In anticipation of the World Credit Congress we gather all the News
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MBA (Henley), DipM MCIM, FCICM
MACM Director General
How can we cope?
• No business hand shakes
• Sanitising hands
• Keeping our workstations clean
• Keeping physical distance
• Wearing masks or face visors
• Virtual meetings
• Business travel restrictions and limitations
• And much more!
But this is not all for the surviving businesses! The global economy is on its knees and needs to recover as soon as possible.
Many European countries are lifting corona virus containment measures and gradually returning back to the ‘new norms’ in doing business, all working and focusing on the economic recovery. Countries are also opening their borders, finding travel corridors in compliance with the scientific recommendations of their respective health authorities.
The current main focus of EAAC is the identification of disrupted value and supply chains in Europe’s economy in order to recommend solutions and suggest possible actions to the European Commission for the quick recovery of the EU economy.
An economic rebound is surely needed!
But what does this mean and entail for businesses, especially the SMEs which are more vulnerable and are struggling to survive and recover from this deep economic crisis, with some of them experiencing complete shutdown of their business for a number of weeks? Are these businesses ready to adapt to the new realities in their specific industries? Are these businesses liquid enough to survive? Do they have the necessary resources to recover? What help do they require to combat such a deep crisis? What strategies should they deploy?
Critical strategic planning, measures and actions need to be addressed and implemented accordingly at this crucial turning point of recovery by businesses:
Feasible Recovery Evaluation
Businesses that were adequately resourced and liquid before the unprecedented COVID-19 crisis struck the world economy are now in a better position to restructure, adapt, endure this crisis and should recover relatively easier and quicker.
However, some businesses that were undercapitalised, highly geared or lacked sound cash flow may by now have lost their competitiveness as a result of high operational cost. These businesses may find it difficult to access funds to remedy this financial weakness and will be constrained to stop trading.
Hard-hit economic sectors and industries, such as tourism and HORECA, make it more challenging for the business operators to re-open while still observing precautionary measures. Not to mention the lack of confidence that exist in consumers to buy these services. In fact, businesses that operate in these industries assert that due to the number of measures and limitations still in place, they are finding it difficult to cope and to make it economically viable and feasible unless more restrictions and limitations will be lifted.
Core business activities
Businesses should also evaluate their core business activities and products. Whether these core products and services are still considered as necessary and, thus, demanded by customers, need to be well defined and established by businesses providing them.
Innovative and new marketing strategies may be deployed during this time of recovery, which may well mean re-branding, repositioning and differentiating of the products and services in order to make them attractive to customers again or even to gain competitive advantage in the recovering and ever changing market/s. Product and service improvement together with the development of new ones may also be implemented to meet the changing demands of the market. This would help to rebuilt confidence in customers, thus, bringing immediate results to the business and at the same time contribute towards longer-term growth which is necessary to rebuild the economy. No business should be afraid to change and if need be, diversify!
Closing off part of the business or selling part of the business both require thorough evaluation and planning to identify which section/s of the business is/are not performing to the full satisfaction of the Company Directors. This may well happen due to high operational costs or the current drastic changing needs of the market. Nevertheless, before divesting, businesses must evaluate and clearly determine the current market position and any opportunities to sustain competitive advantage, and the likely future potential for growth and profitability with and without the divestment strategic decision going forward.
Adequate Financial Resources
Adequate capital and healthy cash flow are the two main ingredients for the survival of a business organisation. This crisis has shown that cash flow is indeed the lifeblood of a business and it is not just a cliché merely used by the people working in the field of credit management.
Cash flow should be healthy at all times and this requires good credit management practices being employed. Nobody should expect to have healthy cash flow if long and extended credit terms are granted for the sake of selling without taking into consideration the profitability of the sale. It is also imperative to analyse the credit worthiness of customers prior to granting and extending credit.
Moreover, it is opportune for businesses to consider the overheads in relation to the direct operational costs. This may well require revising the high costs relating to rent, salaries, bonuses and fringe benefits frequently offered to directors and the top management team.
Reducing the financial burden of a business by restructuring its debt may also be a critical exercise during this recovery period. Businesses should explore the various sources of financing available in order to reduce the pressure to pay interest, such as converting a loan capital into equity whenever possible. An effective costing system and better cash flow management are indeed important more than ever to secure profit and long-term growth.
Skills and Competences
No strategy can be implemented effectively and successfully without having the right mix of skills and competences. This does not only refer to the skills and competences of individuals employed by a business but also the abilities of employees and the top management team to manage and adapt to market changes and also to work as one team, having common corporate goals.
From my experience, I can deliberately say that some, if not the majority, of businesses lack to acknowledge the importance of the role of the credit practitioner/s. Even worse, some businesses consider the credit function as the necessary evil department without giving it its due value. In other business organisations, conflicts between the credit function and other departments are evident with the directors and top management team lack to support the people working in the credit department.
Furthermore, I still experience businesses employing people to manage their Accounts Receivable with no related qualifications or experience in the field of managing credit and cash flow and the main responsibility assigned to them would very often be that of making collection calls and reaching cash collection targets. But proper credit management is far from cash collection and crunching numbers! An effective credit function should be a people’s function and an efficient credit practitioner should possess high interpersonal skills to be able to negotiate profitable credit terms with customers.
One word of advice to businesses in such an economic turmoil is that Accounts Receivable or Debtors Account, as it is commonly referred to, represent 40% of the total assets of a company on average, and this is a liquid asset – money one step away from cash in bank – this asset should be well protected by employing the right people for the job.
The Covid-19 economic crisis may have had a negative impact on a number of industries and businesses. There will be casualties and the unemployment figures are already increasing alarmingly. However, there are a lot to learn from this pandemic, which can be easily summarised and remembered: “Turnover is Vanity; Profit is Sanity and Cash is King” in doing business successfully!
Every year people make promises to themselves in the form of new year's resolutions, and the happiest and most successful people are those who have managed to turn a promise to improve themselves into a sustainable habit. It is no different when running a business. Making a resolution to improve your business, and following through, is an effective strategy to re-energise a company and its staff and lead to lasting, positive change, says Jolawn Victor, head of emerging markets at cloud accounting software provider, Intuit QuickBooks. “These types of spring-cleaning activities and embracing of new processes don’t have to happen in the new year, but it is a very convenient time for most small business owners to assess their companies and commit to making changes,” she says. It helps that there is generally a positive attitude early in the year that makes adopting new practices that little bit easier.
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In order to provide an overview for busy in-house counsel and compliance professionals, we summarise some of the most important international anti-corruption developments from the past month, with links to primary resources. Questions: What corporate foreign bribery enforcement actions were announced by U.S., Canadian, and UK authorities? Which East Asian country passed legislation to establish a new anti-corruption agency? How many corruption investigations did Chinese investigative agencies pursue in 2019?
> Answers to these questions >
While you have probably frequently heard about ‘digital transformation’ in the context of legal departments, the term ‘digital maturity’ will be relatively unfamiliar. These two concepts are distantly related. Digital maturity builds on digital transformation and focuses on how organisations can adapt to an increasingly digital environment. A digitally mature organisation is never done transforming but constantly looking for ways to improve.
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Despite a slow start, technology in the legal sector is beginning to heat up. There are lots of new names and products entering an increasingly competitive market. On the one hand that’s good news for legal professionals, who have a choice of tech partners to help them better serve their clients. But on the other hand it can be confusing to know which tech will produce results, who is the real deal, and who will deliver ROI. To help, we’ve listed 5 key things you should know about ThoughtRiver’s automated contract pre-screening solution.
> see the 5 things >
The average credit score was a record-breaking 703 in 2019, and that’s thanks in part to millennials who have achieved a 25-point increase since 2012. That’s according to the 2019 Experian Consumer Credit Review, which also found that the average age Americans are reaching a FICO score of 700 is the lowest it’s ever been, at 54.The spike in millennials’ credit scores can be attributed to many entering the workforce, advancing in their careers and achieving life milestones, such as purchasing a home.
Crowdfunding refers to the financing of projects by numerous donors. In this process, projects that are placed by borrowers on a crowdfunding platform are financed by many individuals. The platform is then responsible for the operation of the website, the activation of the projects as well as the coordination and consolidation of donors and recipients of funds. Thanks to technological progress, however, decentralised technologies such as blockchain also make it possible for a particular project and donor to merge directly, without an intermediary, and to carry out transactions worldwide on a secure basis.