Courts continues to excel Business Page Stabroek News March 5, 2000 Introduction In a press briefing earlier this week, Managing Director of Courts Guyana Inc. reported on the continuing and rapid growth and expansion of their business in Guyana. The company has lived up to the prediction in Business Page in 1993 that the American style marketing strategy of this very British of firms was a challenge to Guyanese competitors. So successful has the company been that even its competitors are now lining up to do business with it. Readers will recall the public outcry when Courts planted its flag in Main Street with a combination of some of the richest- some would say outrageous - colours imaginable. It is in the nature of us Guyanese that we now not only not notice but take those colours entirely for granted. If the number of persons doing business with the company is any reliable indicator then Courts has been astonishingly successful. It has had over 50,000 customers served from twelve locations spread from Corriverton in Berbice to Johanna Cecelia on the Essequibo Coast. Hire-Purchase legislation What is so striking about all of this is that this has been achieved in the absence of Hire Purchase legislation about which there has been little progress over the past six years. The average Guyanese can only afford consumer durables on hire purchase. Consequently, despite the absence of any pressure for such legislation Government should follow through on the draft circulated several years ago by the late Minister Shree Chan as part of its commitment to consumer protection. Courts of course has established a charter guaranteeing policy of fair trading. How great it would be if other suppliers of goods and services could voluntarily commit themselves to a Charter under which they guarantee their product or service. Courts philosophy was stated by Mr Le Blanc as better value, broader selection and unparalleled customer service. These simply stated ideas have one single focus - the customer. In the implementation of this Courts has proved that Guyanese are prepared to pay a higher price if they are confident of value for money. Competitors One cannot help but ask why Courts competitors could not exploit the opportunities that beckoned so invitingly. The average Guyanese longed for access to consumer durables but lacked the means to own them. As Mr LeBlanc noted approximately $1.5Bn was "secured from the local banking system and financial markets at commercial rates of interest." Courts has achieved such a large share of the hire-purchase market that at best its competitors can play no more than catch-up. They have a huge task although in business not much is impossible. There is a lot that they can learn from Courts: branding, country-wide network, quality, service, accessibility, partnership with suppliers and marketing, which are essential in this the market. Its management is rooted in an open-door policy where customers and employees know that access to the highest level in the organisation is guaranteed, a policy that is all but alien in most other companies in Guyana. The contrast and the lessons Our Guyanese entrepreneurs many of whom honed their skills in a different era sometimes appear totally unprepared for the challenges of the market place. They need much greater exposure to the modern world of business to be able to compete both in the international marketplace or locally against international operators. While many of our company boards have ten to twelve directors Courts has three and is probably one of the most flexible, unbureaucratic and responsive organisations one will encounter. The cost of large unwieldly boards is substantial. Senior executives spend an inordinately long time preparing board papers which few directors bother to read in advance and which hardly promote the business of the organisation. Sometimes directors seem more concerned about promoting their own interest than that of their companies. Executives would do much better spending their time manning the shop and walking the floor. Courts' new store in Mahaica Referring to the recently established Revenue Authority Mr LeBlanc expressed the hope that it would address the insidious problem of smuggling which not only poses unfair competition for Courts but cheats the country of badly needed revenue as well. The inequity of any tax system which often shifts the tax burden from those who can pay to those who cannot does no good for the tax administrator or social justice. It is therefore timely with new ministers responsible for Finance and Trade to address the issues of consumption tax, smuggling and hire purchase legislation. Not every operator may take the view that business success depends in the long run on ethical conduct. Note: Ram & McRae are the auditors of Courts Guyana Inc. Small Businesses face credit squeeze Small and medium size enterprises (SME) are the lifeblood of any economy. The efficient operation and indeed the very existence of major companies depend on those businesses to provide many of the services required for their operation. It is a symbiotic relationship in which the SME's look to the larger companies for supply contracts whether for goods or services. As credit becomes scarcer that relationship comes under increasing strain in a vicious circle of late payments. In the UK the Government actually passed legislation to protect SME's by making payment of interest on late payments mandatory. Free lunch In Guyana many SME's are complaining of increasing difficulties in obtaining prompt payment from their larger customers putting them in serious cash flow difficulties. With bank interest anywhere between seventeen and twenty-two percent conventional wisdom may suggest that delaying payment to creditors is good financial management. There are very few companies in Guyana which impose an interest penalty for late payment and as a result supplier's credit appears to come at no cost. Of course there is no such thing as a free lunch and there are consequences for both the debtor and the creditor with the reputation as a poor payer soon established. Again conventional wisdom tells us that receivables could be financed either by taking credit from one's own suppliers or by bank overdraft. Unfortunately these are not options easily available to SME's since a number of the sources of their supplies is cash and they hardly meet the banks' increasingly stringent conditions for any form of financing. Delays in realising the proceeds from their sales therefore have immediate and dramatic effect. It is not unusual in the construction industry for example to find the contractor running all over the place on payday looking for money to pay wages. Cycle of late payment To the extent that their own customers fail to pay them they are unable to pay their creditors in a cycle which puts all operators at considerable risk. The consequence on the economy as a whole can be quite serious as businesses are ground to a halt. Larger businesses often take SME's for granted and imperiously dictate the terms on which their business relationship is conducted. This is not only unfair but seems unethical as well. Larger businesses have not only a commercial imperative, but if this is not stretching the point, a moral obligation to pay promptly their bills to their smaller suppliers. Difficult economic times generally affect everyone adversely but this very difficulty suggests the need for better financial management. Far too many SME's go into business without a proper plan setting out where they want to go and how they propose getting there. Few people would build a house without a plan even if the CHPA would allow them and it ought to be no different with a business. One of the elements of a business plan is the quantification of the future working capital requirements of the business and identification of where these would be raised. A major cause of business failure is inadequate level of working capital which helps to cushion a business in times of short term difficulties. The UK experience has shown that legislation is not the answer. SME"s have to set themselves up with firmer capital base and be better prepared to weather such storms thus not allowing themselves to become prey to the larger companies. As dependent as they are on the larger customers, SME's may feel powerless to solve the problem of slow payment. They cannot allow this to happen. They need to re-define in a courteous but businesslike manner the terms under which they do business and set out clearly the terms on which credit is extended. They may even consider some payment in advance but at the very least insist on the imposition of an interest charge for payments outside of the credit period. As a last resort they should not rule out legal action. This is costly both in terms of time and legal expenses and usually brings the relationship to an end. There are times however when there is no choice.