Bankers Blues
October 27th 2008
Document has had some problems and we are very grateful for the patience and understanding shown to the company by its customers. Perhaps this posting is a little overdue but the difficulties which it has had to endure have been extraordinary and have been difficult to put into words. Frankly, we have had a battering at the hands of the so called finance professionals, whose shenanigans were first revealed with their Sub Prime lending using Joe Public’s hard earned savings. I’m not a high flying financier playing the markets but surely, doesn’t “sub prime” mean something like “less than good”?
We felt that our customers deserve a bit more than a “Sorry for the inconvenience, normal service will be resumed as soon as possible” type of notice. But how does one put it? How can one describe or explain how events, hardly beyond belief, have affected orders being dispatched etc. How can we go from irresponsible banks recklessly gambling on the financial markets to a twenty nine year old record label struggling to send out CDs of vintage blues, jazz, gospel and country music? We have scratched our heads for a quite a while trying to formulate words that would put people in the picture in such a way that would be informative and give reassurance. Well, let me put it this way…
Cast your mind back five months back to May 2008. The catch phrase “Credit Crunch” had been banded about for a while by then but what did it mean? Well, Joe Public was aware that there had been a little Tom Foolery going on and it had something to do with mortgage lending but the financial world can seem light years away. “Sub prime”, “hedge funds”, “leverage”, “short selling”… Another world, another language.
We had been with HBOS for nine years. The Document offices and warehouse are in a very beautiful and rural area of South West Scotland. It gives the bank a little trouble to get its head around what we do. It’s not sheep, its not cattle, we’re not in the market for buying sixty to seventy thousand pound tractors every other year, its not a wee shop selling wooly jumpers and pottery Belted Galloway cattle.
Last year we were steaming along. A massive back catalogue production program and new releases were welcomed by our customers. Sales were increasing at a very healthy rate and all was well. Our account manager from the bank visited towards the end of the year and literally put her arms around my wife Gillian (co Director) and said how marvelous we were doing. Into the New Year (2008) and the momentum picks up even more. The company is firing on all pistons and we are positive and excited about the year ahead. HBOS have never been particularly communicative but we keep them informed as to how we are doing. We have an overdraft with them but it is less than most people would have as a personal overdraft. We own our buildings outright. Over the years the bank has given us flexibility with our facility. Like all companies, sometimes we go over. Much of the time we are at the lower end and have spent a lot of the time in the black. We have no credit control problems and we can forecast our cash flow very accurately. It is a profitable company
So, imagine our surprise when suddenly and without any warning or consultation with Document, overnight, only weeks after we had received more pats on the back from the bank because of a new, additional, distributor had just been taken , the bank removes the flexibility plunging the company into turmoil.
The account manager was summoned to the Document office and asked to explain the bank’s actions. This was answered by the manager putting her head into her hands and weeping “I can’t stand it, I can’t stand it.” And went on to say how horrible it was to work at the bank. “They’re doing this to everyone”.
At the time very few people realised that not only was there a fire raging in the financial institution’s engine room but within a few weeks the whole thing was going to blow. Little did I know that just prior to the bank taking its action it had just lost £1.25 bn on the markets. That was a lot more than our overdraft.
We were among the first to be affected and it was hard to explain what was happening because, at that point, people still assuming that banks were right and only failing companies could find themselves in such a crisis.
Off our own bat we immediately provided a very healthy cash flow projection to HBOS, along with a Director’s Summary. I took the opportunity to once again go into some length about what Document was about, its importance as a heritage label, the increase in sales both on the collector and educational fronts, significant increases in downloads etc., twenty eight years old label, been with the bank nine years and so on. It didn’t make one jot of difference. I have my suspicions as to whether it was even read. Perhaps it was because we were not in debt to them by hundreds of thousands of pounds. Puzzling.
The company ground to a halt. Seven loyal and talented staff were laid off and had to find other jobs. We locked horns with HBOS. We contacted the Financial Services Ombudsmen who are sympathetic towards our case and have asked us to consider compensation. We are now in a dispute with HBOS.
At the same time we engaged a new bank. A nice bank who think that we are quirky but fab. It is a bank in a large town in the North West of England. Staff are returning to Document. Nevertheless, the process of putting things back on track has taken far longer than expected. Commercial customers such as distributors are being supplied again. We are starting to prepare new productions for the 2009.
Ironically, the piece of the jigsaw that has taken the longest to put back into place has been the on-line sales. There are several companies involved in this process, credit card terminal providers, on-line merchant service providers, the bank etc. All need credit checks. Forms, forms and more forms to fill in, visits by reps and on. We suggested to one bank that perhaps it should be ourselves that should be doing a credit check on them! They didn’t see the irony of the situation.
Putting the on-line sales facility back on line has been frustrating and painfully slow. We have been constantly told that it would be “next week” and then “next week”. As it stands we are looking at another three weeks. Nevertheless, we are taking the opportunity to improve the system and will also be able to offer a wider range of payment options. As soon as it is in place an announcement will be made on the Document web site and a news letter will be sent out.
In the meantime we once again thank all of our customers for their patience and tolerance in the matter and apologise for any inconvenience.
Gary Atkinson,
Managing Director.