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?”

 

Avoiding ostrich management

The result of management and shareholders ignoring obvious problems usually ends up with the plaintive cry “why did that go wrong?”

 

The reality is simple, a large number of companies fail to address problem issues early enough to avoid an oncoming crisis.

 

The signs of a troubled business are usually apparent – these include lack of controls, lack of strategic vision, a demotivated workforce and obsolete or valueless stocks etc.

However for a variety of reasons these problem areas are not tackled.

Instead of grasping these nettles, often the preferred option is to engage in a totally pointless course of action such as a rebranding exercise or the launch of another product range destined to fail for the above reasons.

 

Problems ignored rarely go away. Timely intervention can avoid the need to conduct a messy post mortem

 

Customer service - getting the balance right

 

 

The old adage the Customer is always right has come in for a fair amount of criticism recently and there are many times when plainly the Customer is in the wrong.

Notwithstanding it is of paramount importance to the sustained growth of any business that the Customer is kept onside.

One sector that has drawn much negative comment recently is Banking

The key requirement that any Customer wants is to feel that his/her business is valued and appreciated.

In business securing the deal is only the start of the process and the repeat order very often stands or falls with the after sales service (or lack thereof).

Simple but effective measures such as ensuring all contracts are performed efficiently and within due time and that any complaints are handled promptly and with courtesy will go a long way to building and maintaining long lasting relationships.

We have all encountered the difficult Customer with whom it would be easier not to deal. However, in these difficult times there are many who would willingly take this “problem” and revenue off of your hands.

 

Tapping the barometer

Some of the the best indicators are the least sophisticated. The UK economy may be showing signs of recovery but is far from robust – the clearest evidence of this can be seen as you walk down any High Street.

 

The rising number and popularity of charity shops tell underscore that many families are struggling whilst at the same time the spectre of administration looms large.

 

With many people continuing to struggle with debt and job insecurity it is hard to imagine a return to the heady days of consumer excess.

 

As the knock on effect percolate back down the chain many businesses will suffer.

 

External factors by definition are difficult to handle but at the same time in-house disciplines can at least provide some insulation.

 

Cash-flow will continue to be a critical issue over the coming months so as always strict governance of debtor and inventory control will provide some measure of comfort.

 

 

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. Many companies have opted out of using air freight switching their 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.

 

 

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.

Reduced turnover will result when stricter controls are in place over such elements as payment terms and credit limits.

However, 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.

 

 

Time to tighten up

 

The summer holiday season is now behind us and as businesses start gearing up again, a general sense of reality will start to take its place.

The signs are that the last quarter of 2013 will be a challenging time for business as consumer’s further reign in their spending.

Without doubt now is the time to tackle potential problem areas with some effective housekeeping.

How much inventory are you carrying?

Rather than face a “fire sale” it may well be prudent to lighten up now with some innovative marketing strategies.

How is your cash position?

With the 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 as we head towards the end of 2013 so make sure your business doesn’t become part of these statistics.