Interesting times at work
Discussion
Working for a small business manufacturing and selling stuff online b2b / b2c also via the usual online market places. Was properly busy during Covid, no furlough or work from home for me. It's all gone a bit quiet over the last couple of years.
We appear to be having a bit of trouble paying suppliers - some raw materials either arrive late or don't arrive at all, phone calls received from suppliers asking for payment - not all politely.
I don't know much about accounts but we are getting funds from our bank on the despatch of orders based on a percentage of invoice value prior to actual payment - it this a normal thing? Month end tends to see a rush to get stuff out the door even if some orders go incomplete just to get the numbers up.
It is going to be interesting to see how this pans out....
We appear to be having a bit of trouble paying suppliers - some raw materials either arrive late or don't arrive at all, phone calls received from suppliers asking for payment - not all politely.
I don't know much about accounts but we are getting funds from our bank on the despatch of orders based on a percentage of invoice value prior to actual payment - it this a normal thing? Month end tends to see a rush to get stuff out the door even if some orders go incomplete just to get the numbers up.
It is going to be interesting to see how this pans out....
Polish off the cv, but also check things from your side,
The ex worked for a small company that was the same, only after it all went under did she find that her tax and ni hadn’t been paid for the last few months and there was massive gaps in pension contributions - the company deducted from pay but didn’t pay it over
The ex worked for a small company that was the same, only after it all went under did she find that her tax and ni hadn’t been paid for the last few months and there was massive gaps in pension contributions - the company deducted from pay but didn’t pay it over
Thank you for the replies, they do rather confirm my thoughts.
We have some long established production for 3rd parties - stuff we know we can do. We had picked up more of this recently from a new client, but I think it's turned out to be slightly more troublesome than was expected and probably not the volume necessary to help enough. The problem with 3rd party work is they want stuff asap and right first time....
We have some long established production for 3rd parties - stuff we know we can do. We had picked up more of this recently from a new client, but I think it's turned out to be slightly more troublesome than was expected and probably not the volume necessary to help enough. The problem with 3rd party work is they want stuff asap and right first time....
Nick Forest said:
Factoring…beginning of the end invariably.
Not always. It can be a useful way to manage cashflow and something that unlike a loan, the business only uses when it needs. The thing to look for is whether a company also has an overdraft or other lending to aid cashflow. It's this mix of different lending that usually indicates all is less than ideal.
What's of worry in the case of the OP is that despite access to the cash on the delivery of the items, the company is still unable to keep on top of its purchase ledger. This suggests that its operating costs are too high, margins are too small or sales too low. Or all three.
What he needs to determine is whether this a blip or a more, baked-in malaise that's only going to worsen. From the description given, I'm afraid my money's on the latter.
epicfail said:
We have some long established production for 3rd parties - stuff we know we can do. We had picked up more of this recently from a new client, but I think it's turned out to be slightly more troublesome than was expected and probably not the volume necessary to help enough. The problem with 3rd party work is they want stuff asap and right first time....
That applies to most clients.The problem here is that the margins are going to be a lot less because there's other parties between your company and the end client who all need to make a profit. So if the stuff you're selling directly to an end client has a margin of say, 40%, 3rd party stuff may only have 10%. If it's easy and regular work and the company is not solely reliant upon this, that's fine. But factoring can cost up to 5% of the invoice value so on a 10% margin, that leaves no wriggle room to deal with returns, delays, etc.
Nick Forest said:
Factoring…beginning of the end invariably. Maybe not this week or next month but eventually it’ll end in tears
Any data on correlation between use of factoring and company failure?We don't use it, and never would - but I can see a use case where working in an industry with lumpy and irregular payments. It's not in and of itself a sign of cashflow 'problems'.
We run multi-disciplinary teams and it's always obvious who's factoring, though. They can't help themselves but issue a spurious invoice inappropriately early - and when we leave them to it, because b
ks, they'll chase at exactly one week prior to their terms expiry. No fks given in the intervening period, obviously.Edited by iphonedyou on Friday 21st June 11:40
iphonedyou said:
Nick Forest said:
Factoring…beginning of the end invariably. Maybe not this week or next month but eventually it’ll end in tears
Any data on correlation between use of factoring and company failure?We don't use it, and never would - but I can see a use case where working in an industry with lumpy and irregular payments. It's not in and of itself a sign of cashflow 'problems'.
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