Archive for March, 2010


It is difficult to comment on a budget without involving politics. Budgets shouldnt be political of course, but they are.

The first observation was, why were the front bench nearly all wearing something purple? Have they joined some sort of cult? Very concerning, but perhaps not as worrying as just seeing Harriet Harman on the front bench.

Anyway, at the risk of upsetting any public service workers who read this, the reduction of the huge current deficit is the priority and it is these very employees who should be the target. In Ireland public service workers had their salaries cut by a whopping 10%. Ok things were even more critical there but, given that the average public sector wage is now higher than the average private sector (and we wont get onto pensions) I think the massive savings that could be made in this area should have been targeted. I would also structure the cuts to hit the higher paid public sector workers more significantly. For instance GPs and teachers have seen their salaries increase very substantially over the past few years

The savings would run into many billions and would give the finances an immediate shot in the arm. Of course the danger is the reaction and lets face it, Labour is not going to immediately alienate its core constituency.

Also i do believe that the £80k “Recession Advisor” hired by one council last year (sadly I cannot find the ad) should now do his bit to help… 

For those that wich to have a good rant about public sector wages and pensions, enjoy the very typically Daily Mail piece linked below

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So whats significant about Blockbuster’s possible demise? Is this any different than the failure of any similar retail chain?

Perhaps not but there are factors which are always relevant (or should be) to those making credit decisions. They are technology and place in the market. Where does Blockbuster stand at the moment? I think the words rock and hard place come to mind

And it is not difficult to understand why. On the one hand there are a huge number of outlets which have to be maintained and yet on the other hand DVD is (for many) a fading technology.

The finances are in bad shape of course, with a huge debt mountain that they are seemingly finding it difficult to service, but as with judging stocks, the credit management has to include a large element of judgement of future prospects.

Two stories copied below and within them one very significant line. Blockbuster are trying to sell the UK chain and they might well find a buyer at a price. I hope they do. But a recent attempt to sell the chain in Portugal failed completely and the whole chain was closed down.


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Lehmans and its auditors….

Sadly for those whos affection for big firm auditors and horrendously expensive lawyers falls some way short of unconditional love, it does appear that the investors who were frankly screwed by the advice given to Lehmans by E&Y and Linklaters are up against it if they commence actions for compensation.

But we shall see…

I will return to the issue of auditing fairly soon. I do promise that my post will be a little more interesting than that might sound. Lets just say i have a couple of opinions revolving around how long a firm should audit one client and also (more controvertially), who should be paying the fees? Watch this space…

Back to Lehmans and copied below is an article I am about to read which at first sight is perhaps an interesting insight into the very core of the problems at the failed bank. And it is a also a key indicator as to why companies collapse. That is always of interest to a credit manager, but this is an insight into human psychology too

To put it simply, Lehmans was the North Korea of banking. Why? Because there was a culture of unquestioning obedience to the (somewhat ridiculous) leader and his simplistic thinking. Any dissent was crushed. Everyone was expected to “believe”

We will learn more as this story unravels, but as in any dictatorial state, a culture of fear will ultimate lead to complete failure. In my opinion the same applies to business. Unless there is room for a variety of opinions and viewpoints at the top level (and further down too of course) then the rot will set in

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Growth at last?

These forecasts have certainly not always been 100% accurate but this is clearly a modestly optimistic appraisal. Is the worst over? By some indicators yes and by others no. Read through the article and you will see that the traditionally “lagging”  indicator of unemployment is set to rise whilst the economies recover. This would seem to be especially the case within the EU. It might appear to be a contradiction that employment falls whilst economies grow (slightly) but logically it is easy to understand that the hiring and firing of staff is driven by the growth or decline of a business rather than the other way round. Thus the delay…

Another perhaps more interesting indicator is this piece on China’s exports

Good news again? We shall see…

As for the UK?  Well, the markets do appear to have many concerns about the level of public spending and this is clearly going to continue until after well after the election, when whoever wins will have to make some pretty difficult decisions. In some ways the timing of the election is very unhelpful and the increasingly possible outcome of a hung parliament is also a concern to many

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A Credit fitness test

And the credit for this must go to my friend Ulrike who runs a sucessful credit management consultancy in Ireland. It is an excellent list of questions and really should be applied to all businesses regardless of size.

Ulrikes contact details are

1 Do you have documented credit policy and procedures in operation?      
2 Have you reviewed your credit policy and procedures in the last 12 months?     UNSURE
3 Do you use a credit application form?   NO UNSURE
4 Do you risk-assess new customers?   NO UNSURE
5 Do you operate credit lines and risk categories?   NO UNSURE
6 Have you securities in place for high-risk customers?   NO UNSURE
7 Do your customers know your credit terms?   NO UNSURE
8 Do you have a dunning process in place?   NO UNSURE
9 Have your credit and collection staff received credit specific training in the last 12 months?   NO UNSURE
10 Do you measure your debtor days?   NO UNSURE
11 Do you measure your cost of credit and the effect on your bottom line?   NO UNSURE
12 Have you run out if ideas of how to improve your debtor ledger?   NO UNSURE
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