So The Recession Is Officially Over But Is The Worst Over?

Well firstly growth of 0.1% for the last quarter of 2009 is a preliminary estimate, based on 40% of the returns and experience has shown that the actual figure has been within 0.2% of the figure initially announced. So we could STILL be in recession. The growth figure is still extremely small so in essence the economy is broadly flat.

Interest rates also rise at the end of a recession, inflation is above the governments target and so interest rate rises is inevitable.

So if you do need to borrow the cost of doing so will increase, and of course we have not even started paying back the cost of this recession and government will want to increase the tax paid on your profits.

The possibility of a double dip cannot be discounted if the government squeezes the economy too soon.

In a war situation often the hand-to-hand combat may end but there are still plenty of explosives in the field ready to harm the unexpected passer-by.

The same is true in business today, when a recession ends it shows that demand is returning, and sales are likely to increase, profit is likely to increase and business values will recover and demand for buying businesses will return to traditional levels. But what does that mean in reality?

Imagine if your sales increased overnight by 50%, what would that mean to your business from a logistical point of view?

Perhaps you might need additional stock, new machinery, have to employ additional members of staff, need bigger premises, all of which needs money to fund it, your businesses resources have been depleted, and the banks are still risk averse, they are not interested in funding your speculative growth. What can happen is that your business may paradoxically run out of money and fail.

So planning and cash flow forecasting is increasingly important. Growth without access to funds is a dangerous thing.

You’ve probably heard the saying “cash is king.” Now you know what it means and why so many business owners take it to heart. If your demand in your business sector is increasing, don’t fall victim to your sales success by running out of cash.

This entry was posted on 26/01/2010 at 10:46 am and is filed under The Economy, General. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response or trackback from your own site.