Avoid becoming an unsecured creditor

From a supplier’s perspective the most important part of any transaction is to ensure prompt and satisfactory receipt of funds for goods or services provided.

 

When a company oversteps the mark by abusing agreed payment terms they are in fact using the seller’s tolerance as means of providing an unsecured overdraft.

 

Put simply would you exchange a promise from your buyer for prompt settlement conditional on your company providing the upfront funds enabling them to do so?

 

In reality by continuing to supply a persistent late paying account this is exactly what is happening.

 

It is a question of commercial judgment.

 

In these present trading conditions business is hard won but if the transaction carries a disproportionate risk then it isn’t worthwhile.

 

The time and effort spent chasing a recalcitrant account would be better spent elsewhere.

 

Good service it’s easily doable

 

External factors over which little control can be exerted will continually buffet all business sectors.

 

However, every organisation does have a potentially winning weapon in their armoury namely the opportunity to offer excellent customer service.

 

In today’s business environment everyone expects ultimate value for their cash be it the corporate customer or the man in the street.

 

It is a paradox that as trading conditions become tougher and business harder to win the level of service offered by many suppliers is falling very short of acceptable standards.

 

How much revenue is lost arising from an existing or potential new customer not wishing to endure the frustrations of automated answering and merely hanging up?

 

How much “repeat business” is lost owing to the failure to meet agreed delivery schedules?

 

With such experiences customers are left feeling that their business is not valued. It is little wonder that they look for alternative suppliers.

 

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 focus their energies on customer service will see their business reaping the benefits

 

 

Cash-flow the lifeblood of business

 

Efficient credit control is a vital component for any successful company.

 

It must be a priority that all businesses ensure that their customers are settling invoices on time.

 

With slim operating margins the norm, very few companies can afford the spectre of significant bad debts.

 

Small businesses in the UK are owed billions of pounds in late payments, but new research has shown that a third are reluctant to chase slow-paying customers because they are worried about upsetting them or feel embarrassed.

 

Four in five, SME’s say they avoid chasing debtors because they find the process 'uncomfortable', while the remaining 20% are afraid of antagonising customers.

 

This is a dangerous approach resulting in more than a third of UK SMEs reportedly writing off thousands of pounds of bad debt every year.

 

The following are some procedures which companies can employ to increase the efficiency of credit control.

 

Set credit limits for each customer and review these regularly.

 

Be concise in trading terms for example it is better to specify 30 days from date of invoice rather than 30 days from end of month.

 

Issue monthly statements detailing invoices paid and those outstanding.

 

Score your customers and set a collection policy accordingly.

 

Do not let overdue payments go unchallenged.

 

Evaluate aged debtors on a weekly basis.

 

Prioritise collections and press for settlement of the highest values first.

 

Have a plan of action if payment is not forthcoming within a set date.

 

Despite the vital importance of maintaining a healthy cash flow three quarters of SME’s do not have a person or a procedure in place for chasing bad debt and a vast majority have no established escalation process for late payments.

 

This is a recipe for disaster.  

 

 

 

Clicks versus bricks the battle for market share

 

Amazon predicted to be 9^th biggest retailer in the world by 2018 has no stores.

 

In the UK the impact of Amazon’s business model on leading High St retailers has been devastating. Groups such as Comet has disappeared and HMV have gone into administration.

 

Amazon now has just under 25% share of the UK entertainment industry. Forbes recently listed Amazon at number 33 in the world’s most valuable brands.

 

Amazon are focussed on playing the long game and one of the keys to their future strategy is the latest buzzword "personalisation".

 

This is the mechanism of presenting customers with tailored, relevant content as they shop and in doing so increase conversion and generate loyalty

 

Despite the increased usage of this technology, it is still relatively new to the market but will undoubtedly evolve to become a prime factor in driving the future of ecommerce.

 

More ecommerce companies are devoting increasing resources to develop personalisation software.

 

Several leading brands are assigning more internal resource to creating a truly personal customer experience by appointing teams of ‘personalisation experts’.

 

As with traditional retailers ecommerce companies are now placing greater emphasis on using real insight to make customers feel like valued individuals as they spend time shopping on line.

 

All of this blurs the traditional lines and retailers face a common problem delivering what the consumer demands efficiently and free of delivery charge at prices which reflect ever squeezed profit margins.

 

Effective management

 

In order to achieve success all organisations must have effective leadership.

It is the responsibility of management to lay down a set of ideas and objectives that are articulated, understood and supported by the workforce .Good people do not like working for organisations whose values are muddled.

Managers have to take difficult and unpleasant decisions.

 

These often need to be made swiftly balanced against conflicting demands. It is not always possible to access cast-iron evidence to support the decision making process. This is one of the tests of strong management.

 

A clear and defined vision are essential requirements. Managing a large company, and dealing swiftly with a variety of challenges and issues is a complex task.

 

The desire to succeed which provides the drive and focus on excellence is one of the hallmarks of a good manager.

 

The workforce is the company’s most precious asset. Accordingly the ability to judge people and value their contribution is an essential prerequisite for any manager.

 

To build a talented team requires working with people who may be better at their job than you are at yours, and to guide and motivate them. People learn far more about the art of leadership from a good mentor than from any course or training exercise.

 

The ability to respond quickly will prove invaluable when things go wrong.

Surviving a reverse and changing direction is the utmost test of resilience and flexibility.

 

 

Risk versus reward – the ying and yang of commerce

 

Every business transaction contains an element of risk, yet at the same time how adequate are the mechanics and systems that are in place to manage these risks?

 

In recent years we have witnessed just how costly the laissez faire attitude to risk was in many institutions be they large corporations or smaller SME’s.

 

In the never ending quest for larger profits many of the saner measures of business were jettisoned.

 

An analysis of the most spectacular flame outs all have one common denominator – the architects of these calamities went hurtling over the cliff like lemmings.

 

There has never been a more pressing need to examine all areas of exposure.

 

A forensic analysis of the current Debtors Book might make for uncomfortable reading but like most unpleasant tasks it should not be ducked.

 

It is far better to take remedial action such as a write down whilst you are in control of your own destiny rather than have a 3^rdParty appointed to do it for you .

 

Stock control policy and procedure

 

For manufacturing companies a crucial element of running a successful business is the manner in which they control their stock holdings.

 

Carrying stock ties up money. This money is either borrowed and carries an interest charge, or represents funds that could otherwise be better used in servicing other elements of the business.

 

There are additional costs in holding stocks such as storage and the risk of getting spoiled, breaking, being stolen, or simply going out of style.

 

Wherever possible companies need to reduce stock holdings and there are various means by which to achieve this aim:

 

Liquidate slow-moving or obsolete stocks.

 

Introduce more efficient production techniques to reduce stock holdings.

 

Rationalise the product range weeding out the under performers and thereby reduce stock carried.

 

Negotiate sale or return with suppliers in order to avoid being stuck with unwanted product.