In determining risk and business opportunity there are occasions when visiting clients may be crucial to the initial decision and ongoing relationship. They can indeed create and shape the nature of the relationship and incubate an environment which stimulates business growth. They also allow you as the supplier some influence in the direction your client takes to ensure continued business on open terms and reciprocal growth opportunities.
Visiting clients is crucial to understanding the people and corporate structure behind the numbers and risk ratings provided by business information agencies or indeed credit insurers.
The initial visit will generally be more comprehensive while subsequent visits and on-going dialogue will follow a simpler pattern of updating data previously held.
Businesses should be fully researched before a visit but it is vital that this research does not hinder or unduly influence a decision. If research suggests there may be a problem in supporting the business, set this aside until after the visit. Similarly, if research data suggest the business is good, do not cut corners and determine it an opportunity; data gleaned should simply be noted and only considered in the decision process once a visit has taken place. By all means however, prepare questions arising from research undertaken.
Financial analysis remains a key factor in determining risk but do not do not allow this to cloud or obstruct a wider view of the business and it’s potential for profit and sales opportunity.
I found it useful in my working life to create a template of sorts in preparation of client visit reports which allowed me to question or probe much of the data already researched and obtained.
Standard data
- Date of the meeting
- Reason for the meeting
- Attendees and location
Background data
- Directors and their background
- Formation of the company
- Nature of business
- Business Report
- Associated companies and group structure
- Significant changes since formation
- Specialisation (product and/or services)
- Sales structure and marketing
- Number of employees
- Payment history and credit line movement
- Annual YTD and cumulative sales to the client
- Gross margin yield and terms applied
Property and location – to include the following
- Description and approximate size
- Location
- General appearance
- Owned or leased and length of lease if applicable if mortgaged, valuation and mortgage value
- Company vehicles, leased or owned
- Other locations or sites owned or operated through
Assets – Current
- Credit management structure
- Nature and type of clients
- Terms offered
- Significant clients that may account for more than 10% of Sales or receivables debt
- Associated trade or debt
- Bad debt history
- Explanation of other debtors
- Receivables ageing (not necessarily a full listing)
- Inventory control and operating software system employed
- Depreciation policy
Liabilities – Current and Long term
- Principal suppliers and terms offered
- Explanation of other liabilities
- Associated liabilities or directors loans
Financing
- Initial financing and equity position
- Bank overdrafts and security granted
- Receivables financing – nature, type, cost and maximum availability
- Asset financing
- Directors’ loans
- Credit Insurance
- Mortgages and legal charges
- Associated or Group company guarantees
- Finance leasing
- Future plans
General Information
- Audited accounts and latest management data
- Financial analysis of the above
- Business plans
- Projections and forecasts
- Growth financing
- Comparators
- Industry sector knowledge
- Management quality
- Drive and direction
- Confidentiality
Observation and Conclusion
In completing the visit, set aside the required time to draft a report and review much of the data gleaned from the meeting and research conducted. You will find conflict in many areas but ensure you sift through this and do not allow it influence unless you feel it is particularly critical.
Comment on all aspects of data and areas that may require follow up. Absorb all other known channel data and be bold and forthright in making your judgement. Avoid saying yes or no if you are unsure and seek a further opinion on your report.
You will not be able to obtain all the information suggested in this format but ensure you walk away with as much information as you can to make a considered opinion.
Follow up …..Do not just rely on one meeting to dictate a credit line or term review
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