Telling the story

The aim of this part of the website is to illustrate financial issues through stories. A cross between a regular cartoon in words, and a blog, designed to entertain, as well as to keep you thinking about things financial.

The episodes come under three main headings - profit, cashflow and budgeting, and build on the things we look at in our training. As you read them, enjoy them, but also think about how they apply to your organisation.

Current Articles

That was lucky - (cashflow)

I'm in a networking group of other trainers, and every Friday our glorious leader asks what our successes have been this week.

Colin said he'd sent an invoice out last week, that was paid this week - 20 days early! That was lucky!

Except getting paid on time isn't just luck. Colin used to be an accountant before he was seduced over to the dark side by the magic of computers. But he agrees payment terms up front with his clients - he doesn't just agree to their terms.

The time to start chasing overdue invoices is before they become overdue, not afterwards. That means knowing which clients tend to pay late: start chasing them even earlier!

Getting the invoice right helps. If there's an error on the invoice we've given the client a cast-iron excuse to query it rather than pay it.

We can use our contacts. Rather than just chasing "Accounts Payable" we can ask our direct contact to put some pressure on. As my contacts usually include someone high up in the Finance team (often the Finance Director) this can be very powerful.

Take serious action! I had one client whoalways paid late. So I added a hefty surcharge to the original invoice, that they could take as a discount if they paid on time. Instead of paying on 30 days they paid on 60 days when I threatened legal action, and they paid the surcharge every time.

So getting paid on time isn't luck, it's design!

What's your bag? - (profit)

I always enjoy reading Jo Owen's column in Economia magazine.

This month he was talking about a manager whom he described as "idle", but then qualified that as:

1 clear vision and relentless focus

2 building a strong team and delegating

3 being very clear about where he added value

It was a thought provoking article, especially the third point. Many of us are strong on the first two, but where do we add value? What makes us different? Why do our customers come to us and not the competition? What stops our business outsourcing the service we provide?

I specialise in financial training, but there are lots of training businesses out there. How do I add value in a way that makes me stand out?

Everything I do is tailored to my clients' specific needs, but most training businesses say that! I'm focussing more on helping my participantsimplement their training longer term, rather than just running a training course. And I'm trying to help clients assess the impact of the training.

But if you manage an internal team in a larger organisation, how does this work for you?

Your directors may discuss outsourcing your team to save money. So what do you need to do (beyond providing the basic service that could be outsourced) that really adds value to the business? What are the unique things your business does (or could do) that add real value, and would be sorely missed if the team was outsourced?

Know your customer - 2 - (cashflow)

Last week I asked "Who's your most important customer?"

We looked at the difference between yourbiggest customer, and the customer from whom you make mostprofit. They aren't always the same!

But here's two scary statistics. Only 42% of businesses make it to their 5th birthday. And 75% of businesses that fail are profitable.

So survival isn't just about making sales and making a profit.

The most common cause of business failure is cashflow problems. And the biggest cause of cashflow problems is customers who pay late.

Imagine if your salary was paid two weeks late! It would probably give you a problem. It's the same for business!

Last week we looked at how big customers often use their buying power to negotiate bulk discounts that can damage our profitability.

But they'll also often use that same buying power to negotiate better payment terms. Better for them, but not for us!

Let's imagine our biggest customer has negotiated payment terms of 60 days rather than our normal 30. So our September delivery, isn't paid in October, but we have to wait until November. How do we pay our October salaries and suppliers?

On top of that, they pay a couple of weeks late. And because we don't want to upset our biggest customer we don't chase too hard.

So when you ask your colleagues "Who's our biggest customer?" also ask "Who pays us the slowest?" If it's the same answer to both questions, you may have a problem…

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That was lucky. One of a series of articles to to keep you thinking about things financial.

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