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Is cash king? - news article image

Is cash king?

19 Mar 2021

3 minute read

The origin of "cash is king" is not clear. It was used in 1988, after the global stock market crash in 1987, by Pehr G. Gyllenhammar, who was Chief Executive Officer of Swedish car group Volvo.

Professional advisors talk a lot about cash flow forecasts and projections, including me, but business owners are finding it hard to predict anything in this unknown period where we have a ‘road map’ but no definitive dates. The only certainty is there is much unpredictability to come.

So how do you project and manage the survival of your business and those in your supply chain for the coming year? Perhaps by buying into the adage that cash is king? My opinion is that those pesky cashflows that advisors keep banging on about do actually serve a purpose.

Just as important, however, is making and receiving payments on time, as this is key to helping you manage cashflow and be able to predict any potential hurdles. It enables business owners and finance teams to understand the incomings and outgoings, and to be prepared.

Forecasts can be used to test different scenarios, such as what if your largest client pays late. How can you manage your cashflow then? Research has shown the average time it takes large businesses to pay suppliers has extended by a further two days to 35 days in Q4 of 2020.

So, can kindness kill? I think just the opposite in our current economic climate, we all need to be kind in order that we can all survive. It is not just about collecting monies in, because what happens if we don’t pay our suppliers and they do not survive? It impacts your entire industry, and thinking even bigger picture, has a negative effect on rebuilding UK Plc which touches everyone. It is believed that in the UK, 50,000 small firms fail each year due to late-paying clients. To me, this emphasises how crucial it is for all businesses to make timely payments to suppliers whenever possible. 

There have been some great examples of businesses supporting one another during 2020, such as the actions of Burger King. Following its efforts to encourage people to order from rivals like McDonald's and KFC, Burger King France has lent its Instagram account to independent restaurants during one of the lockdowns. While restaurants remain closed in France, Burger King will not post any of its own pictures on Instagram, which boasts 328,000 followers. Instead, it will highlight several independent restaurants a day. 

Nobody thinks it is easy to keep the cash flowing, especially as no matter where your business is based in the UK, there are restrictions affecting its revenue and cash flow, but that does not prevent you from assessing your accounting practices and controls and easing your cashflow. If you don’t know how or where to start, then get in touch and let us help you keep your business and UK PLC viable.

Is cash king? - news article image


Karyn Jones

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