Destination: CA$H

24-06-2006

On the evening of the 24 th of June 2006, a small group of Mumineen businessmen met informally in Saasa Hall to discuss a critical issue: How to reduce long credit and move to a cash-based business. This gathering marked the birth of Al Tujjar Forum (ATF), an initiative of the Al Jameat Al Tujjar Al Burhaniya (Al Tujjar).

The ATF aims to promote dialog and deliberation among Dawoodi Bohra traders in order to fulfill the following objectives.

•  Work together to achieve manageable and sustainable solutions to current and future challenges confronting Bohra Entrepreneurs.

•  Enhance cooperation and working relationships by networking among Bohra Business people for mutual and community benefit.

•  Address relevant global and regional trends in business.

Maulana (TUS) has stated on numerous occasions that Mumineen should focus on cash business and move away from long credit. Hence, it was decided that this would be the topic of the first forum. The forum brought together 23 business people from different spheres and line of work. Discussions were candid, and intense debate frequent, as participants deliberated on the road blocks facing businesses in implementing a cash policy. In addition, participants brought forward the most pressing challenges facing businesses in the Dubai marketplace.

Seen from one perspective, the market seems deeply dysfunctional, torn by malpractices and instability. From another point of view, however, the market in Dubai is at a fantastic boom due to the unlimited supply of investment and projects. In any case, man aging credit is an integral part of doing business. After all, cash flows largely determine the health and profitability of a business.

Today, Dubai is a market characterized by high demand, frequent shortages and unstable prices, making it all the more important to minimize credit risk. Most participants at the forum agreed that doing business strictly on cash terms has strong advantages. A few shared their positive experiences of dealing on cash only. One participant noted that overseas suppliers rarely give credit and we should follow the method of our suppliers. Some expressed agreement when one member pointed out that goods are much safer in our own warehouse than in the hands of potential late payers.

A number of businessmen at the forum emphasized that credit in any circumstances, should be given after an intelligent assessment of the buyer. Hence, the first step is to know your customer well and then get them to agree to your terms and conditions. Simply discontinue business if they do not accept your terms. Also, simple measures like specifying the exact due date may even assist in recovery of debts. For instance, in most cases, it is more effective to state PAYMENT MUST BE RECEIVED BEFORE 21 ST AUGUST 2006 rather than stating 90 DAYS CREDIT only.

When businesses attempt to reduce credit, they face other hurdles as well. Employees, particularly those in sales, will often discourage stricter credit in the fear of losing business. But it is quite possible to restructure your business to facilitate more cash transactions. Some traders who decided they wanted to deal on cash now import only items which they can sell easily on cash. Other businesses decided to look for cash customers rather than change their product range in order to achieve their goal, and they too had positive experiences to share.

Another key factor determining a business's ability to dictate its own terms is product differentiation. Simply put, this means how different your business is from your competitors'. When a business innovates and provides a unique service, it has the ability to dictate its payment terms. So in the long term, aim to position yourself so you are different from the rest.

Experienced businessmen also had words of advice for new start-ups. Newcomers particularly should be watchful of unscrupulous buyers in the market who often simply ignore calls and stop communication when it is time to pay. The temptation of higher profits and larger volumes often lure businesses into making rash decisions. However, businesses should aim to grow steadily, bearing in mind that extending credit has its risks.

Each business must frame its own policy and abide by it strictly. A well designed policy will stand the test of time and must be implemented with patience and perseverance. Competition will always exist and there will always be other businessmen who may offer more relaxed credit terms. Nothing can be achieved easily, and this shift in particular not only requires a firm strategy, but the strong belief that this is the farman of our Maula (TUS). For this reason alone, it should be the goal of all Mumineen businessmen to take steps, perhaps small ones at first, to make this giant leap possible.