This page contains a Flash digital edition of a book.
In Focus Commercial Credit


Why bury your head in the sand?


Many creditors assume that their clients will talk to them if there is a problem, but is that so?


Martin Campbell Managing director, Ormsby Street martin.campbell @ormsbystreet.com


This is not the one and only area where our small-business customers can bury their heads in the sand.


“I have all my customers on 30-days terms which makes it simpler for me to forecast my cashflow,” is something that we hear a lot.


I bet the cashflow graph in the accounting package looks beautiful and gives them a nice feeling of control, but I also bet that there are questions asked every month around which invoices to chase first in order to address the issues they are facing with cashflow, and how did this happen.


That is the difference between forecasting on your payment terms and forecasting actual on reality.


How you get to that reality might vary. It might be your through own experience of payment performance of your customers – for example, being able to see in your invoice history that business X traditionally pays 10 days late.


Alternatively, it might be viewing the payment performance information supplied by credit reference agencies.


Either way you will get an understanding that business X pays on 40 days and business Y on 45 days, rather than the 30-days terms that you agreed with them. It might not perfectly reflect reality, but it is a darn sight closer than assuming everyone pays on 30 days.


March 2017 www.CCRMagazine.co.uk


I once had a boss who banned the use of the phrase ‘a perfect world’. “We do not live in a perfect world,” he would say. “So stop talking as if we do. Plan for the reality.” That is precisely what many small businesses do not do


It is, perhaps, a little more work up front, but this is far outweighed by any efforts you would need to put in when you realise your cashflow forecast is wrong each and every month.


In the real world


We would all love to live in a world where the best-case scenario, which we have in our heads, comes to fruition.


One where our sales forecasts are exceeded our customers paid on time or earlier, and our pigs are flying.


I once had a boss who banned the use of the phrase ‘a perfect world’. “We do not live in a perfect world,” he would say. “So stop talking as if we do. Plan for the reality.” That is precisely what many small businesses do not do.


Instead, they live in the false reality and, on many occasions, they get away with it perfectly fine.


But they only need something bad to happen once and all the hard work can disappear down the drain. Insurance companies have understood this for years, which is why they are the bedrock of most Western economies.


Investing a little time and money into protecting your business will pay dividends when the worst happens. And if the worst does not happen, then that is great as well. It is a win-win. CCR


19


Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8  |  Page 9  |  Page 10  |  Page 11  |  Page 12  |  Page 13  |  Page 14  |  Page 15  |  Page 16  |  Page 17  |  Page 18  |  Page 19  |  Page 20  |  Page 21  |  Page 22  |  Page 23  |  Page 24  |  Page 25  |  Page 26  |  Page 27  |  Page 28  |  Page 29  |  Page 30  |  Page 31  |  Page 32  |  Page 33  |  Page 34  |  Page 35  |  Page 36  |  Page 37  |  Page 38  |  Page 39  |  Page 40  |  Page 41  |  Page 42  |  Page 43  |  Page 44  |  Page 45  |  Page 46  |  Page 47  |  Page 48  |  Page 49  |  Page 50  |  Page 51  |  Page 52  |  Page 53  |  Page 54  |  Page 55  |  Page 56