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Cash is King

Who would have thought at the beginning of this New Year a virus and a dispute between two authoritarian countries over oil could bring the World economy into sharp focus?

Coronavirus, there’s an addition to the dictionary, has struck. We are not at all medical and cannot comment on its medical effect, but it has the potential to be absolutely catastrophic to business.

Business depends on trade and volume of trade, if trade ceases or the volume of trade reduces then business can be in big trouble, since largely speaking fixed overheads will not follow a reducing trend. This can have the effect of creating losses and critically it can wipe out cash reserves.

What to do?

Here are some thoughts:

Get your outstanding invoices paid by your customers. You need to concentrate on your debtors and get them to pay.

Don’t spend when you don’t have to.

If you need capital expenditure, then try to finance rather than use precious cash reserves.

It is a very old saying, but cash really is king.

Those people/businesses with cash reserves will not only survive but they may actually expand their businesses by snapping up for a song those businesses which cannot sustain.

A recession is very often when the strong become even stronger.

9 March 2020