[MUSIC] Now what about inventory. Can we do something about the inventory? The situation right now is that we are keeping 80 days of inventory in our warehouse, and we were supposed to keep 60. Now, what do we do? We could ask, we just asked, do you remember? We just asked Mr. Lichstein, and asked him you will be better off in terms of financing of your company, it's a balance sheet and P&L and relationship with banks, if you keep less inventory. And you remember what he said right? He said, well this is the core of my business. This is why, this is my competitive advantage, right. And if we were to decrease about, just 10 days again, the cost in 2008, will be seven, so we will be 70 lighter. Lighter would be like, we would need 70 less, right? But, bear in mind as I said before that the competitive advantage of these companies, that they are able to sell a lot of different stuff, and then whenever a customer comes by then he finds or she finds whatever she's looking for. So, Mr. Lichstein was not very, very happy about reducing the inventory. [MUSIC] >> Hey, because. >> Hi, how are you? >> [CROSSTALK] Nice to see you. >> I've been calling you for two weeks. >> Sorry, sorry, I've been. >> About my credit line. >> Yeah, yeah, yeah credit line. Yeah, we've been thinking about it but we just have some concerns around the inventory. We have, we see it as a risk and wondering if we can do something about it. >> Please don't touch my inventory, please. >> No? >> No, because it's actually the competitive advantage. >> Okay. >> So I offer a range of products much broader than the other, my competitors. >> Okay. >> So please, let's find another solution. >> All right, let me think about other ways in terms of business and past week until tomorrow. >> Okay. >> Does that sounds good. >> Yeah. >> Yeah, nice. >> Thanks. >> See you. >> Bye. [MUSIC]. >> Now what about PAYABLES. But we know we have one big supplier, right? We're paying him in 94 days. We were supposed to pay him in 60 days. We would be getting more free financing if we were to delay payment, right? Instead of 94 days we would go to 104. Can we do that? We would be 70 lighter again. But can we actually delay even more the payment to our suppliers? Is it feasible? Like no way, right? Just no way. I mean, supplier is already angry. He asked already for promissory notes. So actually he's telling us he's actually a little bit squeezing us and saying, either you reduce your days of payment, or I'm gonno stop delivering you. And, if we get a stop to deliver from the supplier, we're going to be in deep problem. In the sense that we need to find another supplier, then when clients come to us, we're going to tell them, wait, because I need to find another supplier in the meantime the customers might go to the competition. We don't want to get our supplier angry. Actually, we should reduce the days, right. We should decrease those days. At the same time, there is something in the case if you remember when you read and prepared the case. They said the supplier was not that bad to us. He said, hey why don't you pay me in cash and I offer you a 2% discount? Right? That's what he offered us. But we never took it. Why didn't we take it? I mean let's try to analyze that early payment discount. Let's see. So the supplier's telling you, If you pay me, instead of in 90 days, which is what you are paying now. You pay me in zero days, ten days, or yeah, let's assume zero days. I offer you a 2% discount. Now what is it, how can we compare it with the cost of credit with the bank? Well we need to convert those 2% for 90 days into an annual rate, right. If for 90 days we have 2%, you would agree that 9 times 4 is 360, so 2% for 90 days would be 8% for 360 days. So, what our suppliers actually given us is an 8% discount per year. Now, what's better than? If the bank charges 6% in interest and the supplier charges 8% for a late payment, then what's better? Well, it's much better to get the financing from the bank because it's cheaper, right? So if we get the financing from the bank because it's cheaper, we should pay the supplier in cash at the beginning, agree? Let me say it again, so the supplier gives a discount if we pay early which means that he's charging some money if we pay late, right? So it's better to, to pay early the supplier and then get a lot of credit from the bank. Why didn't we do it before? Well, we didn't do it because we didn't have money. We didn't have cash. If we had cash we would have taken the discount from the supplier and asked money from the bank. But doing that would imply right now. Asking the bank for a million, or more than a million, Euros, right. Which is not the case. Bank is not clear now as to whether it give half a million, imagine if you were asking him more than a million. Now it seems like even if we implement a slight change in policies, it doesn't seem to be enough, right? And this is working on the NFO. It's difficult to lower the upper mouth of the crocodile because receivables, you don't want to touch the clients too much because they will get angry and they might go to the competition. You don't want to touch inventory too much because you might destroy a little bit strategy. You need to have a lot of inventory. Mr. Lichstein is very strong about that. And then payment, we have to reduce that, because the suppliers are getting angry. What about working on the working capital part? And this is what we're going to see in the next time. [MUSIC]
