UK companies begin to wake up to the power of cash

August 13th, 2009 by admin | Filed under Daily News, Employment, Money Management, Recession, Retail, UK employment.

money info If one thing that companies has been forced to learn during the current economic downturn, which has now been with us at various levels of ferocity for more than two years, is to hold onto your cash. Before the system began to crumble around them, players in the commerce and industry in the UK had become no more junkies to the bank, financing not only their expansion programs but also their day to day to cash flow on bank loans and expensive overdrafts.

So when the bubble burst, or exploded being a more accurate description, most companies were left financially exposed and a very large number when to the wall. The companies who had evaded the temptation to become total “bank junkies” survived and with all the difficulties that it entailed, even prospered as the situation has begun to ease, and there is so much less competition about. The recent crop of half year results have gone to prove that companies who are sitting on cash can earn more profit as well as acquire companies, struggling in the face of recession, at knock down prices.

And the rule applies even down to the smallest ma and pa corner shop or one man business. If you have cash, you enjoy maneuverability. You can earn extra discounts convertible to profit by paying pro-forma or within seven days. You can afford to extend extra credit to customers who will be less inclined to argue about the price of a product if they don’t need to pay for 90 days, or even 120.

Money tied up in stock which has been bought at a 15% or even 10% quantity discount is so much better an investment than money left lying in the bank. As has been said, many times when the dust settles on this current recession, one of the principal lessons that have to be learned is the power of cash.