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By Clive Newell, January 2010

Good? Not so good? Hitting difficult times? Just won a fantastic order?

Wherever you are with these questions, here are some simple tips that have worked for me over the years and can save you a lot of headache.

Why give yourself a problem when you don’t need to? In this article I’ll set down some ideas on keeping your business relationships on an even keel to help protect you in good times and during harder trading conditions.

Planning is the first step. Failing to plan is planning to fail! Virtually all business people know they need to plan, but how many of us have actually made a plan, followed it and updated it when things change? If you have any doubt, ask yourself this: “do successful and profitable businesses plan?”

Here is something many good business people miss, you will gain credibility and respect with your stakeholders if you have a solid plan that you are working to and achieving. Stakeholders will consider your business a serious entity if you have a well constructed and communicated plan.

Here’s how this may work:

You – you are yourself a stakeholder in your business and you will have greater self-respect and confidence in working to a plan.

Your bank – banks of course love a good plan! However, if yours is demonstrably very strong and you are working to it and your competitor is not working to his (or does not have one), you will get the backing and support when you need it, they will not. In the current climate, much is written about banks' reluctance to lend money.

If you feel this is true, ask yourself: “Would I lend money to someone who was not planning how to repay me?”

Your credibility with your bank will soar if the plan is good and being followed.

Your staff – be sure to share the relevant points in your plan and keep them apprised of progress. Ask for their views. Most people are motivated by feeling involved and if they are on your side, your business succeeds.

Your customers – When you are prospecting and you have their attention, demonstrate you have a sound strategy in place to make sure their needs will be met. You will kill your business if you sail in and promise the earth with no idea of how to deliver it. If you feel you can “blag”, forget it! Humans have the inbuilt intuition to spot if you are not a serious player or not on the level. A professional business always has a good plan!

For free help and guidance in writing your plan go to www.businesslink.gov.uk or speak to your Business Link adviser.

Handling Credit Control is easy if you deliver what you said you’d deliver. The majority of your customers will pay you and on time. Some however will be slow to pay and some will have no intention of paying you at all!

The maxim is; “the sale is not made until you have been paid”.

There is nothing that picks a weak business out more than a poor approach to credit control. You could have fantastic turnover, great profitability, but if the cash runs out due to slow payment, you are in big trouble.

Here are some pointers to make sure you do not get branded a pushover or worse, a poorly run business.

Your payment terms – be clear on all sales related documents when you expect to be paid. You must do this every time you send invoices, statements, speak to the customer about the debt or have any other communication with them about paying. If it goes to court, the judge will ask if you made it clear to the customer when and how much you wanted to be paid and if you have not done this, you could fail in the action.
Sort out queries. Check if the order met the customer’s expectations as soon as possible after making the sale and delivering the goods or services.
Ask for the money! The British are notoriously reticent about asking for payment, but it only gains respect with the customer if you do. Naturally, you need to be professional in doing this!
Go and get the cheque. If the value is significant and the customer is comparatively easy to reach, ask to see them and say you would like to pick up the cheque.
Take them to court! If the normal credit control processes have failed and negotiation is out, you may have to reach for the court. Assess this on a value basis as it can be expensive and is never certain. In a local business community you will soon be avoided by slow/non-payers if they know they will be taken through an expensive legal process to get money extracted.

There is an excellent law firm in Merseyside who specialise in debt recovery and they are effective and economical to use. They are Thomas Higgins. Go to www.thomashiggins.com and check them out.

Remember too, that if you are getting your customers to pay you to terms (especially 30 days) your credibility with you bank will soar.

Relationships need to be managed based on how you like to be treated as an individual. That is: with respect, honesty, integrity and trust. Anyone within your business dealings be they customers, suppliers, banks and of course HM Revenue and Customs want to be treated this way to!

The adage is “there is no sentiment in business”, but solid and successful business relationships are founded on TRUST.

In not such good times...

If cash flow gets tight, it is one of the most serious taboo subjects a business encounters and it takes guts to tell people about it.

If your business is experiencing difficulties, here are some does and don’ts:

Don’ts

Don’t tell the local press!
Don’t say it is a cash flow problem, but you can say cash is tight at present.
Don’t think someone else will solve the problem for you, they won’t, but there is plenty of help and guidance (much of which is free) available, you just have to ask for it.
Don’t promise a payment knowing full well you cannot make that payment.
Don’t assume HM Revenue and Customs will act as your banker.
Don’t pretend the difficulties are not there.

Do’s

Do get your finance manager/accountant to prepare a solid cash flow statement for you.
Do speak to your bank early on and be upfront about the situation and keep them informed.
Do build a plan as to how you can remove/overcome the cash flow squeeze.
Do talk to your suppliers and explain that you intend to pay them, but need some extra time.
Do inform HM Revenue and Customs if you are struggling with payments.
Do talk to others and get advice. Business Link will not give you cash, but they will give excellent guidance that will help you.
Do make sure you are realistic in your promises of payments. Break a promise and...

Remember, in all dealings in life, success is about building and maintaining key relationships and this means treating others with respect and honesty to keep them on your side.

If you get a bank manager quietly to one side and ask them "What would make the bank lend to my business?", sure cash flow needs to be good, but the main answer is:

“The credibility of the management team”.

Following the above will recession proof your key relationships and, more importantly, enhance your own and your business' reputation.

Essentially, you and your business will gain credibility and credibility leads to more sales!

Clive Newell
january 2010

Recession Proofing: your relationships, your business, your reputation.

How's Business
Planning
Handling Credit Control
Relationships
Don'ts
Do's
Finally

(Clive Newell, January 2010)