Open Letter

To Liar Cameron,

Please find below our suggestion for fixing the UK 's economy.

Instead of giving billions of pounds to banks that will squander the money on lavish parties and unearned bonuses, use the following plan.

You can call it the Patriotic Retirement Plan:

There are about 10 million people over 50 in the work force.

Pay them £1 million each severance for early retirement with the following stipulations:

1) They MUST retire
Ten million job openings - unemployment fixed

2) They MUST buy a new British car.
Ten million cars ordered - Car Industry fixed

3) They MUST either buy a house or pay off their mortgage -
Housing Crisis fixed

4) They MUST send their kids to school/college/university -
Crime rate fixed

5) They MUST buy £100 WORTH of alcohol/tobacco a week .....
And there's your money back in duty/tax etc

It can't get any easier than that!

P.S. If more money is needed, have all members of parliament pay back their falsely claimed expenses and second home allowances

If you think this would work, please forward to everyone you know.

Also.....
Let's put the pensioners in jail and the criminals in a nursing home.

This way the pensioners would have access to showers, hobbies and walks.

They'd receive unlimited free prescriptions, dental and medical treatment, wheel chairs etc and they'd receive money instead of paying it out.

They would have constant video monitoring, so they could be helped instantly, if they fell, or needed assistance.

Bedding would be washed twice a week, and all clothing would be ironed and returned to them.

A guard would check on them every 20 minutes and bring their meals and snacks to their cell.

They would have family visits in a suite built for that purpose.

They would have access to a library, weight room, spiritual counselling, pool and education.

Simple clothing, shoes, slippers, PJ's and legal aid would be free, on request.

Private, secure rooms for all, with an exercise outdoor yard, with gardens.

Each senior could have a PC a TV radio and daily phone calls.

There would be a board of directors to hear complaints, and the guards would have a code of conduct that would be strictly adhered to.

The criminals would get cold food, be left all alone and unsupervised. Lights off at 8pm, and showers once a week. Live in a tiny room and pay £600.00 per week and have no hope of ever getting out.

Eurozone Finance Ministers & IMF claim the Euro is Overvalued

Eurozone finance ministers and the International Monetary Fund see the euro currency as too highly priced, Eurogroup chief Jean-Claude Juncker said Tuesday.

Speaking after a meeting of the 16 countries that use the single currency, also attended by the IMF's Europe director Marek Belka, Juncker said they were all agreed that the "euro is overvalued."

"We are in agreement with him when he says that the euro is overvalued and that a certain number of adjustments are desirable," he said, underlining that the unnatural strength of the euro was particularly the case when compared to China's yuan.

"We see it as abnormal that a fast-growing economy (China) devalues its currency in relation to a currency zone where growth performance is far less positive," he said, citing forecasts for eight percent annual growth in Chinese gross domestic product.

The European Commission is forecasting eurozone growth of 0.7 percent in 2010 and 1.5 percent in 2011.

On Tuesday, the euro moved higher against the dollar -- to which the yuan maintains a de facto peg -- as investor appetite for risk returned on the back of positive data from China, the United States and Europe and as fears eased of a Dubai default.

The single European currency in late-day trade was at 1.5094 dollars after 1.5005 dollars late Monday in New York.

According to French President Nicolas Sarkozy, at that level, "how do you expect us to sell planes to the United States?"

Speaking earlier in the day, Sarkozy said today's "multipolar world" should have a "multipolar monetary system."

Juncker met with Chinese premier Wen Jiabao on Sunday, along with European Central Bank chief Jean-Claude Trichet and outgoing European Union economic and monetary affairs commissioner Joaquin Almunia.

Luxembourg premier Juncker, set to be voted in for a new two-and-a-half mandate as eurogroup leader in January, said they were "not looking for an abrupt change in Chinese monetary policy."

Rather, he said, they explained to Jiabao, joined by the Chinese central bank chief and his finance minister, that Europe wanted to see a "gradual" realignment.

"We were of the opinion that an appreciation of the yuan compared to the euro was desirable to reduce the global disequilibrium we observe," Juncker added.

He said Chinese citizens would enjoy greater purchasing power if Beijing took back "control over its monetary policy."

He added: "Our Chinese friends don't see it the same way, that's hardly a surprise but we were determined to articulate our point of view to them."

Wen Jiabao on Monday said international pressure over China's currency policy was "unfair" after Trichet told reporters that the Europeans encouraged Beijing to take "a more flexible policy."

The yuan's exchange rate is one of the thorniest trade issues between China and the European Union.

When Beijing officials talk about keeping the yuan "stable," it typically refers to maintaining its current value.

The Chinese currency has been effectively pegged to the US dollar since mid-2008, and Europe fears the euro's resultant rise against the yuan will hurt EU exports to China and slow the continent's economic recovery.

Fighting poverty through microloan guarantees - Springwise

Fighting poverty through microloan guarantees - Springwise

A traditional microloan or donation of USD 100 delivers roughly that same amount to the entrepreneur in need, but providing a loan guarantee of the same amount can result in a much larger loan from a local bank, United Prosperity says as much as USD 666, in this case.

Shared via AddThis

Doing Less With Less leads to less

Where do you stand in today's market? and who's standing there with you?

Now that your company has fashionably reduced its staffing levels and you have survived the axe, are you being asked to do more with less, in the wake of these layoffs?

Yes you say, but are you actually doing more? I'm sorry but the real answer is; probably not. According to a US survey conducted in December by Leadership IQ.

When the US research and training firm polled 4,172 workers at 318 companies that had recently laid off employees, 74% of the people who responded said their own productivity has declined. Other findings:

• 87% of surviving workers said they are less likely to recommend their organisations as good places to work. (Quelle surpris! This is a sign of a badly handled layoff)
  
• 64% of surviving workers said the productivity of their colleagues has also declined. (The bad layoff was indicative of poor management motivational skills in the company)
  
• 81% of surviving workers said the quality of service that customers receive has declined. (This should have alarm bells ringing! This way, monsters lie!)7
• 77% of surviving workers said they see more errors and mistakes being made. (Realistically, they may be looking closer, with a more critical and negative attitude or have access to more info through expanded roles)
• 61% of surviving workers said they believe their companies' future prospects are worse.
  

This summary is probably correct, if their customers are sensing negative vibes and are experiencing reduced service, in today's buyer's market. Staff and management should be made aware that they have a vital role to play in convincing customers that there is value to be had by maintaining their loyalty.

Loyal customers and repeat business should be cherished, protected and sustained through innovation and strong management.

If the company has implemented reduced staffing levels without refreshing the management team, its motivation and its attitudes, then the only changes they will need to manage are the shrinkages of its customer base, the obsolescense of its products and services, with the subsequent failure of the whole lame duck enterprise.

Do not mistake Movement for Action

Measured Action for Tough Times

IT Consultants and solution providers are, like everyone else, vulnerable to the recession. However, a recent Market survey shows that IT Consultants and solution providers are preparing to weather the economic storm forecast for 2009. With a lot of good fortune and luck allied to smart planning and insight, they could be positioning themselves for growth in 2010.

US Dollars, GBP and Euros
The dawn of the Obama era in the USA and the infusion of hundreds of billions of dollars, pounds and Euros in stimulus funds are not enough to clear the economic storm clouds gathered over North America, UK and Europe.

Since the beginning of the New Year, the U.S. economy alone has shed nearly 600,000 jobs. Gross domestic product fell by 3.8 percent. And the forecast for the remainder of 2009 calls for sluggish or negative growth.

Consultants poised for 2009
The technology sector, with its IT Consultants and the solution provider community poised to withstand the recessionary pressures of the general economy. The 2009 Market survey of 200 North America IT Consultants and solution providers, reveals that solution providers are very cautiously optimistic about their business prospects in 2009. They fully expect a reduction of enquiries, sales, revenues and profitability. They’re cautious optimism means they are preparing for the worst while hoping for the best.

Weathering the storm
IT Consultants and solution providers are not taking the sluggish economy in their stride. While there is a natural inclination to retreat to a safe place and ride out the downturn, the Market survey report shows many consultants and solution providers are preparing to implement, aggressive business development, sales and market plans. In an effort to not only weather the recession but to power through it and position themselves for growth in 2010 and beyond.

Gross Revenues
Gross revenues from product and services sales increased for 46 percent of solution providers, while only 24 percent saw their top lines shrink. A near equal number of solution providers (45 percent) reported increases in their 2008 profits, while 25 percent said their profits declined.

Ordinarily, healthy revenue and profit increases would be welcomed news for solution providers. But participants in the Market survey were witnessing a phenomenon caused by the recession.

Customer spending down
Consultants and solution providers reported customers spending was down and their existing budgets reduced. This is in anticipation of not getting full funding in 2009 or in anticipation of end-of-the-year budget cuts. Business-technology customers, ranging from small businesses to large enterprises, are expected to continue investments in technologies critical to business operations. This will focus on smart applications and systems that directly reduce costs or innovations that open up new revenue opportunities.

Do not be fooled, they are certainly not freely opening up their checkbooks. IT Consultants and solution providers report that their customers are already cutting back on orders, delaying project implementations and canceling projects to save money.

2009 Forecast
The stated paradox above, is part of the reason why nearly one-half of consultants and solution providers expect their revenue to increase in 2009, while only 32 percent expect a decrease. The key indicator of how tough 2009 will be for solution providers is seen in the number that expect flat year-over-year revenues;

• 30% of solution providers said their 2008 revenue was relatively the same (plus or minus 5%) over 2007,
  
• 21% expect no change in year-over-year revenue in 2009.

• The clear shift to no change or declining revenue reflects longer sales cycles and customers not committing to engagements.

The survey paints a similar picture for profitability;

• 51 % of solution providers expect no change or a decline in their year-over year profits.
  
• 64 % believe their profits will slide by 15 percent or more this year.
• 55 % of optimistic solution providers expect their profits to increase by 15 percent or more.
  
• No solution provider participating in the Market survey, expected profits to sink by 100% or more. Perhaps trying not to think the unthinkable.
  

Consultants and solution providers dependent upon conventional hardware sales expect the largest decreases in revenue and profitability. Anticipating revenue decreases this year;

• 29% of white box/custom system dealers
  
• 27% of hardware resellers and
  
• 24% of general solution providers,
  

Topping the list of specialists anticipating net revenue increases.

• 67% Software resellers
  
• 60% Software-as-a-Service (SaaS) providers and agents
• 55% Systems Integrators
  

Additionally, solution providers say that they are seeing the greatest slow down in business, from small (less than 50 employees) and midsized businesses (50 to 250 employees).

Ring fence your customers
Consultants and solution providers recognize that they must adapt to the poor economic conditions, and many are executing strategic plans to bring themselves closer to their customers. Hopefully this will allow them to preserve and protect existing revenues sources while seeking new opportunities to tap into new revenue streams. Clearly everyone is becoming more defensive of their existing clients and therefore, the new revenue opportunities will be harder to find and even harder to win, possibly with lowered margins and ROI spread over longer periods.

Nearly one-half of consultants and solution providers surveyed for the Market say that their top business goal for 2009 is improving customer satisfaction and retaining existing customers. It’s much easier and more cost effective to expand sales within an existing customer than it is to acquire a new customer and build a relationship. The risk that you put all your eggs in one big basket that could, in itself, fall.

Customer retention not detention
Of the consultants and solution providers focused on customer satisfaction and retention, most anticipate their profits will remain flat or decrease. The same can be said for consultants and survey participants focused on increasing revenue, the second most popular business goal for the year. Are you being retained or detained by your customers and service providers? Discuss!

QoS versus Market Share
Consultants and solution providers who are focused primarily on improving quality of service (QoS), will have a higher expectation of profit erosion. Conversely, consultants and solution providers focused on increasing market share or profitability have higher expectation of improving profitability in 2009. This may not be the case, when taking into consideration the cost of sales.

Revenue Growth - greater expectations?
For revenue growth, 60 percent of consultants and solution providers are squarely set on simply acquiring and developing new customers. Another 30% are expanding their relationships with existing customers. Interestingly, solution providers are not looking to their peer communities for support during the recession. Only 13 percent of survey participants said they would form an alliance with their peers i.e. consultant and solution provider partners, or partner with other consultants to reach new markets and customers.

Together we stand and divided,
we may fall

Getting on top - Dominate your Credit Risk

Until recently, when debt became more expensive and harder to come by, companies generally had a blasé attitude toward managing their trade-credit risk. Most corporations, big and small, don't have credit risk procedures any more sophisticated than the sub prime lenders did. In which case you are flying in dangerous territory with your defenses down.

A simple tip but one that's been largely ignored until recently: Be more wary before extending credit to new customers. Make them prove their creditworthiness. Currently, companies take more a of shy unassuming approach to trade credit by quickly granting it to every new client that comes across their threshold. Once aboard they hope for the best and follow the client's payment performance over time.

Companies too often get into the habit of not asking for any financial information from their customers in favor of speeding up a much coveted deal. Suppliers have been doling out credit based on what little information may be available on their privately held clients, despite the fact that private firms have a higher rate of bad debt. Even after a credit account has been granted, the supplying company may shy away from asking for financial data because they don't want to offend a brand-new client. Clearly the banks have a part to play in all this because they too have been willing to extend credit lines far beyond reasonable doubt.

Companies should ask for customer and bank references up front. Although, that information may be biased and unreliable because of the struggling financial institutions. Will the bank and lenders be there in the long term for their customer? Are they going to provide financing or will they make a quick exit and leave the company with a liquidity shortfall, which may or may not cause the demise of the company? Are the financial institutes responsible for the ongoing viability of their clients, i.e. the corporate companies. What support and backup can they provide a struggling company when they themselves are in difficulty. These and many more, are all questions vendors need to ask themselves when looking over a customer's bank information.

Companies should request that all customers, new and old to fill out a one-page credit profile every year. The sheet should include the company's cash position and the most up-to-date contact information. A type of credit probe which may or may not provide the correct level of information in the right format, in a timely manner. This will lead to more overhead in the accountancy dept or with the business analysts, but if addressed properly, it may provide early warning of difficulties.

If there is any good news to be had during this economic downturn, it's that everyone is in the same boat. Your customers are asking their customers for more financial information. It's now become perfectly acceptable to ask about a client's financial status because everyone is being scrutinized by every supplier. Its a big global circle of accountants, checking each others assets.

If it's impractical to demand financial information up-front, then come up with a triggering number for when your company will demand it. A simple threshold or framework will suffice. If clients cross the established and agreed amount, then they must provide their trade creditors with financial statements to validate their credit. The type and level of the threshold can vary depending on client, industry, item value, uniqueness, development costs, credit exposure, etc. Its not a numerical value, its a way of thinking about and controlling your risk exposure.

Another way to improve your credit /risk management is to conduct a detailed assessment and calculate each customer's probability of default. With such precise knowledge you can price your services accordingly, and by showing your client the calculations, you can easily justify a premium rate. Cash has always been king and currently it is even more critical to companies health and financial welfare, but many companies have no idea who they're selling to, never mind who owns the company or their cash position. Its never been more critical to know your customer.

Moreover, suppliers can no longer rely on traditionally held views that big-name companies are safe from sudden and dire financial problems even if they don't have strong cash flow. Many of these companies have lived on extended credit lines for years and are not asset rich. Other companies can have negative cash flow and positive net worth. They're sitting on land or occupy buildings that no one's willing to buy. If their credit is pulled and they end up going bankrupt, the asset value won't cover the debts.

Experts also suggest sales and credit departments improve their communications between salespeople and the collections side. Your salespeople are trying to maintain the vendor /customer relationship at the same time as maximising their commission payments. This is a tightrope, and is a very dangerous situation for the company to ignore. It must be very, very tightly controlled. Don't allow salespeople to grant extended payment terms, without justification and authorisation, before checking in with their credit counterparts. Companies should use these negotiations to get more financial information out of their privately held clients and reprice future services if possible.

Moreover, salespeople may be able to offer the credit department more insight into a customer's financial situation. Therefore it is imperative that they have the influence, motivation and the time to actually get involved in credit and collections questions. Its a team effort and everyone better be on the team or the game is over.

Slash your credit exposure

The current credit slump and downturn gives companies an excellent excuse for demanding that customers share more financial information with them. This is not for the direct benefit of the customer but to keep on top of the clients' ability to pay and stay viable. You don't want the stream to dry up.

The distinction between dependable and unreliable customers has never been distinct and now it is even less so.

Corporate clients that are paying you on time may in fact be financially unstable and maintaining a good public image, could be delaying payments to other trade creditors. Should you be concerned?

At the same time, some customers may be withholding their payments, not because they're in dire straits, but because their banks is shortening their normal credit lines. More worrying is, if they are not willing to lend to them at all, in the near future.

Indeed, some companies want their suppliers to practically fill in as bankers, by extending payment terms and giving their working capital some room. Ifcustomers are asking their vendors to provide cash flow for them, then this is a very uneasy situation. If you have somebody who was once paying you every 30 days and is now paying you every 60 days, your own credit exposure is going to double. You have to evaluate if you want to take that kind of risk, at this time, with this customer.

It's never been an easy task especially now. Companies need to get a better handle on their corporate customers' ability to pay. Nearly one-quarter of publicly traded businesses worldwide are at risk of defaulting on their debt, according to some recent indexes of "troubled" public companies, whose default probability exceeds 1 percent. During the past 17 months, their risk-management firm's monthly barometer of 21,000 public companies in 30 countries has been creeping closer to the September 2001 all-time high of 28 percent.

What's less-known is how many private companies are at risk of defaulting on their promises to creditors. They tend to keep their vendors in the dark about even basic financial information. Their suppliers are sometimes stuck, relying on only basic bank information.

Of course, the rising number of hurting companies isn't news to accounts-receivables departments that have been well aware of their corporate clients' slipping ability to pay for several months. But there have been some surprises: Now, even customers once considered to be "excellent payers" are taking an extra month or more to pay their bills but then maybe their just taking advantage of your loose credit checks, risk profiling and accounting practices.

In fact, the trade group's latest monthly barometer of its members hit a record low of 40.1 in December. The survey asks 800 credit managers to rate favourable and unfavourable factors in their business cycle (unfavourable factors include rejections of credit applications, monetary unit {cash in} collections, and amount of credit extended). All those factors declined between December 2007 and December 2008.

The overall problem is, suppliers, especially small businesses need to tread carefully before pressing clients to pay up. Every company wants to keep their most valuable customers and not lose them to disagreements or hurt feelings over payment terms. The vendor-customer relationship is symbiotic, very personal and emotional.

However, no company wants to get burned by being too nice and seeing old invoices pile up or payments seized after a customer goes belly up. Trade-credit experts say that by the time you notice a customer is on the brink of insolvency, it's unlikely you'll get all the money that's due to you. So do your homework. Analyse your clients' risk profiles and get on top of your riskiest customers. Then you may have a chance to see the impending crash and minimize the damage to your receivables.

In particular, trade creditors want to avoid having to return payments received within the 90 days before a customer files for bankruptcy. Bankrupt companies can sue for those payments up to two years after they've entered bankruptcy court. So, if a company suspects a client is close to going under, the company can demand cash on delivery, payment in advance of a shipment, or a letter of credit. All of which are methods of payment that are not subject to preference claims.

Another way to avoid unexpected losses: Ask bankrupt customers to add your company to their critical vendor list. Depending on the bankruptcy judge's ruling, this group of vendors may be paid immediately over other suppliers if the debtor can show that the vendors' products or services are crucial to the company's survival and turnaround efforts. At this point the ship is on the rocks and you may just be looking around for flotsam to cling.

Lay-offs and litigation - lawyers win both ways

With potentially costly legal claims by dismissed employees soaring, employers need to make sure their job reduction and elimination plans are substantiated.

Nothing in life is free. While companies are jumping to reduce head count because they see an opportunity to save money in the short term and a way of openly validating those savings i.e. the economy is sinking. Be aware, they should be prepared for the possibility of punitive legal actions against them by aggrieved workers, and they need to consider how they can underwrite the accompanying legal costs.

The number of litigation actions is rising in tandem with the pace of job reduction and eliminations. These cases are boom-time for the defense and employment lawyers. They're seeing a major spike in their business that will not abate anytime soon. Its an ill wind, that usually helps some lawyer or other.

The main categories of lawsuits are those in which employees claim their dismissal was discriminatory, usually based on age and those, which requires advance notice for mass layoffs and plant closings.

Attorneys advise that cautious planning when making layoffs will help avoid a trip to court. They suggest that when you do decide to commit your company to a layoff of any size, then take good advice and plenty of time to make sure it's done right.

The Finance Dept. and accountants may not be directly involved in executing layoff plans, but with the risk of a sizable legal judgment, it gives them plenty of reason to stay involved. If only to satisfy themselves that the plan is legally and therefore, financially sound.

The first step in any staff reduction exercise, should be creating a detailed business plan that explains the need. Included in this will be;

• what facilities or businesses will be affected,
• the number of positions affected,
• what type of positions will be lost (What effect will this have on the future business)
  
• when the layoffs will occur, and
  
• how they will be announced,
  

All this must be clearly defined and approved before any actions are taken. There have certainly been some times when the legal or finance dept. have had to tell management to either come up with a more defensible reason for the layoff or rethink the decision. Analyse and assess the risk.

Juries will side with the employees when the employer doesn't have adequate documentation. Internally everyone is in such an emotional and stress driven crisis mode when they're involved in workforce reductions. Therefore, things that they may think are obvious to the world, are not. It pays to get an objective, knowledgeable view on these things.

The potential for discrimination lawsuits makes it essential that employers create an objective selection process for deciding which employees to let go. If 25 workers are dismissed and 20 of them, say, are over age 50, the chances of a lawsuit will rise dramatically. Its not to say don't do it its just to say, be prepared to defend your decision in court.

Is you wish to be seen to be logical and fair about the selection process, then some lawyers suggest that executives create a list or matrix of criteria for evaluating employees. This can include;

• years of service,
• qualifications,
  
• experience in the field,
  
• job performance,
• team working ability,
  
• disciplinary history.
  

A weighting should be assigned to each criterion, and each employee should receive a numerical rating in each category. Clearly if only one person is allowed to do this, then it will only be one persons opinion and that is difficult to defend.

To avoid subjective bias and statistical anomalies, companies should consider hiring a statistician to objectively evaluate the layoff selection criteria and ensure that none of them is in itself discriminatory.

It may prove difficult to avoid exceptions to the process. For example, a job-performance measure may take into account employees' past three annual reviews, but some people will have been hired more recently. Diligently document and explain in detail any reason for deviation or breaking from the official process.

But even a thoroughly objective selection process, while defensible in court, is no guarantee a lawsuit won't be filed. As a further safeguard, companies should conduct an impact analysis of how layoff decisions will affect the makeup of each protected class of employees. If a protected group is disproportionately affected, the plan will look discriminating and the company may want to alter it accordingly.

A company's legal concerns don't end with the selection process. Executives who deliver the bad news must tread carefully with their word choices so as not to come across as apologetic or sugar-coat the real reason the employee is being dismissed.

By saying, 'This isn't your fault, this is our fault,' you will be falling on your own sword." The employee can easily use such a loose statement against the company in court.

Watch out for a rise in the number of whistleblower cases coming from former employees. As more and more people get terminated, there's going to be more and more litigation and cries of protest.

Red Flags - Customer's falling credit status

When it comes to credit risk profiles, watch closely for these red flags in the companies you depend most on for financial stability, your customer.

The stringent credit markets make spotting a soon-to-be insolvent company increasingly difficult. It's difficult to determine who's really on the edge and ready to go out of business, versus who is having tough times and struggling, but will survive.

To avoid losing future payments, companies should be on the constant lookout for red flags. Signs that a customer is having serious financial problems. The following don't necessarily indicate that a client is on its knees or in contingency mode. But depending on how any of them are relevant, should trigger a warning bell for your credit department. Worst case, the customer deserves close monitoring, and perhaps their payment terms renegotiated.

Changing Payment Patterns.
Perhaps the most obvious clue that something could be financially amiss, but one that cannot be ignored, particularly these days. Previously reliable customers that suddenly start missing due dates warrant attention: If your customer is falling further and further behind in making payments on their invoices, that certainly should be a tip off that something may not be right.

Renegotiation requests
If a company asks to spread payment windows from 30 days to 45 or 60 days, this should raise eyebrows. Hone your credit skepticism on requests to reschedule payment agreements, such as paying off one service over four months rather than all at once, as previously agreed upon.

Shifting Buying Habits.
Even if regular customers are paying on time, are they still purchasing? Examine and analyse the trends. If their previous buying was consistent, but their manner of placing orders has changed, this could suggest trouble. Also, keep a lookout for regular customers that suddenly start buying more. Pre-bankrupt companies have been known to stock up on inventory, knowing they won't be liable for the goods later on. This is a very unpleasant maneuver and should be stopped. Fix your customers' credit /risk profiles and keep them within their credit thresholds.

Rejection levels, Haggling or Higher Demands.
Is your customer returning items more often, or unjustifiably asking you to make deductions off invoices because of damages? Customers that start making unreasonable demands on delivery are sending you a warning. Your customer, may start saying his company expects a discount if a shipment doesn't arrive within very tight deadlines, especially if he knows that you can barely meet. Be warned and look behind the request.

Shrinking Cash Flow.
Keeping a close watch on your customers' cash balances over time, is what the good companies do all the time, if you have access to their financial statements. Find out how much they rely on equity, short-term debt, or long-term debt and adjust their credit /risk profile accordingly.

Large Accruals.
Many distressed companies carry sizable accruals on their balance sheets, so these figures need to be explored and justified. First you need to get access to their balance sheets, that in itself may cause difficulty and could also give an indication of solvency.

Tight Lips.
Customers that previously shared financials with your company, but now suddenly claim it's against their policy to share financial data. This should only make you more determined to find the true picture but if in doubt, err on the side of extreme caution. Shorten their credit lines until they come up with strong evidence to convince you.

High DSO (Days Sales Outstanding).
Companies that have fallen behind on collecting their own receivables may be unable to contribute to yours.

Managerial Shuffling.
Unexplained or questionable changes in management could mean that there's a disagreement between executives and the company's board or owner. More obvious signs of trouble in this regard would be the hiring of a chief restructuring officer or turnaround company. Its a warning flag, but at least they are addressing their issues. Tighten credit lines in the short term, til the re-structure is effective and things improve greatly.

Persistent Rumors.
Credit experts recommend keeping your ears open for any negative news about your customers, which may be the only way to garner helpful financial information about privately held clients. Pay attention to news articles, whispers from your sales teams, and other companies' credit managers. There are industry-specific credit groups that are invaluable for uncovering past-payment records of customers, search for them and make friends with them.

Tax Liens.
A tax lien against a company is the number-one indicator that it's going under. If a customer has postponed paying its taxes, you're not likely to see its overdue payments either. Sound the alarm!

Credit Crunch affects auto trade - 2 for 1 sales

The credit crunch brings with it many painful realisations, not least of these is the confirmation that we, the many, have been paying too much, for too little, for too long. This is clear in the current tactics being employed by some auto traders, desperate to retain their franchises and car sales businesses. Many are offering a 2 for 1 sale i.e. buy 1 new large family saloon car and you get a new small economy car, of the same mark, seemingly free. What a great deal, at first glance.

Shall we consider the maths? First you have to understand what drives the auto traders' business priorities, apart from making big profits. The way that auto and other franchise licenses work is that you, the license holder, need to guarantee the franchise owner a large turnover of product and a certain level of other ancillary business items, through your outlet. For auto traders, this is primarily the number of new cars, spares and possibly second hand cars, if they are running a registered and affiliated scheme that is associated with that automobile mark.

The normal mark-up on a new car is around 40%. I know this because I had the opportunity to assist a franchise holder clear his new car stock backlog, by buying some at cost. There is an advantage to do this if you sell on to the private buyer but there is no advantage in doing this if you expect to make money from another auto trader because they have access to an online register that shows the history of the car from manufacture. If you try to trade it in as a nearly new car you will be viewed with great suspicion. They may believe that you are testing their loyalty to the mark franchise by offering them something that has circumnavigated their rules.

Chances are they will either outright refuse to deal with you or tell you a price that is well below what you paid i.e. something around 50% of the normal on-the-road car price.

So let's get back to the arithmetic. Your new family sized Mazda costs you 25,000 monetary units. The dealer paid roughly 60%, 15,000. The immediate profit to the dealer is 10,000 units. He now offers you a free mini Mazda, which normally costs 7,800. You think you are quids in but the mini Mazda only cost the dealer 4,680. So he still has an excess profit of 5,320 on the deal. Plus he keeps his franchise margins, he gets a loyal and happy customer, he gets the spares and service revenue from a loyal and happy customer. In addition there may also be a small commission (between 5 7.5%) from the finance company who provides the customer with a smart personal loan to bridge any shortfall in monetary terms. So everyone is happy and life is good all round.

As a disclaimer, I would like to say that I have conveniently simplified the maths of percentages here and forgotten to mention the further complexity of reducing VAT, car Tax contributions and other legal and admin overheads etc. to simply the argument. Although this post is based on real events, no car dealers were injured in writing it.

For the future, try not to dwell on how much money the dealers has already made from you in the past. Let it go. The hardest pill to swallow is where your current vehicle's residual finance value is far greater than that of the vehicle's current market value i.e. you will need to spend more money to terminate the finance agreement than the car is worth. Ouch!

On the personal front, clear yourself of as much debt as you can and look to the retail markets for more quick win bargains to come. The wholesale manufacturers, retailers and dealers will become more and more desperate to shift stock because 'stock is money out' (bought on credit) and a quick return through a stock clearance event is the best way to greatly reduce the cost of that credit. Most organisations will be under pressure from their bankers and financiers to reduce their credit profile and overdrafts. Credit facilities are being rapidly withdraw. This will lead to a saturation of the retail market with the loss of many of the current familiar players.

In the parlance of the entrepreneurial estate agents, you will be looking for motivated sellers.

Drive safely, your life may depend upon it.

Navigating in the Credit Crisis - Top 6 Lessons Learned

Recent Ernst & Young Financial Institutions report on the credit crisis reveals that the top 6 lessons learned are as follows;

1. Liquidity (cash) is King - 90% agreement in financial institutions (100% agreement in the real world)
   
2. Risk needs to be examined across the organisation - 73% (Co-operation means no more secrets, fewer surprises and the avoidance of expense rescue efforts)
3. Stay tuned to industry trends, dynamics and cycles - 60% (Look outside & Listen! Use the radar, dashboards and the crow's nest if you have to. There are icebergs about and they will do more than freeze your assets)
4. The people factor - 40% (You have professional, intelligent staff on board, so use them appropriately. You pay them for their knowledge! They know stuff! Talk to them!)
5. Prepare for the unexpected - 35% (Analyse, Assess and Mitigate against risk. Think the unthinkable. Develop Backup, Contingency and Business Continuity plans. Jumping onto the iceberg at the last moment is not a good option)
6. Don't believe 3rd Party rating agencies or your own marketing hype - 23% (Simplify! The devil is in the complexity. Find the true facts and stick to them. Do your research and check in to reality occasionally, between those long business lunches)

Day 1, Lessons 1 - 6 in the Business school 101 course.