Accounting Essentials for Hospitality Managers Chapter 13
There are a large number of small and medium sized enterprises in the events industry and there is a fairly rapid turnover of ownership. This raises serious issues about being able to establish the credibility of companies tendering for contracts.
How could you use the 5 Cs to explore the credibility of companies offering their services to you?
Character
Capacity
Capital
Conditions
Collateral
What can you determine about a potential creditor’s business dealings and track record?
Do they have high levels of outstanding debt?
What experience do they have running similar types of events?
What about the scale of the event, the nature of the event and the location of the event, ie, is it inherently risky?
How many people are involved in the enterprise and what experience do they have?
Explore the financial management of the company.
Can they present adequate financial records reflecting a strong financial position
What markets do they operate in?
Are they subject to international trends as well as local ones?
Have they taken steps to protect themselves?
Think through their portfolio of assets – many small businesses have very limited assets
Do you have anything to claim against if they were to have a liquidity problem?
If you look through the websites of event organizers, you will find that companies attempt to meet this credibility challenge by offering case studies drawn from their previous experiences.
These typically describe the client, the location and the nature and scale of the event.
It is very rare to see a company willing to demonstrate its financial position and the controls they have in place to ensure financial stability.
Think through what you could say about a company that you have worked in to convince a would-be supplier that your company is financially sound and therefore credit worthy.
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