Pass the parcel - downturn in retail sales
24th July 2008Suppliers across the south are bearing the brunt of the downturn in retail sales as their clients extend payment terms.
The warning comes from accountancy and financial services group Smith & Williamson and comes in the wake of reports that department store chain Debenhams Plc extended its payment terms to 96 days.
Chris Appleton, a director at Smith & Williamson's south coast office in Southampton, said: "What happened there is just the tip of the iceberg as the high street chains and other big players do all they can to preserve cash.
"There is no doubt that suppliers are bearing the brunt of a downturn in retail sales as their larger clients demand longer payment terms while at the same time pressing for larger discounts.
"This double whammy could not come at a worse time as local businesses are already feeling the effect of a cash drought caused by the credit squeeze.
"A number of them are walking a tightrope of survival and they should somehow look to bolster their finances because bank and creditor finance is no longer readily available.
"This corporate game of Pass the Parcel may seem innocent enough to a casual observer but the fact is that many smaller companies faced with this sort of dilemma would struggle to manage reduced cash flow and profitability."
Mr Appleton suggested that owners and employees of small to medium enterprises should look to improve efficiency, introduce new capital and reduce costs, as well as calling in expert help.
He added: "Unfortunately a number of firms, however well run, will end up distressed and fall victim to the cash crisis. A surge in insolvencies is on the cards, which will compound matters further.
"It is absolutely vital that owners take a ruthless look at their books - being proactive could make the difference between survival and failure."
For further information:
Chris Appleton - Director
Tel: 02380 827622
Email:chris.appleton@smith.williamson.co.uk
Press Office
Kate Harrison 020 7131 4228 / Alison Hayman 020 7131 4138
Disclaimer
By necessity, this briefing can only provide a short overview and it is essential to seek professional advice before applying the contents of this article. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication. Details correct at time of writing.
Note to editor
Smith & Williamson is an independent professional and financial services group employing over 1,500 people. The group is a leading provider of investment management, financial advisory and accountancy services to private clients, professional practices and mid-to-large corporates. It operates from offices in London, Belfast, Bristol, Dublin, Glasgow, Guildford, Maidstone, Salisbury, Southampton and Worcester. Nexia Smith & Williamson is the audit practice of Smith & Williamson and is an independent company.
Smith & Williamson Limited
Regulated by the Institute of Chartered Accountants in England and Wales for a range of investment business activities. A member of Nexia International.
Nexia Smith & Williamson Audit Limited
Registered to carry on audit work and regulated by the Institute of Chartered Accountants in England and Wales for a range of investment business activities. A member of Nexia International.
