Monday 1 July 2013

High Street failure creditors owed £2bn – report

In a BBC article, financial analysts Company Watch found £499m was recovered in assets from the 19 biggest retail failures since 2012.

Banks and other secured lenders got at least £365m and about £123m was spent on fees and other bills. Administrators earned £33m from the failures, with some charging up to £950 an hour. Only £14m went to last-in-line unsecured creditors such as suppliers, landlords and customers, meaning a total loss of approximately £2bn.

To put that in perspective, assuming suppliers have an average 7% net profit margin, a loss of £2bn translates into incremental sales of £28.5bn in order to recover the loss…

Others can debate the merits of the insolvency laws, but for NAMs the issue has to be the reduction in at-risk retailers and wholesalers in the customer portfolio.

Essentially, as the frontline members of the supplier-retailer relationship, it is vital that NAMs optimise their unique advantage in being able to combine their closeness to and knowledge of, the  customer with latest financial results in order to pick up signals of deepening financial crisis and take appropriate action before the bankers, government and administrators line up outside the shop…

NAMs can underestimate their value at this stage. While others in the company have to rely upon historical data and press commentary on the customer, the NAM is unique in being able to ‘read’ the state-of-mind of the customer, today.

In order to optimise this advantage if is obviously essential that  the NAM understand the basics of Balance Sheet and P&L in order to be able to complete the insolvency jigsaw.

Some tips:
-  See cover charge indicator
-  Spotting the signs of trouble 
- Working around bankrupt customers

Failure to anticipate the ‘obvious’ means the NAM is saddled with the task of obtaining the incremental sales elsewhere…

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