With all the uncertainty and market volatility in recent weeks should SMEs still focus on cash so that new opportunities and growth can be funded without over-trading (running out of cash)?
It seems that although many small businesses are reporting increases in orders, they are being cautious about taking risks.
Generally as an economy comes out of recession and orders start to pick up there’s a risk of over-trading, especially where a business has insufficient capital reserves to fund the period between order and payment.
This explains the well-documented rise in insolvencies that characterises the start of an economic recovery. We haven’t seen a rise in insolvencies yet and the feedback from SMEs has been that they are not yet convinced of a stable recovery.
We believe SMEs are taking a realistic view in welcoming increased business, deciding to make hay while the sun shines, but not yet pursuing aggressive growth strategies.
What is your view?