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CITY LINK and BETTER CAPITAL
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Which bits don't you like?
I must admit it took a while to understand double entry bookkeeping all those years ago, but surely it is just a way of recording transactions?
Just wondering what bits of D.E you don't like?
Following the city link story in the papers, but no personal connections. I did work with a chap whose wife used to do the self employed courier thing with her own car - seemed a hard way to earn money in my view.
Sometimes accountants do tend to have an over inflated view of their own skills in other areas, I find , however.
Thanks (0)They turned down an offer for the company
They said the offer wasn't high enough! I know they have supposedly sunk a lot of money into the company, but they bought it for £1 originally. The new offer must beat that, and it would ensure the employees had a future. Maybe the administrators will find a buyer.
@Tom123 - most self-employed couriers make a pittance, if any profit at all. I think lots of them do the courier work just so they can claim working tax credits.
Thanks (0)Tom and Shirley
Tom
Start from my belief that you can never make anything too simple if you want other people to understand it: City Link was a very very simple business.
It is, or sadly was, in a very simple business, home delivery. That business is growing due to the increase in on-line purchases. Therefore all other things being equal (they never are) you should be able to start from a single entry of increasing positive cashflow.
Why does this straight line need to be made confusing for the Better Capitals of this world by making this very simple straight line into double-entry bookeeping.
Similarly a major cost of home deliveries is the cost of fuel: again a single entry, but this time decreasing.
The difference of the increasing cashflow from more business, and less cost from the price of fuel would result in more profit.
Double entry bookkeeping can make the above seem to be nonsense! I submit it is the unnecessary complications of double entry that allow the Better Capitals of this world to confuse the rest of us with smoke and mirrors.
Shirley I feel very very sorry for all the self employed drivers who had their vans painted and bought uniforms, possibly based on Better Capitals (single entry) promise to fund the company for another year. I look forward to seeing Better Capital's reason for breaking that promise------but I bet it has more to do with double entry bookkeeping than single entry recording of simple accounts!
Thanks (0)Tesco
I remember being initially surprised at the Tesco problems. Being naive, I assumed if you ran a shop you just added up the till rolls to get the sales - how wrong I was.
Thanks (0)In fairness ...
Whilst agree with ShirleyM over taking the offer on the table in the light of jobs. The fact that BC paid £1 to Rentokil/Initial (2013) who had acquired it in 2006 doesn't avoid the fact that CL had been a loss maker since 2007
Perhaps BC should not have left the incumbent management in office - after all if they had not been able to turn CL around since 2007 then clearly they were not of sufficient calibre for the future & relied upon a hefty annual subsidy from Rentokil to cover losses (approx. £300m since 2007)
Really all BC (Moulton) tried to do was rescue the company, hoping to make a turnaround profit along the way. Therefore in one sense BC were trying to save jobs & realistically it is not in their interests to get all the bad publicity if things go wrong - but dropping £40m pa is unsustainable
No-one seems to have addressed the swingingly low margins with this type of business, resulting in off-loading deliveries onto self-employed and inevitably if the business model is unsustainable there is only one end result - fault of management (on £600k+ pa)
Surely the real issue is the structuring of the deal (presumably leveraged?) and the precedence of those owed money if the whole thing went bang - resulting in the 'work force' being at the bottom of the pile & financiers at the top
Also what is the status of the pension fund - this should be down to Rentokil/initial but one assumes this has been off-loaded so the taxpayer will have to cover this?
For starters insist that Rentokil cover the pension fund - it is simply disgraceful that companies can off-load liabilities onto the taxpayer with various wheezes!
With companies like this, in one sense it boils down to the consumer and how much people are prepared to pay for delivery. Unfortunately nobody perceives delivery as being of any value because it is only an ancillary service & there is nothing really tangible for your money
Maybe we need to look to ourselves as well - although, other carriers manage to operate on these tight margins
Thanks (0)"We need to look to ourselves"
JC
You are absolutely correct: the only reason this continues to happen, is because we allow it.
We have allowed VC's (in the main Accountants) to establish a business model where a loss making company, with substantial assets is acquired: those assets are then "secured" by a lender (in this case BC) against that lenders debt.
If the company is turned around the VC walks on water, and makes a big profit from selling the shares. The VC is hailed as a "saviour" (Jon Moulton?) of modern capitalism for turning the company around.
If the company continues to make losses (as with City Link) the lender calls on its security, and the taxpayer (us) and the unsecured creditors (frequently us) and the staff (us as well) are left witth the losses.
City Link should never have gone bust (the easy route out for Better Capital). If it had been left with its original management (that understood the "business"), not the accountants that understand double entry bookkeeping it would have "evolved" its buiness model.
For instance with City Link a sensible business person would have broken down the cost of delivery: this would demonstrate that the delivery of say 100 miles to the local hub cost say 10% of the total cost, whilst the final say 2 miles to the individual home would cost the other 90 %, (Time Costs of starting and stopping and parking delivery vehicle, cost of customers not being at home, etc etc) all for one parcel!
That is the cost that needs to be addressed----so why not establish a City Link local collection point? You need a town centre shop (there are plenty of those available------so get a reverse premium to assist cashflow?) . You need parking facilities (make a small parking charge to add to profit)
Whilst the customer is waiting for his parcel to be collected he can be browsing a catalogue, and as a further incentive for her to come to the CL collection point a discount can be offered from his next purchase, financed by the supplier.
I have just picked up a John Lewis purchase at my local Waitrose. The simple business model works!
That is how City Link could have survived. The Germans have all these mid-sized organisations full of innovation----we seem to have only accountants trying to baffle us with double entry book-keeping!
Thanks (0)THE sad END
http://www.birminghammail.co.uk/news/midlands-news/administrators-sell-c...
Thanks (0)