There is an irony that as the UK heaves itself back to the workplace, the weather forecasters are warning of a long run freeze. A bit like business’s ability to get credit.
Over the holiday period I received an email from my bank. Paraphrasing: ‘Hi: we trust you had a great Christmas break. We’d like to review your facilities and chop them in half. Have a great New Year.’
This is the first time in 15 years of being with the same bank that I’ve ever known them to (pretty much) arbitrarily cut any facilities. For the record: I’ve never defaulted, always done anything the bank required and on time. I’m fortunate I don’t need the bank. At least not for the time being. I’m painfully aware there are plenty of others who DO need their bankers.
2009 is the year when banking changes. As someone who has been directly involved in financing operations since 1979 I cannot recall conditions remotely like those we’re seeing right now. The notion that property provides a safe basis for securing loans isn’t exactly over but has been badly dented. Everything is under scrutiny.
Cash flow quality matters. It always has but now more than at any time I can recall, an ability to proactively manage cash is critically important. In his most recent post, Positive Churn’s Clive Birnie believes we’ll see a massive inventory correction:
As cash stops flowing freely in at the tills having a mountain of cash tied up in a circumnavigational stock blocked pipeline is a life threatening disease.
Global inventory is a complex, messy problem. Contracts for the production of many goods are stretched around the world, sometimes involving complementary trading operations. Think scrap metal leaving the US, new cars coming in.
If the global banking system remains as constipated for any period of time then the bankrupticues will surely follow. BUT…there is plenty that COULD be done to improve conditions in the supply chain. It will require working with suppliers and customers but the key right now is to solve the ongoing communications issues that bedevil many organizations. Professionals can take a pivotal role in working with clients on these issues.