins everyone in any commercial organisation must ensure that they are operating at optimum efficiency.

 

Whilst many Retailers continue to pin their hopes on “multi channelling”, they are not the only sector who will having to radically re-think strategy in the coming months.

 

The Dragon breathes fire again

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, but towards the middle of 2012 there were concerns that the economy was labouring.

However, China has reported better-than-expected trade data, adding to optimism that growth in the world's second-largest economy may be rebounding.

Exports, a key driver of expansion, rose 14.1% in December from a year earlier. Most analysts had forecast a figure closer to 4%.

Imports also rose, climbing 6% and indicating stronger domestic demand.

This is particularly welcome news for many of Asia's biggest and emerging economies who have become increasingly reliant on China as a trading partner.

 

 

 

 

Action this day!

Daily we are seeing clear cut evidence that the first quarter of 2013 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 commercial casualty rate will climb in the early weeks of 2013 – now is the time to do everything you can to ensure that your Company doesn’t become part of these statistics.