Despite a desperate attempt to trade its way out of a hole by embarking on a massive sale with heavy discounting, Dick Smith Electronics has been placed in the hands of the administrators. It is a case of a large retailer – way out of the league of the SMB accounting and bookkeeping professionals – yet a powerful lesson on the value of sound cash flow management, something bookkeepers and their SMB clients should know (a lot!) about. If Dick Smith can go belly up, there is little doubt that many, many SMBs are at risk.

What went wrong in high-profile Dick Smith’s desire to fill customer’s shopping carts?

The company had a cash flow problem; it had poor supplier terms and, according to retail experts, had the wrong products. Is there anything more important to a business than having the product that customers want? And then selling the product without resorting to heavy discounting?

The value of reporting

Managing cash flow, debtors and inventory are key management issues for any business especially in the highly competitive electronics category. Reporting and real time data would be an imperative for a company of the Dick Smith size. It is no less important for the SMB.
In the SMB sector, it’s a case of business as usual for the bookkeeper to keep her head down and do the books; all the while many SMB owners will be craving meaningful reporting of key performance indicators for their business.

Dick Smith Electronics’ bankers refused to provide the retailer with extra funds to pay suppliers and staff after the coffers had run dry.

For sure there is whole set of other factors that helped drive the final nail in the coffin – such as their move to generic house brand electronics and the folly of heavy discounting – but there can be no doubt that good reporting and sound financial projections will become front and centre activities in 2016 for the SMB decision maker and their trusted advisor.