Monday, March 21, 2005

Its Not About the Money......Its Always About the Money

I like risk and count myself as one of the fortunate people who get paid to do what they like..........I get paid to assume certain risks and to cut right down to it, it is because of the money (not because I want to make the world a better place).

Being that I get paid to take on certain risks, I have to develop certain strategies in order to control them. One of these strategies is called collateral control. We advance capital against certain forms of collateral, such as A/R, inventory and purchase orders, but in return we require control over said collateral. In the case of A/R, we require debtors to sign acknowledgements and directions of payment. In the case of inventory, we required debtors to maintain their inventory in a place in which can control it, typically a third party warehouse/fulfillment center.

Many of our clients have trouble getting their heads around this fact. They lose sight of the fact that we are putting up money that no one else will and this is one of the mechanisms that allows us to continue in this capacity. The typical response is why, dont you trust me? My response is that I don't want to have to trust you, it distracts us both from generating profit.

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