Credit Matters Blog

Another Christmas Business Story

Kim Radok 17 January 2014


One of the best aspects of reading about business stories, is we don't actually have to suffer the costly blow-outs and loss of reputation to our business which may have occurred to others. We can read these stories and reflect on the issues raised and see if they apply to our business. If they do, then we have the information to make changes for the better.

The core theme of the article written by Mary Schlangenstan was the issues which apply when customer expectations are not met because of:

(i)  a lack of foresight;

(ii) lack of sales and business discipline; and

(iii) not understanding and accepting the limitations of a third party supplier.

As a result, there are penalties to your business of:

(i)   unnecessary business costs;

(iii)  loss of customer satisfaction and

(iii)  the drain on cashflow to meet the unnecessary costs and the revenue forgone by missed sales.

A brief overview of these factors follows.

A lack of foresight - We know or should know, at Christmas, irrespective of the nature of your business, it will be a hectic time with late minute orders, budgets to be met (or exceeded) demanding customers and the possibility of our third party  suppliers being equally under pressure.

Too often there is a lack of pre-planning for these situations and the common "get out clause" is the "perfect storm" scenario. With due respect, what rubbish! Christmas comes around every year and we should be planning for the end of year issues accordingly.

Lack of sales and business discipline - Too often, sales are lost because salespeople and their management promise things that are never deliverable. Such situations are generally caused by unrealistic budgets, a one dimensional approach to maximise every sale irrespective if it is a realistically prospect or not, or whether the sale can be delivered in a timely manner.

These problems usually occur because of the "dollar signs which appear in everybody's eyes" and which subsequently corrupt common sense decision making. Hence the un-realist promises of delivery.

Not understanding and accepting the limitations of a third party supplier - when there is a third party is required to deliver your product or service, then it is up to you to understand what they can or not do. It is no good simply forwarding your product to them or taking orders and expect them to deliver it if there is no time.

Hence we come back to the business / delivery deadlines which you can reasonably expect your third party to adhere to. That is why deadlines are in place.

As a result, failing to adhere to the above circumstances there are unnecessary penalties as follows.

Unnecessary business costs - which include goods being returned, orders cancelled special "penalty / apology gifts", etc.

Loss of customer satisfaction - which inevitably includes the "penalty / apology costs" mentioned above, lost customers, business going to your competitors etc.

The drain on cashflow to meet the unnecessary costs and the revenue forgone by missed sales - never to be underestimated. Unfortunately, too often, no business case is made to ascertain the loss as the loss is usually glossed over as being relevantly unimportant and merely written off as "another cost of doing business".

That is until, the cashflow budget blows out in the coming months as returned sales result in outgoing and reduced cashflow, the previously estimated cashflow budget is found to be unachievable etc.

Studying the business world around you is akin to working on your business and not just working in your business. The Christmas and New Year period offers you an opportunity to  read, watch and reflect on what is happening, and is one way of working on your business in a relatively stress free manner. Better yet, you do not have to go through the costly expense suffered by other businesses who failed to understand what was happening in their own organisations.

May you be paid today rather than tomorrow

Kim Radok