Integrated Transport System

Back in 1997, John Prescott said that 'Britain would have an Integrated Transport System'. Of course, as with much of what Prescott said it was pure hot air. Sadly, nearly 12 years on, we are paying the price of those empty words and lack of action.

The CBI today says that our transport network is 'unreliable, congested and is undermining our competitiveness'. It echoes what most of us in business have felt for some time - the word they have missed off is 'expensive'. Remarkably, they rated train travel as satisfactory in terms of reliability and is considered to be improving. Clearly they have been using very different trains to most commuters.

Trains, Planes & Automobiles

Trains are a running joke in this country. While rolling stock is slowly being updated on the lucrative franchises handed out, the handling of rush hour remains appalling. If you commute into London then you will know what I am talking about. Fast trains at rush hour are the most expensive tickets on the network and you are subjected to densely packed carriages and no seat for the journey, made almost unbearable in Summer due to lack of ventilation. Nowadays, my wife and I will travel by car together as affording two tickets at such excessive cost each day is just ridiculous and with £9 for parking and £8 for congestion charge and around £10 for diesel it makes economic sense.

Of course, the answer that the Mayor and PM will have is to raise the price of the congestion charge or find some other tax to attempt to penalise you into taking the packed trains - or as Ken Livingston was planning, to actually charge a congestion charge for using the trains in rush hour. This stupid and illogical way of trying to manipulate behaviour comes from the long, historic belief of the Anglo-Saxon and Norman lineages that if you tax someone then they won't do it.

The idiot thing is that no one takes a rush hour train or car journey by choice. They do it because that's what business and working demands. Most people in this country have set hours of work and while flexi-hours are a great innovation, over 90% of businesses cannot afford such luxury for its employees simply because their customers demand service within normal business working hours and beyond. In order to be successful in business, you need to be delivering your products and services within working hours. And that means that any more costs heaped onto getting staff to work within those normal hours will just make the business less competitive.

The Burden of Transport

In my business, my biggest expense lines outside of payroll is travel. Taking out accommodation costs which I try to avoid if I can, a quick analysis reveals it is cheaper to use a car for internal travel in the UK than trains with the exception of the Underground in London. A cursory glance will tell you mile for mile it is cheaper to use planes than cars or trains. Yet a bus and a train has to be cheaper than a plane to buy, maintain and run, particularly with all the ancillary costs.

Most people commuting to their office cannot recharge that to their employer and so bear the cost themselves, so the hidden cost of transport in business is huge. This will eventually manifest itself in wages which need to remain competitive yet still provide enough to cover the employees' transport back and fore from work. If you look at the cost of specifically trains and buses over the last 11 years it is easy to see that their cost has risen well out of proportion with wage increases.

It is costing us more to work than ever before thanks to transport costs.

The State of The Union

Britain is not some backward nation on its uppers - well not yet anyway. In that last 11 years, we were told repeatedly that we had a super economy and we were well off as a nation. Of course that has proved to be complete rubbish but it does make you wonder why on earth we have not ploughed enough money into getting our transport system in line with the modern age. Ministers would tell you that it is because of lack of previous investment and it's a case of catch up. Well, that's no excuse to exacerbate the problem on their watch. Now we are talking mega-numbers, not quite in line with bank bail outs, naturally, in order to put it right.

And here is the rub. This has been a Government of missed opportunity which is a phrase I have used before. The real shame is that when a crisis came hundreds of billions of pounds were taken without a cursory thought as to how they would be used or spent by the people they gave it to just as a knee jerk reaction to the failing banking system. Heaven knows, if such money was available then, why were we not spending it on our future like transport infrastructure - and if it could have so easily have been conjured up, why did we not use it before?

Of course, tax is at the heart of the matter and we shall find out in years to come just how much it has cost to save the skins of a few bankers and keep a bunch of bank businesses many of which deserved to fail. What we will count the cost of at the same time is how much new infrastructure, new hospitals, schools and much more we could have spent our hard earned money on while we pay off the 'expense tabs' of the elite bankers, the very same people who now sit like vultures on the PM's shoulders telling him how much money he needs to spend to dig himself out of the mess he got us into.

You can be sure of one thing, not one of them will be telling him to hold back the cash for banks and spend it on transport or any other worthy cause. That does not pay a banker's wages or bonus - and that is the priority of this Government, make no mistake. This period of history will be the single biggest missed opportunity in Britain's economic history - and we will remain uncompetitive for years because of it.

Planning For Survival

I make no apology for bringing up the subject again - we are officially in a recession and there has never been a more important time to understand how sensible, regular planning is a discipline in business that can help you not only survive but flourish.

But I'm A Nimble SME, Why Do I Need To Plan?

I have blogged ad nauseum that this recession has struck at a merciless speed and how, in short trading cycles, household name companies with long, proud trading histories have literally collapsed in front of ours eyes and gone bust.

Insolvency Practitioners and Liquidators are having a boom time as many more companies go to the wall and require their services - it's the nature of the beast.

One way to avoid all this is to do some basic, disciplined planning. And in my estimation this comes in two forms: 1) Front End - Sales and 2) Back Office - Finance. In reality the two are inextricably linked as one fuels the other. However, very often planning is only actually done in Finance - at the front end we have only Forecasting.

Forecasting vs Planning in Sales

It's a nit pick but I would say a basic salesman's forecast is pretty much guesswork based on historical data with a guesstimate on some of the more sizable deals which may have a larger effect. When this is rolled up to management level, very often there are factors and trends applied to arrive at the sales forecast en masse. By that time, the overall number is pretty much a real guess and bears little resemblance to the sum of the raw data. This may actually work fine when sales are buoyant as what often happens is that opportunities are plentiful enough to accommodate the odd deal drop out - the overall number becomes more predictable.

Generally, little planning is involved in that process. It's just an approximation and if sales are close to budget there are no real causes for concern. It's when things start to go wrong that you realise that a bit of planning might have helped.

Planning, when applied to forecasting, is actually reviewing every single deal and working out what is required to win that deal, what margin does it yield, is the customer capable of paying, making sure the terms are agreed, what factors in the market can effect it and what can you do mitigate their effect. This not only gives you a realistic view of every sale but it also gives a very full view of the cost implications of either winning or losing a sale.

Again, these implications seem less important when the graphs are pointing up and to the right, but when there are hazardous market conditions like downturns around, suddenly this level of understanding becomes important.

Right now, it's not a good time for a sizable proportion of your business being in sales to car makers or banks for example and even if they are it is highly likely that the sales may get protracted, become more price sensitive and possibly involve longer payment terms. This level of detail is vital as the Finance Planning is the key part that balances resources to sales.

Financial Planning

Most companies do a budget and a cashflow forecast but it is very likely that SMEs will tend to do these on a monthly, at best, and usually quarterly basis - some may only budget once a year. However, there are plenty of natty tools out there that could make Planning simple and a daily task (cf. www.adaptiveplanning.com)

If the Sales Planning has been done properly, then the Finance side can take the input and do a new level of scrutiny. The first step maybe to review the credit lines to every company on the sales forecast to take account of the prospective sales - the outcome may be to ensure that all existing invoice queries on the accounts are cleared down and settled, credit lines actually raised ahead of a big sale or the credit team can swing into action to look at options to help the customer pay like leasing or debt assignment etc. If the Planning is done properly, Finance can be proactive in helping to deliver sales rather than an order arriving and then tantrums occur as Finance won't extend the necessary credit.

For new customers, get a credit check done. They are not that expensive and they can save wasted effort and heartache. So often a deal comes in and Credit Control (sometimes called Sales Prevention) step in and say 'no credit'. Good Sales Planning will alert Finance early and they can get the checks done ahead and have time to plan if and how a sale can be managed. And there is a downside - sometimes sales are not worth pursuing because the customer does not have the necessary ability to pay - Sales need to know the hard truth early and in these austere times they need to be told if they have to go find another customer to make up the shortfall. Good planning breeds realistic thinking and focuses everyone on the really vital things and avoids 'wishful thinking'.

Once Finance has a realistic view on when sales will drop, when and how customers will pay and if this can be smoothed in any way, then they can take a detailed look at the overall cash position. When times get harder, they can start making decisions on policy to help get resources into winning sales rather than on less important things - a classic example might be cancelling the Corporate Jet when sales drop (take note Citigroup)!

The Results

What Business Planning can do is focus in on the really important things that can directly affect driving sales, creating cash and maximising profits (or indeed, minimising losses in some cases). In harmony, Sales can focus on tactics to close orders and get invoices out early, while Finance can help offer incentives for the customer to settle early or get leasing involved to secure the cash. Meanwhile, Finance can also turn their attention to suppliers to renegotiate or back off the terms of deals so that pain is shared on the cash front.

The key thing is anticipation of issues - when cash is tight you have to be on top of everything from negotiating terms, to collecting cash and extending terms with suppliers and paying as late as you can. One of the biggest areas of cash slowdown is mismatching terms or invoicing inaccurately - communication between front and back office becomes ever more important and this is where Planning really pays dividends so that all discounts, rate plans and terms are agreed formally and the details passed to Finance and equally Finance make sure the invoices are sent out accurately and early. Debt chasing should be more vigorous and leveraging the Sales relationship can often get customers to pay up on time especially when they need something urgently - Sales should have a handle on all that and get leverage.

Expenditure

While cash is king, profit is crucial and maximising it in tough times is a priority. Now is the time to challenge why people travel so much, entertain so often, travel Business Class or use trains when a car could be cheaper or vice versa, then look at all cost lines and squeeze every penny of saving you can so that as much resources can be applied to winning sales as possible and not go on flowery 'nice to haves'.

I have said this before but never underestimate the power of communication with staff. Everyone loves to get good news and pats on the back. But there seems to be an automatic assumption that either staff don't want to hear bad news or they can't handle it or they can't be trusted with it. All of those assumptions are wrong - in tough times, the support and innovation of your staff will help share pain when needed and equally help make sure cost cuts are achieved without a large loss of productivity and sales are made as planned. Leaving them out of the loop can really affect the plan detrimentally as well as ruin motivation.

Get Innovative

So much of sales behaviour is driven by compensation plans and you need to be able to gear the plans toward meeting priorities in tougher times. A profitable deal is not profitable until the cash is in, so why not think of either changing the point of commission payment to when the cash is collected or accelerate the earnings for early payment and the opposite for late payment. Further, focus on success so raise the barriers at which commission is paid but give more for overachieving.

Planning will also reveal the margin hotspots and highlight those deals where margins are low. If such deals are with customers whose payment records are poor then you know that your real margin is lower while possibly smaller deals with customers at higher margin and good payment records are worth proportionally more to you. Make sure you have all the information to make the judgement calls and give the bad news to salespeople early rather than wait for deals to come in or, worse still, snipe at them later. The decisions to accept these deals should be shared.

Tackle Cash Requirements Early

What this detailed Planning will allow you to do is to get a much more realistic picture of how your cash positions will pan out and therefore dictate how much cash may be needed and when. So much of what is going on in business right seems to be guesswork but in your own company it should not be that way. Having all the deals and expenditures explored, terms agreed, collections strategies in place, credit checks done will actually make the task of going to your bank or similar far easier. Why? Because you can answer their questions. There is nothing worse than bluffing in this situation as you don't get a second chance at that but having a detailed Plan with contingencies built in and the even the compensation plans geared to help, the Banks cannot fail to be impressed with your ability to know and run your business. They still lend on trust and that should be your priority.

Get Advice

There are going to be a lot of vultures out there who will want to start telling you how to cut and restructure your business, turnaround experts who are just accountants with knives. What you need is to give yourself a better chance to win business with a cost line that can support it. Too many companies Plan badly and then just hand over the company to accountants when things go wrong.

Plan better now and you will not only survive - you will THRIVE when the recession is over. Make sure your planning is done with your Sales and Customers in mind as the key priority - focusing inwardly will make you lose sight of your path to survival.

For help on planning to survive, call me on 0207 193 2356 or drop me a line at nigel.dunn@calxeurope.com.

You Can Have All The Information You Want - Except That

There was no U-turn yesterday by the Government on MP Expenses, just an adjustment of policy.

Freedom of Information

Campaigners were yesterday celebrating a 'victory for people power' after a web protest about the Government's planned exclusion of MPs expenses from the Freedom of Information Act (FOI) effectively caused the Government to take the proposal off the agenda. Conservatives, who inwardly shuddered at the potential scrutiny, jumped on the bandwagon and accused ministers of a 'U-turn' and the Liberal Democrats 'celebrated' by calling it an 'humiliating climbdown'.

MPs were due to vote on Thursday to exempt their expenses from the FOI and Labour had instructed its MPs to vote it through while Tories and Lib Dems had been ordered to oppose it.

The National Interest

"It's a blow for National Security and gives Terrorists the upper hand," remarked a source close the Government. "Now any Fanatic can get hold of an MPs expense information and bomb their favourite expensive restaurant, daub paint viciously on their second or third home and even see which country they have spent the most on visiting in the last year. It's a disgrace."

"I don't know what those traitorous finks in the opposition parties are smiling about," continued the source, "Now any idiot will be able to see where they have taken their wives on party 'Information Gathering' trips, if they have a spare car for their girlfriends or what underwear they bought for their secretaries to wear in the office. They'll be the ones who are sorry, you know."

"Gordon is furious," said the source, who declined to be named as we lunched at La Caprice. "I mean this is what we are forced to do - justify ourselves by having cheap meals like the proles. He had cross party agreement, you know, and now the lilly-livered opposition leaders have bowed to popular press opinion and the bloody Internet protests - you would not catch Labour cow-tailing it to public opinion. No way. They are a disgrace to Politics. We all justified ourselves when we got our seats in the House of Whoopee and made sure we could have lavish offices, a fine retinue of good looking staff or family members being paid £50,000 for some research even when they weren't there, claim extortionate mileage of gas-guzzling vehicles and be exempt from Congestion Charge that Red Ken stupidly brought in, travel First Class as often as possible and for the dearly beloved and missed Former Leader Who Should Not Be Named, in Gordon's presence, to commandeer the Royal Flight to shuttle MPs back and fore from Brussels."

"And now we are threatened on the Second Home scam. That interfering High Court Judge (we know where he lives you know - he can expect an expose on his private habits even if we have to make them up) ruled the second home allowance should be made transparent. I mean that would mean dear former leaders would have had to reveal they had no mortgage on their home in their constituency but were claiming the same as an allowance. It's a brilliant scam - of course while claiming the allowance we never give back any of the bunce when we sell it as that's all ours. Just a shame those damn Americans blew the whole finance scam by not covering up sub-prime and took away the property bonanza. It really all is a tragedy, you know, and it's the public we are thinking of - they just can't cope with the information and may leap to wrong conclusions like there has been a systematic abuse of public money by MPs for years. How stupid and damaging would that be? People may even start not believing us when we tell them Saddam Hussein had weapons of mass destruction primed for use on our Sovereign Territory. Then where would we be?"

The source went onto applaud his colleague Harriet Harman. "Superwoman, as we like to affectionately call her, is absolutely right. If MPs had to publish expenses retrospectively, then there would have been a 'blizzard of information at great expense'. I mean obviously she means that there should have been a blizzard but most of us have 'mistakenly shredded' them. Anyway, the public have no interest in MP expenses - we have told them there is nothing to hide and they believe every word our glorious leaders say and if they don't we we have an expensive sham public enquiry that we pre-load the answers to anyway."

"Know this, it is the job of Government to decide what is the Public Interest and how much they should know and expenses are vital for proper Government, just ask Lord Mandelson," remarked the source before going to meet a 'Trade Delegation of Ladyboys from Thailand' at a private room in an unspecified hotel.

Campaigners for the Freedom of Information have pointed out that the whole point of publishing MP expenses retrospectively would be to produce a 'blizzard of information' to justify to the public that MPs are spending sensibly and are not abusing power.