The corporate cashier holds the shock. In any case, many SME bosses still don’t feel much pressure on this issue. Their accounts are still afloat, thanks in particular to “whatever it takes” even though government measures haven’t covered 100% of companies. At the same time, liquidity in the markets is high and rates remain contained, which offers real funding capabilities for banks and investment companies.
A continuing hardening of economic reality
However, any seasoned business owner knows that this won’t last. in the vitam aeternam. Self-financing starts to decline and investment drops significantly. Tensions on supply, the resumption of inflation, the consequences of the war in Ukraine, the resumption of the Covid epidemic in China, etc. are already reshuffling the cards in the economic game. We are also starting to see announcements of backup plans and a tightening of relationships between directors and subcontractors. Companies that adhere to a PGE will have to start repaying it with, for those who do not have the capacity, the temptation to reprofile and, consequently, the risk of increasing the cost of credit. And if order books are well stocked, production costs explode. The monthly Rexcode-AFTE survey published on April 19, 2022 also reveals that treasurers of large companies and ETIs are more likely to consider their situation “difficult” than “easy”, the first since November 2020.
Despite everything, as it “holds up”, business leaders whose SMEs are holding out are still not paying enough attention to cash flow issues – with the risk, as is often the case, of waiting until they are almost in the red to ask for help. . And still…
Restructure to maintain your ability to grow
The restructuring of its debt and cash flow when everything is going well proves to be a very strong guarantee of competitiveness and resilience of the activity. Even though it’s a subject still little understood by business leaders, it’s a powerful weapon to work on your growth plan in advance. Especially since, ultimately, it is cash flow that sets the pace for the execution of development plans. The sequence of actions depends on the funds immediately available. A cash flow restructuring can also allow time between when a project is launched and when it generates revenue; the time required to operationally structure the business accordingly. Therefore, it is important to keep in mind the calendar, anticipate and plan your cash flow.
To make concrete progress on the topic, it is important to start by identifying the sources of expenditure and, therefore, the need for funding. If the need is linked to the structure of the activity, funding should be sought from its shareholders. If the need is linked to a cyclical element (opening a website, closing a market, falling productivity, increasing supply costs, etc.), it is possible to resort to bank financing or fundraising. If the need is linked to a drop in orders, the SME must work to increase its turnover and, at the same time, reduce its break-even point and, consequently, its fixed costs. On the other hand, if the need is linked to a rapid increase in orders, the company must identify and assess the needs arising from its BRF.
Also anticipate the time to get results
Once that step is taken, the business manager will be able to gather the right experts around the table to carry out the cash flow restructuring. Knowing that the time to observe concrete results varies according to the convergences and divergences of visions and interests among the actors gathered. An impact can be seen after 2-3 months if the right experts are there – or it takes much longer to arrive…
The important thing when you are a business leader is to know that there is always a solution, whether you are in stress or in growth, and that restructuring your cash flow is one of the levers to be activated in the context of implementing a development strategy.