John Linton
.....for the word was passed around...the amount of bad debt had got away....and had joined the wildest nightmares.....it was more'n ten million pound....... (apologies to A B Paterson).
As people trickle back to 'work' from their various holidays and 'breaks' I would imagine that more than a few meetings will be held around the various capital cities as the realisation begins to dawn on various financial controllers that the amount of money collected over the past four weeks is much less than "usual for the time of year" and that much of the accounts receivable has not only increased over the past four weeks but has, almost in unison, moved a further 30 days in arrears.
I say this because I had three telephone calls yesterday from three of Exetel's larger suppliers which, stripped of the good wishes for the new year (mine seems to have started some weeks ago), all seemed to have the sole purpose of enquiring about what I knew about various companies that were also their customers. It became apparent that my contacts at these suppliers (all from the "sales side" of the business) were getting a very hard time from their finance departments about the amount and age of their unpaid accounts. It didn't take much 'probing' on my part to get the feeling that all was not well in the land of carrier to wholesale buyer land at this particular point in time.
You would have to live in some remote area of the planet that had no contact with the outside world to not know that the current "GFC" would produce slower payments up and down the supplier to end user 'chain' and that Australia would eventually feel the same effects that have been occurring in the US and the EU for many months now. Personally, I expected our defaulted payments on our January 1st bill run to be much worse than they turned out to be - I was very pleasantly surprised that they were in fact less than both December's and November's - but we had taken a number of measures over the previous few months to try and make that happen - being able to read the daily financial press. Of course, our 'business model' is, and always has been of necessity, a major contributor to our protection from bill non-payment by our customers which prevents us from getting in to the situation that, apparently, so many small companies do:
http://online.wsj.com/article/SB123258195829104305.html
I felt particularly sorry for Ms Ortiz (one of the reasons I told some acquaintances recently that we weren't interested in bidding for their "huge" business opportunities).
As of a few moments ago Exetel's defaulted debt on the January 1st bill run is 67 customers (out of North of 90,000) and a little over $A4,500 out of around $A4 million billed in January to date. However we would expect to collect all but 2 or 3 of those defaulting 67 customers before the end of the month. In addition to the 67 January 1st defaulters there are another 3 new customers whose activation charges have been defaulted but, generally, those are collected within 48 hours of the default.
I don't feel 'smug' about those numbers - that's the way we set the company up to operate and that's the way it's been since we did our first daily and monthly billing. We have collected virtually every cent of the well over $A100 million we have billed over the past five years and collected it on the day we issued the invoices for it. We couldn't offer the low prices that we have always done if we couldn't be certain of being paid on time.....and we couldn't, as a small start up business, be certain we could stay in business if we couldn't pay our suppliers on time. So the "no pay - no service" policy has been rigidly adhered to from 'day one' and it has ensured we survived. Doubtless it has cost us some "major business opportunities" throughout that time but then it has also been "one less thing to worry about" as Forrest (or was it Forrest's mamma?) might have observed.
Perhaps things are going to change as the recession begins to 'bite' and perhaps, depending on the severity of what is going to happen, there will be very real collection problems as 2009 progresses - I certainly wouldn't bet against it. If what I picked up from yesterday's phone calls is correct then I doubt that beginning to take 'new' collection actions now is going to improve anything - if the current customer base is already slow paying/defaulting on their debts then there is no basis for believing that worsening financial conditions will make that situation any better.
P.S:
If you heard/watched the interview with Lindsay Tanner last night you would realise just how inept the current group of uneducated know-nothings posing as the Australian Federal Government are. In response to a series of questions from a neutral/helpful ABC interviewer he could only keep mumbling that no-one in the world knew what to do but the Labor government would be taking immediate and positive action to ensure things (things FCS???) would not be any worse than they could be. If you didn't know he was a 'real' Minister Of Finance you would have thought it was a John Clarke/Brian Dawe send up he made such a total goose of himself. Irrespective of his degree of self goosification the fact remains that that bunch of losers really don't have a clue and will continue to p*** away money until Australia is bankrupted.