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Hell for Halliwells

A few years back I put together a credit policy for a group of companies which gave guidelines for which sectors required credit checking. Amongst the very few areas of the economy that were considered “safe” were banks, accounting firms and legal practices.

Given the news below, I think this requires updating….

http://www.ft.com/cms/s/0/3a3cb714-87a0-11df-9f37-00144feabdc0.html

Banks we know about of course and in truth it is still unlikely that there will soon be another Lehman Brothers. The knock on effect would be too much to bear. But with Vantis in trouble and now almost incredibly, the leading legal firm Halliwells on the edge of administration, we now know that the professions are not immune to financial mismanagement.

But is it “mismanagement” or “bad luck”?

I would say the former. Take an example of a plastic mouldings company in Surrey that won a large order on the basis of 30 odd years fine work in the sector. The order came from a reputable client in the US and required substantial investment in new plant. Yes, you can guess the rest of the story. The order was cancelled at the last minute and although there might have been provision for legal recourse, have you experienced the US courts? The firm went into administration and by anyones standards there was a strong element of “bad luck” involved.

So whats the difference between this and Halliwells who have been brought to their knees by an extremely expensive office refurbishment and commitment? Quite simply it comes down to fact that such an overhead should not bring down any business on its own. Frankly, nice offices should be a somewhat different priority  to essential  plant and machinery.

Of course many a firm will claim that it is an essential element of their client relationship, but that will not be of much comfort to their creditors.

One of the oldest pieces of advice for credit managers attempting to assess a new client was “look at the car park”.  Stuffed full of BMW’s allocated to everyone from the cleaning lady upwards is not perhaps a good sign.

The same certainly applies to nice new empty flashy offices.

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