Archive for December, 2010

Retail horror

Traditionally the new year is welcomed in by the sound of banks pulling the rug from under a variety of retail chains. There is a reason for this timing and perhaps it would be best not to explictly state what thi is but this has become a well established new year custom in recent years and many will be wondering about what 2011 will bring.

So how will this new year shape up ?

My gut feeling is that the high street will escape without too many names disappearing. Ok there are high profile difficulties at a number of chains (JJB and HMV spring to mind) but they are perhaps not exposed to immediate risk. Optimism about the future is growing and this is as much as a factor as the balance sheet and p&L.

But if there are concerns about any of your debtors or prospects, think through exactly where they are placed in the market. Are they being squeezed by online retailers (HMV, Waterstones) or are they simply stuck in an overcrowded and suddenly less bouyant market (JJB perhaps)? On a smaller scale, are they exposed to discretionary spending habits (gift shops jewellers)? Also, would you shop there? Thats a very basic question i know but your opinion will be reflected by many and casting mind back to recent failures would prove that very point

All questions that need to be addressed and very much part of any credit manager’s portfolio

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An interesting list of big name 2010 business failures in the US

A few suprises too?

Love this summary

Oriental Trading Company. A little bankruptcy. No big deal. That’s the message this crafts, novelties, and party-supply retailer conveyed after declaring bankruptcy in August, saying on its website that it plans to continue with “business as usual” and that writing off more than $400 million in debt “will enable us to pursue our growth strategy more effectively.” The company, owned by private-equity firms, is shifting more of its business from catalogs to its website as it tries to shed costs and reach more consumers

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Think I may have highlighted this site before but some good pre xmas reading here about greed and corporate calamitys from the other side of the pond…

Very seasonal and a great site

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Scrooge was a financial controller…

December 12, 2010 1 comment

 Or so it will feel for many credit managers at this time of year. Cash is suddenly unavailable and the spirit of christmas is decidedly lacking.

So how do credit controllers cope and what tactics do they use to ensure collections?

Heres a few hints and frankly bleeding obvious (but sometimes neglected) ways and means…

1. Make sure you chase that account early. Tomorrow is the 13th. Yes, suprising isnt it? and how many working days are left?

2. And how many of those will be “working days”. In my ad agency days I witnessed one “team” disappear every lunchtime for 5 consectutive days for all afternoon “lunches”. And even when they were there, well….

3. It is also year end and the cash balance has to be fat for January the first. Do you have the same requirement? Consider this. You can both have booked cash as at 31st December. How? You collect a cheque off them on that day and bank it. See? 3 days to clear but you can book the uncleared cash.  There is a method for BACS payments too but you will have to email me for that.

4. And do “collect”. Ok boring old BACS and Chaps have taken the place of cheques for many businesses but a bottle of wine or box of chococlates in return for picking up that cheque can work wonders for future relationships. Provided that the client isnt a recovering alcoholic or a diabetic…

5. Contact clients first thing.  They may be rushing around to get everything clear for their tacky xmas party that afternoon. It does seem to concentrate the mind..

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HMV – the high street falters again

Keeping with the theme of record labels….

This story follows on quite nicely from EMI given that HMV were owned by EMI not so very long ago. How times have changed.

Sales at HMV stores fell by a whopping 16% during the last six months. This has had the inevitable effect on the share price and the losses are mounting

Slightly unfeasibly a lot of this was blamed on “the weather”. Ok. Cd and DVD sales are very seasonal, but 16%? The concern here is that we are looking at another MVC or Woolworths.

And from a personal point of view, what a shame that would be. I like HMV. Their Oxford street branch is an absolute mecca for those of us that love classical and jazz, with knowledgable staff and a superb range. In a chilling reminder of Borders, I read that they are closing the Oxford street outlet, but bretahed a sigh or relief when I found it was  the smaller one near Bond Street tube.

They havein recent times  revamped the local branches but for those that primarily like music (as opposed to games or DVDs) the CDs do feel squeezed into the back of the shop . And the range is smaller which means many are more likely to download or go to Amazon (although HMV’s online store is far better and the one I gravitate towards). Its almost as if they have slightly given up on their core traditional business.

So what are the prospects?

It should be remebered that a big part of their business is the Waterstones chain which is not suffering quite as badly but is hardly booming, but as with high street music, books face a major battle against the online retailers. And thats the crux of the matter. Downloads are only going to increase and claw deeper into the market. As with the Blockbuster chain, you just feel that this form of retail will simply be ultimately swamped by technology.

Or will it? Books and CD and Box sets will always make gifts in the way that downloads never will and that element of the market should never be underestimated. 

Personally I hope that they recover. The high street will be a lot duller without an HMV or Waterstones to browse in for the odd half hour. The consensus in the financial pages seems to be that they have strong management, so lets hope they fight back strongly

And lets hope the credit insurers keep the faith ….

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End of EMI ?

December 5, 2010 2 comments

Interesting stuff from Robert Peston.

The music industry is close to my heart. I worked as a credit manager for a £100m turnover company duplicating CDs, videos and cassettes for every type of label from the off street busker to the big five giants. It was absolutely fascinating and the strongest credit management challenge I have faced. The risk of debts was high but the competitiveness for business extremely strong too. Also, the record label One Little indian was part owned and run from the premises, so there was a real insight into the industry. A few stories I could tell too….

Strangely enough EMI were one of the few big players we never had any contact with. If I recall rightly this was because they pressed their own records, but how the mighty have fallen?

Sadly the music industry has contracted in recent times. The reasons are well known and there is perhaps little to add other than one observation from the final days of my time there…

The business I worked for banked everything on the explosion of CD rom.  A massive gamble on DC duplicating machines in anticipation of a boom. CD rom was going to sweep the world…

…and then the internet came along

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JJB Sports

Whats going on there? I wonder if they are on the cusp (if they havent already) or losing credit insurance cover. If so…..

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