Cash is king as ‘working capital’ advice booms

pile of cash

Cash is king as the downturn takes affect

Companies are squeezing suppliers and bringing their income from customers
forward in an attempt to improve their cash positions as the downturn takes

Experts in the management of ‘working capital’ say they are experiencing huge
demand, particularly in housebuilding and those affected by commodity prices.

Companies can improve their cash positions by negotiating with suppliers to
put off debts and by ensuring money comes in promptly, to stave off financial

Andrew Harris, an associate partner at Deloitte and head of its working
capital team, said he had not seen such a focus ‘for ten or 12 years’. He added:
‘When credit is easy to come by companies just don’t focus on working capital.’

Harris said moves to negotiate with suppliers did not necessarily mean
negative consequences for SMEs. ‘There is plenty of scope to manage without
doing the knee-jerk thing of not paying people.’

Roger Bayly, a working capital expert at KPMG, said there had been focus on
improving visibility of cashflows as well as in squeezing more cash out. ‘In
recent benign economic conditions people have got much less rigorous about
credit control on the customer side.’

Businesses are also increasing the speed of their processes to prevent cash
being tied up between the purchase of materials and the cash inflows from the
finished product.

Related reading