Partner Article

Chasing sales could ‘catch out’ businesses in the North East

As challenging market conditions continue, businesses in the North East that are busy chasing sales could be leaving their company more vulnerable to the effects of the downturn, according to business recovery experts at PricewaterhouseCoopers LLP in Newcastle.

PWC is reporting that many businesses have already cut costs and have managed their cash carefully while waiting for the upturn – but the firm is now warning regional businesses not to rush into any new dangers.

Grahame Vincent, senior manager and cash generation expert at PWC in Newcastle said: “Of course businesses want to increase their share of the market, but more sales can also bring more costs and there is a balancing act to be done to ensure that growth is achieved in a sustainable fashion.

“Business failures typically increase during an upturn and often this is because of a shortage in funding for working capital. In response to this, business managers could look to release cash from their own balance sheet, driving down working capital as a means of funding growth.”

According to the firm’s experience, companies that follow best practice when it comes to cash management processes are likely to be in a significantly better cash position than their counterparts.

Grahame Vincent said: “Those businesses that are able to drive cash from working capital will be well-positioned to take maximum advantage of the market conditions. However, those that struggle under the burden of high levels of working capital may find that they suffer a lengthy hangover from this recession and emerge significantly weakened.”

This was posted in Bdaily's Members' News section by Ruth Mitchell .