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Monthly Archives: May 2012

Clinton Cards can no longer push the envelope

17 May 2012

In 2009 Clinton Cards made a pre-tax profit of £24.1m on sales of £345m, an operating profit margin of 7%. Last year it made a loss of £10.6m on sales of £364m. Last week saw this one time High Street giant slip into administration to become another statistic of austerity.

In its pomp Clinton owned more than 1,100 shops and had 25% of the greeting card market. With associated buying-power they pushed the envelope and paid manufacturers as little as 30p for a card they sold for £3. With 8,000 staff and rents said to exceed £80M it was a model that relied on sales, sales and more sales. Where did it all go wrong?

Following the banking crisis, high street footfall mirrored reductions in consumer confidence that was further stifled by government austerity measures. Forced to shop around, consumers found supermarkets and the internet offering lower priced cards, with the latter offering personalisation. Cash flow problems now hit Clinton, restructuring resulted and branches closed.

Ironically, it was to the banks that Clinton went for help to ease their cash flow problems with Barclays and RBS providing them with a total of £35M. The banks ultimately gave temporary waivers for 'technical breaches' before deciding to sell the loans to American Greetings (Clinton Cards biggest supplier) who, you've guessed, called in the loan!

If circumstances conspired against Clinton, it's clear that they responded too slowly to changing market conditions. Herein lies a lesson for all businesses big or small, B2B or B2C. The inability to meet the demands of creditors can seriously damage the health of a business. Witness our own recent research undertaken in partnership with the Forum of Private Business among SMEs on the topic of payment trends.

According to our survey 59% said they pay late, either intentionally or unintentionally, with 77% of these citing late payments by their own customers as a reason. Other factors leading to late payments include: insufficient funds 70%, and a lack of affordable finance from banks 55%. So what can you do to protect your cash flow?

Saying "no" to business is always an option. There is little point taking credit information only to ignore its advice. There is even less point getting paid late yet continuing to supply. When all the signals tell you that your buyer is having problems, heed the signals, be brave and say "no."  However, once you have a customer, there is much you can do to get them to pay.

Step up your collection activity; use your directors and your sales people to contact your buyer, use e-invoicing, and make pre-due calls and get a commitment to pay. Remember that companies owe money but people pay bills. Polite persistence pays.

(ct)

By: Gordon | Tagged: , , , , | Leave comment
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