Cashflow finance7/25/2023 ![]() While cost-cutting is an obvious survival tactic when times are hard, it can cause huge headaches. Businesses should prepare to be tenacious and approach several lenders if they wish to get the best match for the right price.” Identifying the least dangerous cuts Persistence is also key to success in this respect. Being proactive and raising cash before it becomes a problem is inevitably what will separate the businesses that succeed from those that fail. This might suggest cost-cutting is a more attractive option for most, but Taylor argues that “the perception that good business owners are able to manage, even when cash flow becomes challenging, is detrimental. Only 20% of small and medium-sized enterprises view debt finance as necessary for fuelling growth, according to Growth Lending’s recent research report, Don’t Bank On It. Taylor recommends that CFOs choose a lender with experience in their industry.īut borrowing clearly doesn’t appeal to everyone. She says that, while many options are available, choosing the most appropriate ones can be “overwhelming for business leaders”. An overwhelming challengeįinding alternative ways to raise funds during times of great economic turbulence is no easy task, notes Vicki Taylor, principal at commercial finance provider Growth Lending. Such bumps could vary from an unforeseen cost overrun on a firm’s IT upgrade project to a sudden reduction in demand for its products. Tarimo warns: “In assessing the merits of using external finance, businesses need to be confident that their return on investment will be greater than the cost of the finance raised and can be delivered in an acceptable time frame.”īorrowing without ensuring that there’s enough slack in the facility to allow for unexpected bumps in the road is a dangerous move, he adds. For instance, they will apply more exacting stress tests to management forecasts to ensure that a business can continue meeting its repayment obligations “if things don’t go according to plan”. He says that business lenders will be scrutinising applications more closely than they have been for some time. Phil Tarimo is head of debt advisory services at the Dow Schofield Watts consultancy and a former specialist in corporate finance at RBS and Yorkshire Bank. ![]() He suggests that they should “first explore opportunities to raise cheaper funds, such as asset-based lending and invoice financing”.īeing proactive and raising cash before it becomes a problem is inevitably what will separate the businesses that succeed from those that fail Wells adds that, while many CFOs will turn to the capital and debt markets to replenish their cash in the difficult times ahead, such finance will become more expensive as business valuations fall and the costs of borrowing. This can be achieved only when all departments are working harmoniously together.” ![]() CFOs must build trusted relationships with the wider business and collaborate regularly with other teams to create additional value. “Many out there are under pressure to reduce costs, but cutting too much can lead to the collapse of a business, while not cutting enough can hinder its profitability. “It’s important that CFOs proceed with caution,” Wells warns. He reports that many finance chiefs have left themselves little room for manoeuvre, having already cut costs to the quick over the past two years. At this time of great financial uncertainty, the task of raising capital also requires them to make increasingly tough choices.ĭan Wells is the founder and CEO of financial leaders’ network GrowCFO, which also aims to make the role attractive to younger people. Reducing expenditure without harming key operations has become a critical consideration for CFOs as the UK economy falters. ![]()
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