“Tryin’ Times”, to borrow a line from Donny Hathaway, would be an understatement in summarising the past three years. During this time, business owners and their teams have displayed incredible resilience and creativeness. Having worked with SME’s for over twenty years, their drive and dedication comes as no surprise.

Recovery post pandemic and from the turmoil of 2022 requires continued tenacity, strong planning and, most importantly, rigorous control of working capital. Historically, cashflow pressures are exacerbated during and post-recession and I expect that the next 12-24 months will be no exception.

In addition to the post pandemic cash pressures, driven by the repayment of covid loans; re-stocking, HMRC arrears and rent deferments, we have seen incremental pressure on material costs and wages.

Economic recovery, whilst much needed, will add strain to existing banking facilities. Sales growth coupled with the cumulative cash pressures noted above can quickly erode cash reserves. You can never have too much headroom in your banking facilities, which provide time for decision making that is aligned to medium and long-term strategic goals whilst allowing flexibility to respond to opportunities in the short-term and further unforeseen challenges.

Insufficient headroom, in contrast, leads to juggling cash day to day and short-term decision making that invariably consumes managements time and increases the strain they are working under.

The full impact of the failure of Silicon Valley Bank, Signature Bank and the tie up between UBS and Credit Suisse remains to be seen. Encouragingly, compared to the financial crash of the late 2000’s, there is significant liquidity in the market and a strong appetite from funders to support companies. I expect this to remain the case.

Next time, I’ll explore working capital and some of the funding options.