Today, the topic that is getting all the attention of VSEs and SMEs is cash flow. Managers devote a lot of energy to stabilize their financial position in order to be able to sustain their activity. In fact, nearly 50% of them have seen their financial condition deteriorate since the health crisis. Many concerns remain.
Since emotions still play an important role in decision making, it is necessary to base it on objective elements and establish indicators that allow monitoring the situation in real time.
Origin of cash flow problems
orders that are struggling to go up
With the enduring crisis, more and more companies have faced a sharp decline in order books and may be slow to return to pre-crisis levels. This translates very differently depending on the region. The construction industry has clearly seen its long-term visibility affected. While this was visible for several months before the crisis, it fell for a few weeks with fewer and necessarily smaller orders. For sectors such as trade, services or industries, the decline in consumption and the saving propensity of the French has a significant impact on sales volume. The habits of the French have changed, which can affect all business activities globally.
Extended Payment Terms
If the Law of Economic Modernization has reduced the payment deadline to 45 days, it does not pertain to individuals. Because, if in principle there is no time limit for individuals, we know that in order to promote commercial relationships and in the current context, companies are obliged to disseminate payments. Then it becomes difficult to achieve equilibrium of settlements. So much so that many leaders can find themselves with very weak cash flow. Another point to take into account, many companies that find themselves in financial difficulties and who take longer to pay off than before.
complex access to credit
Despite the political will by successive governments to support the cash flow needs of companies, companies are finding it difficult to be backed by banks and most of them believe they are having difficulty finding funds, Despite the fact that the relationship with his bank advisor mostly remains the same. good shape.
This will help businesses
The state has reduced its alcohol intake to allow companies to pay their Social Security contributions, while tolerating delays without necessarily clearing companies immediately. It is much more flexible than before, even if the taxes are substantial.
If we still hear that we are in a country that does not like entrepreneurs, “those rich profiteers”, the situation has changed a lot in recent years. The gap between great leaders appointed by the board of directors and entrepreneurs investing in the company on their own assets has gradually been reduced. It is to be noted that today, the image of the entrepreneurs has greatly improved and various measures such as simplification shock, for example nominal social declaration or simplification of registration formalities have contributed in facilitating the daily life of the companies and their manager.
But that is not enough. While successive governments have moved to simplify the business environment, our administrative and political structures cannot help but create complexity. The difficulty remains that what is given on the one hand (CIR, CICE, etc.) today and which often benefits large companies, is taken away immediately (taxes, tax audits, etc.).
What measures are to be implemented?
The basic solution remains to revive activity and revive consumption. Note that measures such as the Competitiveness and Employment Tax Credit (CICE) are only in effect for smaller structures. Even with 100% support, when the future of the order book is uncertain, it is difficult to envisage the creation of jobs when it is difficult to sustain what already exists. Knowing that these employees in small businesses have put in and are still striving to support their businesses and their jobs at their level (unpaid overtime, imposed vacations, bonuses removed, etc.), recruiting Difficulty taking risks. Which would question this balance which has become uncertain. Without waiting for this improvement, it is necessary to observe several aspects in terms of daily management:
customer service optimization
Customer credit represents 25% of the company’s assets in France and unpaid customers are in default for approximately the same percentage. Therefore the manager must have a clear vision about the future receivables and should keep his accounts as up-to-date as possible, especially with the issue of quotes and invoices as well as regular reminders. If monitoring trade receivables is important, it is top notch to avoid the risk of defaults and optimize WCR. Among the solutions to be implemented, we can list: mitigating the risk of unpaid overdue invoices and non-payments, streamlining customer follow-up, handling all disputes, estimating and forecasting cash requirements.
list optimization
Less obvious to improve, stocks are expensive and notably unsold. The tasks to be done can be lengthy and their results may not be quick, which can represent a real difficulty for entrepreneurs as they are more and more involved in their daily lives and the difficulty of achieving heights in relation to those decisions. The consequences may be medium or long term. In order to rationalize your stocks, it is essential to optimize stock levels, do real-time monitoring and avoid stock shortages.
supplier post management
Many companies have little or no control over the relationship chain with suppliers. They focus too much on purchase cost and very little on discount, delivery, stock, on terms of payment, volume or turnover. In order to optimize supplier positioning, it is necessary to take an interest in the disbursement process, commercial conditions and supplier relationships.
In the end, the main challenge to the sustainability of our fabric of small and medium sized businesses clearly remains employment! Today, we are facing a tense situation, restructuring and direct judicial liquidation which can happen at any time.
It is imperative for managers to stabilize their company’s financial position. This will require the return of consumption, control over their management and optimization of their organisation. To achieve this, they have to take it upon themselves again and agree to seek advice to gain perspective on their daily organization and focus on the profession, knowledge, expertise of the company.