May you live in interesting times

May you live in interesting times

 

A combination of recent market volatility, the continuing spectre of failure in
the Eurozone 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.

Rigorous 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 guarantee as to future performance.

Very few businesses fail overnight and there are usually enough warning signals which should enable a supplier to reduce its risk.

Be on the lookout for early warning indicators such as unusual ordering patterns, delays in payments etc.

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.

 

 

Speak softly and carry a big stick

  

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 Eurozone 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?”

 

Commercial post mortem – a forlorn exercise

 

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.

 

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 fall–out for 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. This is especially true in the case of many non-exec Directors merely added to the Board on the basis of a “name”.

 

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.

 

Cost effective entry into the UK market

 

The UK offers a very attractive market for companies wishing to export their products. Counter party risk is identifiable and can be successfully managed.

 

However one barrier may be the perception of high operating costs. 

 

There is no doubt that to commission and run a UK operation can prove a costly commitment. The lists of outgoings such as rent, communications, staffing costs are daunting, particularly in a start up situation where income streams are lagging far behind these costs.

 

This is where we can assist you, as an established independent company, we have experience of representing overseas organisations in marketing product into the UK.

 

In addition to opening up new markets for your products and services we can also police the all important areas of logistics and payment of your invoices.

 

An introduction to our activities can be seen on our web site www.glbconsulting.co.uk or alternatively why not contact me at gordon.blackburn1@btinternet.com to arrange a meeting to discuss how we assist you in entering the UK market.

 

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.

 

Diversification –sometimes it turns around and bites you

 
Without doubt one of the most difficult challenges a business faces is diversification. Very often a company is faced with the dilemma of diminishing revenue returns and a tired business model which is either irrelevant or obsolete.

Diversification is seen as the solution to this dilemma. However, the mechanism for achieving this objective can be particularly difficult.

One should always respect geography it may be very tempting to consider that there are opportunities just waiting to be picked up but to underestimate the advantage of local knowledge and conditions can again prove costly.

Mobile phone retailer Carphone Warehouse has agreed to buy out its joint venture partner Best Buy for £471m, giving it full control of its retail operations across Europe.

The joint venture - Carphone Warehouse Europe - operates almost 2,400 stores across Europe.

The joint venture was created in 2008, when Best Buy paid £1.1bn for its 50% stake in the firm.

Carphone said the two companies had decided to focus on their own regions.

The withdrawal marks the end of a costly venture into Europe for Best Buy.

Carphone Warehouse Europe opened 11 American-style Best Buy electronics megastores in the UK, but closed them in 2011 after they lost tens of millions of pounds.

In essence diversification can provide the answer to a company’s need for increased revenue but without a clearly defined strategy it can equally provide another drain on an already embattled balance sheet.