Hardly a day goes by without a front page headline telling us the world may or may not implode, but to ignore the issue or treat it with disdain is likely to hurt even more.
Dealing with it correctly can make a lot of difference in terms of survival. Canny resellers must take advantage of openings or opportunities as they appear.
Recent initiatives designed to offer increasing levels of trade credit availability are unlikely to help if a firm is not adequately placed to manage its working capital requirement or to pay when obliged.
Guaranteeing to use a specified level of credit provided places extra strain on a business, more so when activity is never uniform from one month to the next.
These programmes rarely have wide appeal given the strictness of the
Review of trade credit on the basis of increased trade is a normal standard
routine in any event and in my experience, increasing the line first then looking for this to be used often disappoints.
It could be argued that providing increased trade credit where it is not required mirrors the tactic employed by banks and mortgage companies responsible for the sub-prime fiasco that sparked the so-called credit crunch in the first place.
Trade credit is really not an issue presently as many suppliers carry significant unused credit availability. What may be at a premium is extended term availability, given the squeeze in funding and loan availability.
Such demand, either short or medium term, will test the strength of relationships between suppliers and clients and some serious thinking will undoubtedly be required.
Recent write-offs by banks and mortgage lenders leave us with little breathing space and the pressure is on to make good this shortfall. Pity financially stretched firms that may find borrowing impossible.
What is needed is careful attention to detail, a firm grip of working capital and an attitude that says profit is a concept that is only tangible when converted to cash.
If you buy something for £10, incur a cost of £2 and sell it for £15, until you have £3 in your hand it matters not a jot.
Many firms do not review costs as often as they should or monitor the way in which working capital is managed. Cost review should not be driven by economic downturn, but by a continuous process that evaluates return, directly or indirectly.
Management of accounts receivable trade debtors is crucial and yet so few apply themselves diligently to this until cash dries up and suppliers cannot be paid.
A dedicated resource in this area can repay itself several times over.
Supplier payment is critical and so is the negotiation of terms. Bigger players can demand or bully extended terms, but an SME may feel disadvantaged.
Yet their business may be equally relevant and more profitable to a supplier. A sensibly thought-out request, either permanent or short term, can frequently deliver a positive result.
Some resellers owe their survival to suppliers who on being approached to listen and assist, have done so and collaborated closely with others, privately or through informal, confidential arrangements.
These suppliers not only continued with risk, they increased it and worked with resellers to ensure full recovery. Where there is dialogue and a level of trust, nightmares can become sweet dreams.
Inventory and turn are also part of the cash conversion cycle, as is keeping a firm grip on stock holding and obsolescence, with proper purchasing controls keeping a lid on unnecessary purchases.
It is no use for internal management data to show no change to the value of inventory month to month or inventory levels exactly the same as eight months ago.
A good, solid and functional operating system that delivers quality, accurate
financial information under the stewardship of finance is a prerequisite to
business growth. Finance needs to
influence management more and not merely churn out numbers in isolation.
The channel is fortunate. It is more resilient and enjoys a distribution supply chain intent in granting the right level of support and latitude. It does, however, have some areas that require attention and remain open to dialogue. But I have yet to come across an industry sector served by credit as well as the one we are in.
Automation firms UiPath and Automation Anywhere close out their funding rounds with $265m and $300m respectively
View photos of last night's awards ceremony in London
View photos of all the winners from the 2018 Channel Awards
After a glittering awards evening in Battersea celebrating 25 years of the Awards, we are pleased to share the list of winners and judges' commended winners