The soft option that should spark a bonfire……

Another impassioned piece about the proposed closure of libraries, this time by The Times columnist Caitlin Moran. I personally think that libraries are fantastic places. The whole family uses ours nearly every week. The ordering service in particular is fantastic, enabling us to catch up with favourite authors and required reading, as well as discover new books recommended in various publications. And if we choose to do so we can rent a wide range of CDs and DVDs.

Of course I do feel a little guilty about the benefit we get from our library. “Libraries gave us power” sang the Manic Street Preachers, extolling the role they played in widening access to education for all. Once libraries really were working class enablers. Now they have seemingly become yet another middle class welfare perk.

And yet I still think I do have a right to be angry about library closures. Not because I believe that there are probably other areas that could be cut (I am sure there are, although I will try and avoid fatuous point scoring about councillors’ allowances and expenses and executive salaries and perks). No, the real villains are the countless statutory obligations which are handed down to local authorities from Whitehall and Brussels, and that have to be followed without deviation or hesitation, adding billions of pounds of burden onto local authority budgets. Sadly our local authorities do little to fight or highlight this.

Library closures in short are a cop out. They are soft option, high profile decisions. They allow local authorities to blame “the cuts” and therefore by definition the government. The real evil in all this is regulation and red tape. It does not just affect our businesses. It affects our local services and the taxes we have to pay. If jobs and wealth creation aren’t enough of a reason to get this often promised bonfire of regulations started, then the thought of library closures should be the final spark that gets it going.

Watching the outside world go by?

There was an interesting article in the weekend papers asking how many private investors had heard from their financial advisors during the stock market turmoil of the past week or so. Not many I would wager. Indeed it would be interesting to know how many advisors of any kind had been systematically reviewing the impact on their clients’ businesses of the recent economic and social developments.

One of the benefits of working with an external advisor, such as a part time FD, should be that they are able to bring information and perspectives that those who are working on or in their business full time don’t get. I frequently get asked by clients about what is happening in the world outside their business, and what changes they may need to make as a result.

Having said all of that, how do you manage a situation where the FTSE can go from 2% down on the day to 3% in a couple of hours? The big temptation is to sit tight, hope that it will all blow over, and that everything will turn out well in the end. Nonetheless it is difficult to balance wondering about the impact of current events with maintaining focus on the medium to long term goals of the business.

Based on recent events I have advised clients trading overseas that managing their currency exposure has become even more important, that the riots are a timely reminder to check insurance policies and cover levels, and that a thorough review of all clients and suppliers, including credit checking, would help to minimise any negative impact.

With the constant talk of deficits, cuts, debts and global imbalances, it is easy to become despondent and tread water waiting for better news to begin to come through. It is worth noting that many large corporates remain in a strong financial position.

However should financial Armageddon ultimately occur I suspect there is little anybody will be able to do about it. For advisors and managers alike it all comes down to managing what you can, being as good as you can, and keeping focussed on the bigger picture of what you are trying to do, whilst always of course looking for opportunities or dealing with the risks that present themselves in the short term.

The value in a holiday…….

When Black Wednesday happened in 1992 I was blissfully unaware of it all, being 30,000 feet in the sky between Singapore and New Zealand. It was only when I arrived in Auckland that I realised that the rest of my holiday was going to cost about 10% more than expected. 

Last week, however, I was painfully aware of being in Switzerland when the whole world decided that the Swiss Franc was a safe haven currency with the consequent effect on the sterling franc exchange rate.  

It was pointless trying to think in terms of the sterling cost of what we were buying, because if we had done we just would have been too scared to do anything. Certain things, such as food in the shops and beer and wine, were reasonably priced compared to the UK. However restaurants and consumer goods were almost prohibitively expensive. Nevertheless we had to enjoy ourselves somehow. More importantly we had to eat! Therefore in our minds the cost of a Swiss Chocolate Doodle ice cream at the Lausanne Movenpick Hotel by the shores of Lake Geneva on a sunny day was more than compensated for by the value of a tasty treat in idyllic surroundings.

Yes it all boils down to those old chestnuts, cost and value. The current climate has seen a real focus on the former which is understandable. Like the cynics quoted by Oscar Wilde it is easier for many finance people to calculate the costs of goods and services rather than the value. However more experienced finance professionals, as well as understanding in detail the cost of doing something, will also understand the costs of not doing something.

You probably feel that once again you have been subjected to the sad ramblings of an accountant. And yet cost and value are at the heart of most pricing strategy discussions, and the businesses and their financial personnel that fail to understand how their customers deal with these concepts are not going to achieve their profit potential.