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Christmas cards and company administration

This evening I’ve been mostly writing Christmas cards. It’s a regular chore that comes around each time each year; at it’s more fun than filling out tax returns. Actually I do rather enjoy writing Christmas cards as it gives me another opportunity to connect with our customers. I rather think of “our” customers as “my” customers. It gives me the excuse to play with another new online toy – online postage printing.

Basically the Royal Mail allow home and business customers to be able to print postage directly from their website onto envelopes or labels. They support all the usual sizes of envelope and don’t charge any extra for the service. What’s cool about this service is that you print a square 2D barcode which contains the computer-read address information so in theory the mail will go directly through the sorting office without delay or manual loss.

So that’s the scene. I went to one customer’s website to confirm their address and saw it had been taken down intentionally. Google brought up the bad news, the bad economy had forced this customer’s businesses to go into Administration (this means the company appoints third party accountants to run it’s last mile, pay off it’s creditors [if it can] and to close it down). As if that’s not bad enough, this customer had two businesses and therefore two accounts with us and they really rated us highly as a supplier. It was as if they were there one moment and gone the next. As a supplier to these businesses we are now officially in the “Business affected by the Recession” club. Needless to say, my heart goes out to the employees of this business who have been made redundant and to the other suppliers, especially the small businesses who rely on the supply chain for their cash flow.

Anyway, it appears the administrators hadn’t found us so this year, instead of a Christmas Card a letter to the administrators was sent. There are some things that we could have done better to manage this customer and our cash flow and hopefully this advice will help another company. These are not lessons learnt, we actually do these things and keeping a finger on the pulse of your business is crucial if you want to survive what many economists are predicting will be a “prolonged recession”:

  1. Always maintain regular and open communication with your customers. We were waiting to hear back on payment for an order from this customer and didn’t want to bug them. This was back before they went into administration and presumably nobody at the client was aware that there could a problem.
  2. Ask to be paid early or develop a payment schedule with discounts for early payment and penalties for late payment. If you can be paid early, you minimise the amount of risk that you take on when supplying a customer as a creditor.
  3. Check that your customer has received your invoice, keep contact until the invoice is paid and follow up with courtesy contact following the invoice.
  4. DO YOUR PART: Support your creditors by paying them quickly. You’re not the only business in the economy and the solution to the recession is for cash and credit to start to flow quickly again. We are proud members of the Better Payment Practice Campaign. All our subcontractors are paid partially up front, early or at the latest, right on time. Since 2003 we have never paid a bill or salary late and we actively encourage all participants in our supply chains to do the same.The Better Payment Practice Campaign

Comments!

Has your business been affected by the “credit crunch”? Have you had a client go into administration and been left to deal directly with the administrators? It would be good to hear from you. Also, if you were expecting a Christmas card and haven’t received one yet, please don’t worry! I’ve only sent a dozen or so so far (by hand!) and I’m not sure I can get around to everyone before Christmas!

Published inOld Evolved ISV PostsUncategorized

One Comment

  1. Hi Mike,

    Nice to see somebody thinking about both sides of the coin, and certainly a very valid thought for this time of year and in these economic conditions.

    I’ve actually got no voice overs booked locally this month for the first time in years. Usually I’m pretty busy in December doing Christmas phone messages, shopping center radio station adverts etc. This year nix. My usual clients are telling me that, yes, indeed they have cut back on “non essentials” and they sound genuinely unhappy they’ve seen need to do so. A recent article in a Melbourne newspaper reports Santa bookings are likewise down with many Santa’s not being booked at all.

    Retailers locally will benefit however, in the short term, as the Federal government is sending around a thousand dollars AU to each person on benefits in an attempt to stimulate the economy. I don’t necessarily believe this is a bad thing as such, except that a heck of a lot of it will end up in the coffers of the gambling industry and casinos.

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