In this extraordinary economic environment, many companies are finding that
the hardest thing to do is to pick up the phone and make the first call. And
that’s a mistake. Companies that take control today hold a considerable
advantage over those that don’t.
Hoping for the best is not a strategy. You need to act definitively and
decisively to control the situation before it controls you. It is amazing how
some executives behave like turtles when things get tense. They pull back into
their shells and hunker down for the duration. In today’s turbulent environment,
unless you have all the cash you need for the foreseeable future, that’s a
formula for disaster. Don’t be a turtle. As FD, it is down to you to stick your
neck out and make that tough first call.
In the good old days, all you had to do was pick up the phone and someone
would lend you money. Not now. These days, lenders are extremely cautious and
few are taking on new customers. That means you need a solid relationship with
your current bank before it is too late.
I spoke to an FD last week who admitted he had been holding off speaking to
the bank. He finally made
the call and now wishes he had done it earlier. If you do not make that tough
call to your ‘friendly’ banker you may well face rejection.
The bottom line is that bankers like leaders with steady hands. They want you
to communicate with them proactively and often. In fact, it might not be a bad
idea to pick up the phone right now and set up a meeting.
Such a call can only serve to make your company more credit-worthy and
improve your negotiating position.
And when you meet with your banker, talk to him or her about the basics –
explain how you are taking control. Make sure you can demonstrate you have taken
action to cut discretionary costs for real, not just for show.
Make sure your banker knows you’re close to your best customers and that you
understand their creditworthiness. Give your banker a clear picture of your cash
situation today, as well as for the next 12 and 24 months (not easy in today’s
unpredictable economy but you need to have a really good stab at this).
Share contingency plans with your bankers – if you know it, they should know
it too. This downturn will end. Make sure your banker knows how you’re preparing
for growth and the long-term future.
If you have not already done so, it is time to make the call.
Margaret Ewing is a partner and vice-chairman at
Deloitte and former CFO of BAA
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