The high cost of complacency

From a company Manager’s perspective the recent market gyrations and latest pronouncements from politicians and economists alike have done little to calm nerves and now more than ever is the time for good housekeeping and firm controls.

Constant 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 guide as to future performance. Look out for tell tale signs 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.

The key is to make sure that when the dust eventually settles that your company emerges in a stronger position.

Risk/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 .

That’s the way to do it

 The latest assessment of the UK economy by the IMF makes for uncomfortable reading. The UK is back in recession after the economy shrank by 0.4% in the final quarter of 2011 and by 0.3% in the first three months of this year.

The IMF lowered its growth forecasts for the UK to 0.2% in 2012 and 1.4% in 2013. In the spring, it had forecast growth of 0.8% this year and 2% next year.

The IMF said that the UK faced "significant challenges" from a stalling recovery, high unemployment and threats from the Eurozone.

As domestic budgets are ever more squeezed this will impact on businesses across the board.

This is an appropriate time to conduct a root and branch analysis of your business. Undoubtedly there are areas which would benefit from some radical adjustments/ change of direction. The consequence is not acting now could have very negative effects in the next few months.

Now is the opportunity to prepare for difficult times rather than adopting an ostrich "head in the sand" attitude.

When trying to explain a disastrous strategy to your Shareholders or Bankers it will be of little comfort to trot out the tired old defence “it seemed like a good idea at the time”.

Keeping close to your Customer

Over recent years rapid advances in technology have transformed the way we do business. Our everyday business tools would have been regarded as flights of fancy not so long ago.

With the unstoppable rise of e-commerce come challenges. Perhaps the biggest danger is the lack of personal contact between a company and its customers. Obviously this is not an issue for an online retailers selling products over the net and being paid via a Debit Card or Pay Pal etc.

However, there is an increasing tendency for B2B sales to be concluded by email or even SMS. The personal element has been lost and so has the identity and customer relationship. The surest way to avoid problems is by knowing your customer and understanding their business.

This relationship and mutual understanding is not possible to maintain thru a key pad and email ordering system.

Symbiotic relationships key to survival

All too often the focus on the current economic background is negative. However one of the benefits emerging 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 vital that a good understanding exists between supplier and Consumer.

In as much as a Supplier will be 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.

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

The problems in Spain continue to mount

Spain has already asked for and been granted a bailout for its banks. The worry now is that the financial demands of some of the country's 17 autonomous regions will mean the country will have to seek a full bailout, in the same way that Greece, the Republic of Ireland and Portugal did.

Many of Spain's regions have high borrowing needs, and speculation is growing that a number of them will follow Valencia and ask formally money from Madrid at a time when the central government itself is having trouble borrowing money.

The spectre of Spain’s deepening crisis continues to rattle markets and against this background companies are finding it increasingly difficult to source funding from institutions. Now more than ever is a time to focus on cash-flow and ensure that all receivables are dealt with in a timely fashion. Sloppy credit control practices could prove very costly.

Diversification can be damaging

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.

The first step is examining why the current business model is not working. This requires an honest appraisal from the Management in respect of their own performance.

 Then the areas of diversification have to be closely considered, very often people plunge into businesses in which they have little knowledge or experience and the results pretty quickly show up these deficiencies.

Thirdly 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.

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.