Managing Your Cash Flow

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CIMA’s Ray Perry gets down to business

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RB: What were the key findings of the survey?RP: An overwhelming majority – 83 per cent – of mid-size businesses believe they will survive the recession. But although the mid-size market is weathering the storm and remaining upbeat, it is clear that it is caught in an economic vicious circle. Respondents want to move in to new markets and ramp up company and sales turnover. Yet, despite optimistic cash flow trends, ongoing decreases in areas like headcount and net profits are making it difficult for these companies to drive things forward at the speed they would like to.

RB: Is this as you expected? Were there any surprises?RP: Better than I expected, actually. I was very pleased to see that things are starting to pick up out there. And they’ve done it without much help from the banks. A lot of businesses have created money by battening down the hatches, changing suppliers to free up money and being resourceful.

RB: Do you think that the individuals surveyed are indicative of Britain’s business community as a whole? RP: Yes, I think so. This survey is aimed at the mid-sized business community so it is intentionally mass market. The SMEs are being hardest hit by recession. When cash flow becomes difficult, they are the firms that can’t get loans and are cold-shouldered by the banks. They are most likely to go to the wall first. Larger firms have been cutting back labour force to free up expenditure but a lot of smaller companies don’t have that luxury.RB: The survey showed that confidence in the government is at an all-time low: only 11 per cent have faith in Gordon Brown and his cronies. Why is this?RP: One of the big things that government said it was doing to help SMEs was the VAT cut. But that had no impact whatsoever. I’m pleased it is ready to change it back at the beginning 2010. I haven’t seen any increase in business because 2.5 per cent was knocked off. Instead, it knocked effectiveness. Plus there’s the fact that businesses have found it difficult to secure loans – that was another government promise. With the banks moving into public sector hands, we all thought it would be easier to secure loans. That hasn’t been the case.

RB: How useful are these results to CIMA? RP: We go into winter slightly more positive. This survey shows increasing numbers of members do see the fabled green shots and are looking forward to profits next year, most are expecting a one to five per cent increase. Businesses are starting to believe they are through the worst. Only three months ago, in our previous survey, people were saying that recession would set in for another 12-18 months. Now the same businesses believe it will be a year maximum.

RB: Have you had any response from government about the findings?RP: The survey goes out to them today. We will know more then.

RB: Given the survey findings, what would your top three pieces of advice be to British enterprises?RP: What’s worked well for a number of companies is risk management: being sensible with investments and controlling expenditure. They’re also getting more value out of their supply chains. Many have changed suppliers to get better value. But it’s not just about cost but service too. Companies are also starting to focus on skills, training and development again. Over the last year, training took a real hit due to cutbacks in staff and training budgets. Now there’s a renewed focus on the upturn and on meeting challenges ahead.

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