Tuesday 22 January 2013

Customer in trouble - your call?

'The big ones hit the headlines, but when you see them all in a list....'

Given the cost of recovering lost profits when a customer goes bust, it is obviously vital that suppliers watch for the signs of trouble and act faster than the other guy. Obviously the finance department are equipped to pick up the signals in a customer’s annual report, but this merely gives a historical view.

Why the NAM view is crucial
However, when combined with a NAM’s daily experience of being in the market, continuously being exposed to a mix of weak and relatively healthy customers, understanding the effect of business pressures on interpersonal relationships, being subject to all the stress-symptoms of a customer drifting to the edge, and usually tasked with the job of filling the supplier’s profit-gap via incremental sales, it is more important that early warnings detection and signs of possible recovery be built into the NAM role.

This means NAM’s should familiarise themselves with the key financial indicators (see above) and couple this with any signs of a stress-driven deterioration in their dealings with the buyer and other functions within the business, and hot-line their findings to their finance colleagues…

It goes without saying that NAMs should then be part of any decision to modify (application of credit limit, withholding supplies etc) any aspect of the trading relationship, given that the NAM will have to communicate the decision to the customer, handle any flack arising and have to find the appropriate incremental sales elsewhere…

Anyone having issues ref pulling the plug should remind themselves that if their net profit is 5%, and a customer goes bust owing £150k, then the incremental sales required for recovery of profits are £3m….

More here & here

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