1. Lessen the “Crunch” impact
A topic much in the news and hardly a day goes by without some front page headline
again telling us the world may or may not implode but to ignore the issue or treat it
with disdain is likely to hurt. Dealing with it correctly and appropriately can mean a
whole lot of difference in terms of survival and taking advantage of openings or
opportunities as they appear.
Recent initiatives designed to coax and offer increasing levels of trade credit
availability are unlikely to help if a business is not adequately placed to manage its
working capital requirement or be in a position to pay when it is supposed to.
Furthermore, 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 or where activity is project driven. These programs in truth rarely have wide
appeal, invite increased incidence of default and low take-up is the reality, given the
strictness of parameters set. 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 utilised often disappoints. It could be argued that providing
increased trade credit where it is not required, or worse perhaps, not justified, mirrors
the tactic employed by those banks and mortgage companies responsible for the sub-
prime fiasco that sparked the current financial crisis and economic climate.
Trade credit at present is really not really an issue with many suppliers carrying
significant unused credit availability. What may be at a premium however is extended
term availability given the squeeze in funding and bank loan availability; such
demand, either short or medium term will surely test the strength of supplier/client
relationship and some serious thinking and consideration will undoubtedly have to
apply.
Stacking up recent write-offs by banks and mortgage lenders leaves us with little
space to write on and invariably pressure then falls on the consumer and corporate
business to make good this shortfall, more so those already heavily in debt or
financially “stretched” who may find borrowing more impossible and demands to
reduce debt more common. Ultimately, it’s argued, banks never lose.
What’s needed therefore is careful attention to detail, a firm grip of working capital
and an attitude that says profit is a concept, only tangible when it converts to cash. To
put it crudely, if you buy something for a tenner, incur a cost of two pounds and sell it
for 15, until you have those three pound coins in the palm of your hand, it matters not
a jot.
It’s fascinating to note how many companies rarely review costs as often as they
should or monitor the way in which working capital is managed. Cost review should
not only be a programme driven by economic or business downturn but 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, of course, cash dries up and suppliers cannot be paid. A dedicated resource in
this area alone can repay itself several times over in a very short period of time.
Supplier payment is critical and so is the negotiation of terms applied. Bigger players
can demand or bully extended terms but an SME may feel disadvantaged. This is a

2. misplaced perception and not the case as their business may be equally relevant and
indeed more profitable to a supplier. A sensible and thought out request, either
permanent of short term, can frequently deliver a positive result.
Although not generally well known, some Resellers owe their very survival and
current well-being to suppliers who on being approached to listen and assist, have
done so and collaborated closely with others, privately, or through informal and
confidential arrangements. Despite serious and business threatening situations, these
suppliers not only continued with risk, they increased it and worked cap-in-hand with
Resellers to ensure full recovery. This aptly demonstrates that where there is dialogue,
trust, and free exchange of accurate information, nightmares can so easily become
sweet dreams.
Inventory and turn are also part of the cash conversion cycle and keeping a firm grip
on stock holding and obsolescence, with proper purchasing controls keeping a lid on
unnecessary purchases and resultant write-downs. It is of no use whatsoever for
internal management data to show no change to the value of inventory month to
month or inventory levels exactly the same as 8 months ago
A good, solid and functional operating system that delivers good quality and accurate
financial information under the stewardship of finance is a pre-requisite to business
review and growth. What is more, finance needs to engage more and influence or
direct management and not merely churn out numbers in isolation.
The channel is fortunate. It is more resilient and enjoys a Distribution supply chain
that is intent in granting the right level of support and latitude whenever required. It
does however demand positive movement in areas that require attention and remains,
as ever, open to dialogue. I have yet to come across an Industry sector as well served
by Credit as the one we are in.