Forging effective partnerships

 

Over recent months the focus on the current economic background has tended to focus on the negative. However one of the benefits to have emerged from the current business climate is the value that can be placed on a mutually beneficial customer/ supplier relationship.

 

As increasing numbers of business operate on a just in time inventory basis it is essential that good understanding and clear communication exists between supplier and their buyer.

 

In as much as a supplier is prepared to go the extra mile to ensure that his buyer receives his goods on time and in good order so it behoves a buyer to ensure that he pays as required and is not abusing the goodwill of his supplier by “pinching” some extra period of credit.

It is a simple but effective quid per quo.

 

If parties work together in a professional and commercial manner it will strengthen the relationship and both will emerge from the current situation with a renewed confidence in each other and a better based business for the long term.

 

Failing to act, acting to fail

 

Very few companies implode like a supernova. In the vast majority of cases the distress signals are visible for some time before the flame out.

There are many tell-tale signs such as consistent abuse of payment terms, erratic ordering patterns and lack of response to emails or calls. These are early warning signals.

When faced with mounting problems it is highly likely that the solutions will of necessity be painful. However, radical and decisive surgery is often the only way to ensure a patient’s survival.

Unfortunately many companies adopt the Mr Micawber attitude that “something will turn up”.

In the overwhelming majority of such cases the only people likely to turn up are the administrators/liquidators.

Be it merely inertia or fear of addressing the problem issues the outcome will inevitably remain the same.

Customer service - the art of the achievable

 

The old adage the customer is always right has come in for a fair amount of scrutiny recently and in truth 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.

 

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 increasingly competitive times there are many who would willingly take this “problem” and accompanying revenue off of your hands.

 

 

Time for review

We are seeing further evidence of the unstoppable rise of e-commerce in the run up to Christmas. However for the more traditional retail outlets there is a growing concern that the vital sales boom is not materialising. This in turn will impact upon suppliers.

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 is being carried. Make sure levels of stock turn are satisfactory and that obsolete stock is not being carried. Rather than face a “fire sale” it may well be prudent to lighten up now with some innovative marketing strategies.

 

A healthy cash-flow is essential. With the backdrop surrounding financial institutions and governments alike, don’t rely on 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 firmly managed.

Undoubtedly, we will see failures in the early weeks of 2014 – now is the time to do everything you can to ensure that your company doesn’t become part of these statistics.

 

Don’t get trapped in quicksand

 

Despite many warnings and scares many companies are still failing to adopt a robust approach to their financial controls.

 

These companies fail to recognise the need for strict discipline in respect of stock turn and control but what is even more disturbing is the reaction to the debtors’ book.

 

As more and more customers seek actively to delay payment this element of business policing is even more critical.

 

When a customer exceeds the agreed payment terms, they are in reality using the supplier as an alternate (unsecured overdraft).

If left unchecked this situation can spiral out of control so that in a worst case scenario the supplier is forced to keep “supporting” the errant customer for fear of realising a bad debt.

 

Think of the parallel to the recent Eurozone debts (Eire/Greece etc.) – it is a slippery path.

 

Without a vigilant approach it will not be unusual for payment terms of 30 days drifting into 60 and beyond. The implications for your company’s financial position is all too obvious.

Failure to spot a crisis – FSA for short

The ongoing fall-out arising from the departure of the Chairman of the Co-op Bank continues. Flowers was the £132,000-a-year chairman of the 'ethical' Co-op Bank from 2010 until May this year when he stepped down as the bank's financial woes became apparent. The bank lost £700 million in the first six months of this year.

The failure of the regulatory authorities specifically the FSA (the UK’s Financial Services Authority) again highlights the fact that they really did not understand the complexities of the business which they were in the position to regulate.

Furthermore the FSA's seemingly lackadaisical approach to his appointment was - many would say - compounded, by the fact that it allowed Co-op Bank for months on Flowers' watch to negotiate another huge deal. This would have resulted in the bank trebling in size by buying more than 600 branches from Lloyds (a deal from which Co-op ultimately withdrew, when it belatedly recognised it was beyond its management capabilities).

Following the closure of the FSA, on 1^st April the Prudential Regulation Authority (PRA) became responsible for the prudential regulation and supervision of banks, building societies, credit unions and major investment firms.

In promoting safety and soundness the PRA focuses on the harm that firms can cause to the stability of the UK financial system. A stable financial system is one in which firms continue to provide critical financial services – a precondition for a health and successful economy. Hopefully it will be more efficient than its predecessors.

The situation at the Co-op Bank is an outstanding example of a business out of control. At the same time it begs the question how many businesses are similarly basket cases yet by smoke and mirrors are able to befuddle and confuse both their shareholders and bankers.

For example as the owner of an SME are you really confident in the integrity of the figures presented to you by your finance department? Or as the shareholders of RBS are you merely content to receive good news without challenging the how and whys of these results being achieved?

It all boils down to the age old fact that if something looks too good to be true it usually is.

Developing and sustaining relationships

 

Business practises have changed markedly in recent years.

 

Although many operations are completed electronically in this virtual world, we should never forget that essentially commerce is about people trading together.

 

The reality of the real world is that goods need to be moved from point of production to point of consumption and obviously the diverse elements which make up this chain cannot be achieved solely via a computer terminal.

 

It makes sound economic sense to foster and maintain good customer relationships as it has been determined that it costs up to five times as much to win a new customer as it does to retain one.

 

There is an old adage “know your customer,” this maxim has never been more relevant than in these uncertain and challenging times.