Archive for September, 2016

Manufacturing fetish

rubber-soul-production-lineOver the past week or so we have heard from politicians from the extremes of left and right, John Mcdonnell and Donald Trump,  waxing lyrical about “manufacturing”. They almost appear to cling to the incoherent belief that manufacturing is somehow far more worthy than other forms of adding value

I am going to post a more thorough piece on this shortly but for now I will quote the first class economist John Kay, who it should be noted, is seemingly centrist in his political belief

Manufacturing fetishism – the idea that manufacturing is the central economic activity and everything else is somehow subordinate – is deeply ingrained in human thinking. The perception that only tangible objects represent real wealth and only physical labour real work was probably formed in the days when economic activity was the constant search for food, fuel and shelter.

A particularly silly expression of manufacturing fetishism can be heard from the many business people who equate wealth creation with private sector production. They applaud the activities of making the pills you pop and processing the popcorn you eat in the interval. The doctors who prescribe the pills, the scientists who establish that the pills work, the actors who draw you to the performance and the writers whose works they bring to life; these are all somehow parasitic on the pill grinders and corn poppers.

When you look at the value chain of manufactured goods we consume today, you quickly appreciate how small a proportion of the value of output is represented by the processes of manufacturing and assembly. Most of what you pay reflects the style of the suit, the design of the iPhone, the precision of the assembly of the aircraft engine, the painstaking pharmaceutical research, the quality assurance that tells you products really are what they claim to be.

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Trouble for lenders?


The recent collapse of peer to peer lender Funding Knight might have served as a wake up call for that segment of the market but what may be deemed the traditional end of invoice finance suffered a small casualty last week

First Capital Factors were not a big player. They were quite regional being concentrated in south and west of England and I will admit they never won one of my clients despite having opportunities to pitch.

Nothing wrong with that but perhaps indicative of not having anything distinctive to offer the market. They were very pleasant to meet but a little ‘old school’ ,

And that is the problem. The market is more diverse than ever and many of the past working practices of invoice financiers are looking dated and even a little ridiculous

Just this week I have become aware of three new entrants into the market with widely differing products. Debatable whether they will all succeed or find the right niche but its healthy for borrowers as well as additional responsibility for brokers. Which they should welcome. I do

I would hesitate to say that businesses have “never had it so good” but with the right guidance there is a lot of opportunity out there

Naturally I wish their employees well and perhaps it is of little comfort for them to know that regeneration is good for the market.

But of course, it should also be remembered that small lenders do not have governments to bail them out.

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How not to run a credit control team

I recently consulted with a rapidly growing business that was experiencing difficulties with their debtors. Clearly for reasons of confidentiality I cannot disclose who the client was but below is my summary of their issues.

The key here is that whilst this was a pretty extreme case, the problems are familiar and largely revolve around staff management and motivation. Another difficulty is that certain finance people cannot understand that credit control is not exclusively a “process” role.

1. The team lacked focus. I set targets and this brought about some motivation but credit controllers need to take ownership of their ledger.

2. The targets should be two fold. Day to day collection total targeted on a monthly basis and a target for reducing the old debt. Under no circumstances whatsoever should targets be based around “calls made” . Making a call is very different to getting a result and if one call takes all morning to release a large old debt then so be it

3. Credit controllers need some lassitude to take responsibility. Unlike many in accounts the best credit controllers are self motivated and should not require anything more than guidance. With targets to hand they know what is required

4. The process for chasing is muddled. Accounts under £1k should be purely chased by letter unless there is a dispute

5. Supposedly difficult accounts should not be handled by anyone other than the credit controllers unless there is a negotiation in place. I could not understand why others such as the financial controller were getting involved. It’s extremely demotivating for a credit controller with the clear message that they cannot be trusted

6. Some of the management team consistently referred to disputed accounts as “your problem” . I have not encountered this attitude before and it’s completely dysfunctional. This has to change. There are better methods to handle the disputes than weekly meetings and I had something effective in mind

7. You need skilled credit controllers with a strong attitude. Not temporary staff who are simply “chasing debt”. They should be looking at the role as a career and be looking at debtors as an asset of the business that carries some risk and needs careful management. They need encouragement and training.

8. The letters badly needed rewriting. Frankly they were not even literate. I was in the process of doing so. There needs to be a set routine for management of the letters

9. Seriously overdue debtors should receive a solicitors letter. Online claim forms are fine but can cost and can drag out the collections. They should be a last resort given that they take up time and resources. I negotiated a good package with a top firm of lawyers. It would be cheap and effective

10. There needs to be consistent reporting of debtors days and aged totals.

11. Credit assessment is essential. Bad debts are expensive and most are avoided by skilled credit rating

12. There is a tendency to apportion blame rather than genuine teamwork. I have always found that any credit controller under my charge who was willing to work would be guided towards motivation and strong results. That is not a boast but the key is that their failings were my failings. I took always took that responsibility

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Who wants to lend?

LOAN - just say 'No'

In the past few weeks three clients have asked me to source fairly good sized loans to help expand their businesses. Nothing unusual in that but once again the market was instructive.

The prospects were particularly strong and had excellent credit ratings. Also the lending was going towards a defined purpose and the security was strong. Add all this up and you would think that the lenders would be crawling over each other to fund. Not so

The problem was not that the appetite was missing but the whole procedure and responsiveness and this is where the established banks are going to continue to lose out. The contrast between the requirements of the new fintechs and the big four are vast. That could be countered by the claim that the old school lenders were being diligent but again that is on a fraction of the story

Business owners are busy people. They also tend not to appreciate excessive intrusiveness and reams of paperwork. In one case the bank were asking questions which were quite extraordinarily personal and which my client rightly refused to answer.

My clients (and myself) also expect their calls to be returned

Loans through fintechs frequently cost more but the gap is closing quickly. They pride themselves on keeping the applications slick and to the point and even more importantly they are driven by competition to act in an extremely timely manner

Two of my prospects have had banks sitting on applications for over two months now. My other prospect sourced through a finch and had the loan within a week



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Dyson and the EU. Vacuuming up the facts?

dyson-vacuumThere has been a lot of hot air regarding the trading situation for the UK post Brexit. Most of this has surrounded potential tariffs and the sheer ability to trade with the 27 states. Most of this has also originated from those that have virtually no knowledge of the actual commercial world let alone that of buildings  business

There has been a fairly consistent undercurrent in certain supposedly educated quarters that brexit was motivated by “ignorance”. Even for those of us who were very marginal on the vote, this comes across ignorant in itself. On various internet forums I even have seen supposedly self proclaimed knowledgable “remainers” claim that leaving the EU would result in a trade embargo. Stupid

This is total nonsense. But perhaps its not down to me to convince readers of this blog. Instead I will point you in the direction of James Dyson who’s interview with  the BBC is a clearheaded and astute as you could possibly ask for

And no one would accuse him of not understanding markets and export would they?

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Paul Mason? Call yourself an economist?

Having read  this article I dont think so

Mason is regarded by some as the leading economist on the left although I will say that I have found little of interest to grasp. Like to many from that political wing (the awful Will Hutton springs to mind), there is a lot of ranting but little convincing clear headed thinking. The British left desperately needs a Paul Krugman

The title of this piece is.

How to blag a job in finance: buy some black shoes and talk like an aristocrat

I have many reservations about many aspects of the lending industry but this is dreadful bigoted nonsense. Sure he may be playing to the gallery but the fact is that it is a total lie as illustrated and dissected by the many comments that follow

As a broker I am working constantly with bankers in asset finance and the picture he paints is complete rubbish

The question is of course that how can you take anything this “economist” says seriously when he is riddled with such clueless prejudice



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Identify these cities


The first is harder than the second and if you really get stuck the answers are here along with many superb aerial photographs



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