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Borders Books and Losing Credibility

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It’s never easy avoiding favoritism, particularly when it involves a large amount of business with large sums of money. Yet, as those who were Borders bookstore now know, ignoring or delaying others can lead to more than just annoyed clients.

According to Sarah Weinman, publishing industry reporter of DailyFinance:

Just days after reporting dismal holiday earnings, Borders (BGP) can’t quite shake off the negative news vibe. According to Debtwire, the company has been “playing a risky game of favorites” by paying only some of the publishers it does business with — and the ones losing out are in the process of taking legal action. Borders’ long-documented money-losing, credit-extending and cash flow problems means that the company is trying to hold on to as much money as it can, and one way it appears it has done so is to make sure its biggest clients are paid first while smaller publishers must wait their turn.

With increased delays, and inquiries into whether Borders would come up with a restructuring plan to speed up outstanding payments rebuffed, a group of these smaller publishers have retained the bankruptcy firm Lowenstein Sandler as legal counsel. It’s the same firm that prepared a financial analysis of Borders last December which pinpointed the bulk of the company’s problems — declining revenue and profit margins, a short-term liquidity crunch, a highly leveraged capital structure, and a challenging operating environment. With $674.2 million of short-term obligations, the report noted, “Borders is likely to face a short-term liquidity crunch if it is not able to refinance its debt or generate sufficient cash from operations.”

It’s another example of the clock ticking on Borders, which must come up with something drastic and unexpected to keep the company afloat a little while longer.

As many businesses continue to bear the weak economy, it comes as no surprise that such large companies are facing financial difficulties. As the article explains, Borders had been facing such problems for over a year. Unfortunately, they were unable to bounce back from this, and an array of other problems, and the company eventually went out of business in 2011.

upset business consultant

© Flickr user RLHyde

There was a big amount of debt in the picture, but ultimately Borders wasn’t transparent or honest, and that led to its demise.  The business section of TIME detailed that problem:

When the recession hit in 2008-09, Borders was already carrying a huge debt load. It had restructured twice since 2008 in an attempt to pay down some $350 million owed. But Borders could never get out of the hole that its inefficient business practices had put itself in.

But for what weren’t focused on here, the major problem wasn’t necessarily that Borders was unable to pay their clients. After all, there is no doubt that normal operating procedures can no longer be normal when struggling to keep up with finances. In times such as these, downsizing, price-reductions, pay cuts, and even filing for bankruptcy are commonplace. The problem is, instead of being up front and honest with their financial delays, Borders apparently chose to give the run-around to their smaller publishers.

As the team at AccelaWork sees it, failure can actually help help worker productivity. But, when it begins to cloud judgement and negatively impact client relations—especially among those who help keep your business afloat—failure no longer beneficial. Instead, it leads to a loss of cooperation, clientele and worst of all, credibility. If your company is facing any or all of these issues, don’t wait! Contact our our business consultants today. We’ll help you identify and benefit from positive failures while showing you how to avoid futile ones.

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