Tuesday, 20 December 2011

Cash-flow

I'll be honest, this is an open and honest plea.

Beer is a low margin business.

A low margin business is one that might have a high turnover, might do lots of potentially profitable trade, but where the costs to profit ratio is quite poor; You have to sell lots of beer, take a lot of money, and turn it all around very quickly, if you stand any chance of making an honest living.

Of course, if you are a big brand which is wanted in a pub, you can demand that supply is only guaranteed provided the bills are paid, or that they are paid by direct debit. Unpaid bills or bounced direct debits are rewarded by the account being put on stop. No more bland mass produced lager for you, mate.

Even more secure is to operate the tied pub model.

In the microbrewery industry it is important to take the business you can. But taking that business can lead to difficulties. I don't like to say to the very well meaning pub manager who really wants to stock my beer "I'd deliver, but your head office hasn't paid the last two invoices"

Nearly everyone pays in the end. Even the one who was 10 months late and we thought we were going to have to take to court, paid in the end, although the distasteful joke made at the time left a bad taste that will ensure lasting memories.

But consider the readers salary. Consider that to make a reasonable living we would have to turn over at least 10 times our expected salary. Consider you, the reader, and whatever salary, income or other financial input you get. Consider that you might consistently be owed about 25% of the yearly payments due to you. How would you feel about that? How much would it cost you in interest?

Consider that we have 10 times that in monies owed to us.

We generally deliver beer having already paid 1 for the hops, malt, bottles, labels, cask finance charges, van HP, tank capex loans, cleaning chemicals, wages 2 and many, many other costs. Not too long after delivery we have to pay - we HAVE to pay - the beer duty.

Many pubs and bars pay cash on delivery. We love you very much indeed. A large proportion pay within 30 days. We love you by an amount that is imperceivably less than the aforementioned pubs. If everyone paid within 30 days I would not be writing this post. Paying within 30 days, or even a little bit longer, is how most businesses work. We're all in the same boat and we understand.

There are some bars who take delivery, take the money off the drinker, bank it, let us pay all the costs and still don't pay for the beer after over 60 days. If all our customers did that we would be out of business.

As it is, these bars and pubs are preventing us from growing our business.

You know who you are.

We know it's tough out there and we are all in the same boat. Money is tight for all of us and when you are in business you have to manage that cash flow as best you can. I'm sure pubs and bars have problems too, remember, we've been there too.

You could help us out here.

If you are a drinker, make sure your favourite bar or pub knows you want our beer stocked. That way we can put more pressure on these bars to pay their bills on time. A reason why it's not stocked might be because we've decided not to supply due to non-payment.

If you are one of our well-meaning bar manager customers who are at the mercy of some head office bean counter then please communicate to them that they are damaging the craft beer scene by delaying payment inappropriately.

If you are an aforementioned bean counter and are reading this then I'm very surprised, because frankly, I didn't think you cared about decent beer. But then, I suspect I'm right on this one, and you are probably not reading this.

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1or at least have our suppliers breathing heavily down our necks threatening to stop us brewing because we haven't paid. If you're reading, Mr Supplier, we love you more than you know for being as tolerant as you are.

2Sorry Alex, I know that might not be quite true, but we love you even more.

3 comments:

Barm said...

You probably already know, or at least suspect this, but it is increasing common for big companies to deliberately delay payment as long as possible, essentially using their suppliers as a free overdraft and managing their own cash flow problems at your expense.

Dave Bailey said...

Barm, this is true, but inevitably, as the banks get more sniffy about our own overdraft limit, we are forced to be more difficult with our own suppliers. This is not a situation I'm happy about.

If all our customers paid what they owed us tomorrow, and we paid all our suppliers, we'd have money in the bank.

What perhaps should be remembered is that most outlets are cash rich.

Eddie86 said...

COD is our preferred way of dealing with breweries - it means there's no nasty surprises 30 days later. Which reminds me, aren't you due down this way soon?