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February 2011

February 2011

Talk to anyone in the industry and the same comments keep coming back - I’m busy but my cashflow is a nightmare!

Getting paid for our work seems to be harder than actually doing the work at the moment. There is a trend among some of the major retailers to raise money by extending credit terms with suppliers. More and more the terms have slipped from 30 to 60 days and now I’m sure you will have all heard the line ‘60 days end of month’, that’s a polite way of saying “I’m not paying you for three months”.

So what’s the answer? Put the customer’s account on stop after 60 days? They will just find someone else to do the job. I recently had the managing director of a company call me and accuse me of holding him to ransom and bullying his staff. I had stopped his account because he owed me £30k over 120 days – who’s holding whom to ransom there?

Call the bank and extend your overdraft? Banks don’t want to lend you money any more unless it’s on their terms. I turnover in excess of £2m a year and expect to make a net profit of around 7%. It’s fair to say then that my profit and loss account looks more than healthy and yet my bank will not give me more than a £40,000 overdraft. It’s OK though - they can set me up with confidential discount invoicing and free up far more of my sales ledger than I actually need but, then they will charge me over £20,000 a year to do that. I doubt a £100,000 overdraft facility would cost me £5,000.

Go 90 days with your suppliers? The choice of suppliers for ink and vinyl is limited if you want to buy at the best rates. Most of the bigger firms that supply ink and vinyl are factoring so they need to see the money 60 days on the nose so 90 days is not going to happen.

As usual the small business is being hit hard by the financial crisis, but how hard would it be for the government to regulate these credit terms and make it harder for larger companies to flout them with a devil might care attitude? Comments please to industrymole@imagereportsmag.co.uk

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