With the media continually reporting doom and gloom it is fair to say that everyone holds concern for the immediate economic future. None would be more concerned than our friend, the credit manager.
The uncertainty comes at a dangerous time for business as it is around now that most businesses will be presenting 2011 management accounts to the bank, together with budgets that will be setting bank expectations for 2012.
In discussions that we have had with our Bank contacts, we understand that the banks are on the look out for poor performance, poor management processes and businesses not hitting the expectations set.
Banks are much stronger than they were 3 years ago when the GFC took everyone by surprise. They remain supportive of clients that are trying to do the right thing, however any business that is not performing and not making the right noises of someone trying to turn things around will feel the discomfort that banks have the right to provide. At best this will be an increase in your rates. At worst this will be loss of control of your business as the bank seeks to take control of its exposure.
If you have concern for either your recent past performance or your imminent future performance, then you need to tread carefully when conveying this to the bank. DO NOT try to hide it though, as they will see it eventually. Better to take the pain now and maintain their support than to scare them and lose it.
Identify the problems and devise a plan to fix them. Only present a problem to the bank once you have a clear strategy to fix it.
Volunteer regular reporting to the bank to keep them up to date with the rectification.
Provide detailed plans that show when the problem will be resolved and what implcations it will have to the banks position. This is best done with a 3 way forecast, but make sure that the expectations you are setting are extremely conservative. You need to hit the targets you say you will hit.
If you have concern in this regard, then consider obtaining a Pearl Finance Financial Overview Report or Bankcheck report before you confront the bank. Our bankers will show you what the bank is going to see and help you plan the communication to ensure that the bank remains a strong supporter of your business.