A gun to the head

As more and more companies struggle with their cash-flow issues, they are revisiting their payment terms with their suppliers.

The latest review from Marks and Spencer has resulted in them imposing extended payment terms from Freight-on-board (FOB) suppliers who have seen their payment terms extended from 60 days to 75 days, while full-service-vendors (FSV), who transport, store and deliver goods for M&S, will see their payment delayed from five weeks to seven weeks.

The changes, which will boost Marks & Spencer's cash flow, could anger suppliers. M&S's major suppliers were upset in October 2011 when the firm asked them to make a one-off contribution of 1.25% of their annual turnover with the retailer to its store revamp programme and associated advertising.

In reality the suppliers have little alternative – if you want to keep trading then you have to accept the “realpolitik”.

 

The key is to make the most of available cash resources which inevitably leads to some hard commercial decisions. Late payers are a luxury that no company can afford in this climate. Stock must be turned into cash as quickly and efficiently as possible.

 

Those who either will not or cannot adapt to the demands of today’s business will go the way of the dodo.

 

Wake up and smell the Coffee – whilst you can

 The rise of the developing world is really just a return to business as usual.

 

After all, until the 18th Century, India and China were the richest countries on the planet. For 18 of the past 20 centuries China had the largest economy in the world until the 19^thcentury and the industrial revolution.

Chinese companies are increasingly active and will continue to make international acquisitions. Bright Food China's second-largest food manufacturer are currently in talks with Israel's largest food producer Tnuva Food Industries Ltd over a potential acquisition, which is valued at $1.29 billion and expected to be the largest purchase of an Israeli firm made by a Chinese company. Bright Food spent about 7 billion yuan ($1.14 billion) in the year 2012 in purchasing 60 percent of the shares in Weetabix, a British breakfast cereal producer, after carrying out eight other overseas merger and acquisition projects since 2009.

Meanwhile in the US, Smithfield Foods Inc. , the world’s largest hog and pork producer, said U.S. regulators will allow the company to be bought by China’s Shuanghui International Holdings Ltd.for US$ 4.72 billion a deal which represents the biggest Chinese purchase of a U.S. firm.

The Committee on Foreign Investment in the U.S., or CFIUS, approved the transaction and it will be voted on by Smithfield shareholders at the company’s annual meeting Sept. 24.  

Meantime as evidenced by the recent purchases of Corn from the US, China will continue to be a major buyer in the international agri markets in response to demand from its burgeoning middle classes. Chinese China's state stockpiler Sinograin recently bought more than 1 million tonnes of U.S. new-crop corn,in addition to sizeable volumes of Wheat and Sorghum.

 

With a population in excess of 1.3 billion (approximately 20% of the world’s population) imagine the implication for Western consumers should an early morning cup of coffee become the beverage of choice!

 

The Bank that likes to say "no"

Back in the 80’s the TSB (aka Lloyds) coined the advertising slogan “the Bank that likes to say yes”.

Fast forward to July 2012 and the launch of the government’s Funding for Lending scheme designed to help hard pressed SME’s obtaining funding. A year on and the figures reveal a somewhat depressing picture. Net lending to businesses has dropped by £2.3 billion since the launch of the scheme.

Ironically the banks who were bailed out by the tax payer namely Lloyds Banking Group and RBS are two of the worst culprits with their net lending dropping by £12 billion.

Where SME’s are able to obtain funding it comes at a hefty premium with nearly one in 10 companies servicing bank lines at more than 11 percent interest.

Whilst there is much talk about the recovery in the UK economy there is nothing to suggest a more accommodating response from the banks to small businesses in the near term.

Starved of funding businesses will find it hard to grow so it is imperative that every effort is made to maintain efficient cash-flow.

Managing in troubled times

 

Working with companies over the past months I have noticed that there is an increasing sense of demoralisation amongst many sectors of the work force.

The causes for this are readily identifiable, many people are struggling with their own domestic finances whilst at the same time the need for increased levels of performance and efficiencies at work have rarely been as intense.

It is the responsibility of the Management to ensure that during these times Staff members are encouraged to give of their best.

Too many managers are remote from the day to day activities of their staff and appear to have the attitude that the people who report to them are lucky to have a job.

This mentality is counterproductive. Staff need motivating and incentives do not necessarily have to come solely in the form of financial rewards.

Some of the best run and therefore by definition most successful commercial entities are those where the workforce is engaged and feels part and parcel of the organisation rather than merely there to make up the numbers.

 

4/5 ths of the iceberg is below the surface

In the wake of the financial crisis the Chairman of the US Fed Reserve commented that "even as we make progress on known vulnerabilities, we must be mindful that our financial system is constantly evolving and that unanticipated risks will develop over time,"  

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. 

For example I have worked in trading environments where 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.

 

Low cost 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 products and services for the UK market. 

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.

 

Everyone needs to feel recognition

Against the current economic background everyone expects ultimate value for their cash be it the corporate customer or the man in the street.

 

It is a paradox that as times 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 customers opt 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.