Archive for the ‘Cash Management’ Category

Business Contingency Planning

Friday, August 27th, 2010

“In the middle of difficulty lies opportunity” (Albert Einstein)

There has been much speculation in the press over the last couple of weeks about a double dip recession.   Whilst no one can predict with certainty when, or indeed if, it will happen, one thing is for sure the likelihood has significantly increased.

I hope and pray, like you, that it doesn’t happen but I must prepare myself for the fact that it might.  I need to review and tweak my Plan B  – the one I wrote at the beginning of 2009 but thankfully didn’t need to execute!

‘Plan B’ encompasses many things for example: better cash management; better debtor management; identification of alternative sources of funding; cost reduction; labour force reduction.  In a ‘nut shell’ it identifies the creative ways of achieving more with less.

 I have prepared a paper to get you started 10 Things to Include in Your Plan B.  I must emphasise at this point though that just because you have a Plan B doesn’t mean you have to execute it – but never has the saying ‘better safe than sorry’ been more apt.

Invariably the development and execution of ‘Plan B’ is easier (less painful?) with expert help.  It’s not without its challenges but we have guided many businesses through difficult times. 

“The only thing harder than planning for an emergency is explaining why you didn’t” (Unknown)

 Mike O’connell, CEO, Isosceles Finance

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10 Things To Include in Plan B

Tuesday, July 27th, 2010

Previous blog Plan B

Here are 10 things to consider when developing ‘Plan B’

  1. Honestly and rationally assess where your product or service is in its lifecycle.  Is it really a product fit for mass production and marketing or is it an early stage prototype requiring more investment? This will help prioritise resources.
  2. Define the core skills and processes required for the business at this stage. Do you need an expensive business development director if the product is still only a prototype.  Likewise, do we need a fat development department if have with a mature product?  Do I need a full time FD when a part time FD will suffice?
  3. Identify which members of the management team are appropriate for the business at this stage?  Who are the fighters?  Who can roll their sleeves up? Which members of the management team can perform multiple roles?   
  4. Determine which one or two key markets have the lowest barrier to entry – i.e. where are you likely to get the easiest and earliest success?   Investors often take more confidence from a small and growing pipeline rather than one or two big deals.
  5. Swift and decisive communication with staff is paramount. Staff usually know exactly what is going on within their company.  They know sales are down, suppliers are complaining.  They see the investors in the office.  They will take confidence from knowing management understand the situation, are taking decisive action and are truthfully keeping everyone in the picture. 
  6. Identify areas for cost cutting and cut costs as early as you can.  Try to do it so deep that you do not need to repeat the activity.  Don’t forget that management also need to be seen to make sacrifices not just the staff.  Avoid extravagant demonstrations of spending in order to buy staff goodwill.
  7. Change the shape of sales deals.  Get some cash up front or agree staged payments.  Consider software rental, maintenance holidays, trade reduced maintenance for longer terms – be as light footed and as flexible as you can.
  8. Pay very special attention to cash flow and debt.  Work hard to reduce your aged debt – incentivise your credit controller and sales people.  Renegotiate with suppliers and debt providers for example agree staged payments with HMRC for PAYE. Get all allowances in early, e.g. R&D tax credit. 
  9. Now may be a good time to collaborate.  It takes a brave management team to actively seek out potentially competitor companies and strike up a relationship.  Yes you may have to give up a little margin.  But in times of crisis more imaginative ways of getting your product to market are required.  Few companies are truly identical.  Few have the same technical strengths, the same scale and geography of operation. 
  10. Develop Plan B before you need it. Be clear on your KPIs (key performance indicators) and  how you measure performance.   Agree the point at which you will execute Plan B and stick to it.

Invariably the development and execution of ‘Plan B’ is easier (less painful?) with expert help.  Isosceles have guided many small and medium companies through difficult times. It’s not without its challenges but with positive action at the right time, it is possible to shape your future!

 Mike O’connell, CEO, Isosceles Finance

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Demanding Service

Wednesday, June 2nd, 2010

As the generations pass we have become ever more demanding and exacting, especially when we are spending our own money. If we are buying a service we expect it to be fit for purpose and high quality. We expect a degree of expertise from our service provider. We expect a better job than if we did it ourselves.

If we engage a builder, plumber or decorator we find it is easy to generate an expectation of the result we want and to measure the output against this expectation. We can be a very exacting customer indeed. If we buy a product off the internet, we now spend hours reading reviews comparing prices and again make an exacting purchase – the best quality for the money we can afford.

I find it interesting to contrast this with how businesses generally measure the output of their employees. How many companies set out a detailed SLA for each employee? How many companies measure the performance each month against that SLA before they pay an individual’s salary?

In the world of accounting we may agonise before buying a software product for a few thousand pounds say to help with accounting or reporting, but if a Financial Controller spends a month building a spreadsheet do we really acknowledge that the model costs thousands. What about the ‘opportunity cost’ of what they should have been doing?

As an outsourced accounting services provider I find the process of defining an SLA and invoicing every month means that my customers ask themselves (and me) “What is the real cost of the finance department?” “What value has finance brought to my business during this month?” “Why did it take that length of time to deliver that task?” “Why did that activity cost that much?” “Are we monitoring and measuring the right things?” This level of scrutiny is a positive thing, in my opinion, it keeps our standards high and I genuinely feel that out outsourced accounting service gives a better value for money service than an in-house team where the monthly cost of finance has not been monitored for a long time and gets washed into the general bucket of all the other salaries.

Mike O’connell, CEO, Isosceles Finance

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Trials and tribulations of the Venture Backed Turnaround – Part I

Tuesday, April 27th, 2010

Being a venture capitalist must be one of the toughest jobs going – you are as popular as a traffic warden who used to be an investment banker.  Your odds of success are probably no more than one or two projects in ten.  Although you perform as much due diligence as you can, you are still more or less reliant upon the representations that the management team make.  If you are successful no one likes you, if you fail you deserved it.  Yet without this very important source of capital, some of our largest and best companies in the world could never have made it – Google, e-bay, Amazon.

I believe there are only three ingredients to a successful venture-backed business excellent people, timing and luck.

Mike O’connell, CEO, Isosceles Finance

To be continued ……….

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Plan B?

Tuesday, April 20th, 2010

Many of life’s failures are people who did not realise how close they were to success when they gave up! (Thomas A. Edison 1847-1931)

In order to get a business off the ground good business practice says we need a business plan. Indeed if venture capital funding was required the plan probably took many, many hours of toil to craft and now resembles a sculptured ‘work of art’ being unwaveringly implemented as we speak.

But the market conditions that prevailed at the plan’s conception will always change.  Sometimes as we have seen with the tumultuous economy of 2009 and now also 2010 these conditions will change quickly and beyond all recognition.  What then?  Many business leaders will leave their plan in their desk draw and continue regardless.  Sadly these businesses will not have grown or prospered and may even have failed. 

The more astute among you however will realise the plan needs continual tweaking, in real time, and will already have a ‘Plan B’ just in case.   

‘Plan B’ encompasses many things for example: better cash management; better debtor management; identification of alternative sources of funding; cost reduction; labour force reduction.  In a ‘nut shell’ it identifies the creative ways of achieving more with less.

Invariably the development and execution of ‘Plan B’ is easier (less painful?) with expert help.  We have guided many small and medium companies through difficult times. Its not without its challenges but with positive action at the right time, it is possible to shape your future!

Click here for my white paper –  10 Things you Should Include in Your Plan B

Mike O’Connell, CEO, Isosceles Finance

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When is a personal guarantee not a personal guarantee?

Wednesday, October 28th, 2009

Delivering services to cash strapped businesses is one of the most delicate and difficult equations. 

One of our service provider clients called me last week for advice.  Our client had been supporting one of its cash strapped customers who had reached its credit limit.  A Director of the customer gave a personal guarantee (verbal) that the outstanding account balance would be paid on an agreed date if our client continued to provide service.  Unfortunately the Director reneged and our client is taking legal action against its customer.

It is a sad state affairs when Directors give personal guarantees  and then renege, however in these modern times where MP’s can no longer be called honourable and when bankers are being routinely jailed in the US why should we be surprised about a little old personal guarantee default.  The depressing  part about this little story is that during the most difficult times of business it is trust which get’s businesses through -  suppliers cut their customers some slack, bankers extend terms, employees cut their pay.  During the difficult times a company in difficulty gets through with the support of its employees, investors, bankers , shareholders and suppliers – all the stakeholders.  The strength of relationships forged during these times will endure for many years to come.  During these times a contract with the most exacting terms does nothing, companies and their directors rely on the strength of their commitments followed then by their actions.  For our client the granting of a personal guarantee could not have been a stronger commitment.

We have been working with many cash strapped customers – helping to manage their cash.  We have found that an honest and open communication technique is the best.  Do not tell a supplier they will be paid at the end of the month when they won’t, do not say you have lost the invoice when you haven’t .  Do part pay invoices.  Do pay small amounts regularly.  Do have senior members of the management team ring and talk to their suppliers.  Do not give personal guarantees and then renege.

This set me thinking about the legal status of a verbal guarantee.  It is important to realise that this is an agreement between an individual director and supplier.  Verbal agreements do have a legal standing, but there must be evidence that terms have been agreed.   The legal advice to our client was that whilst they may have a case to prosecute the individual director for the personal guarantee, it is more straight forward to take insolvency proceedings against the company.  It will be interesting to see what happens it is just possible that the director will have greater assets than the company.

Mike O’Connell, CEO, Isosceles Finance

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