With precise knowledge of the cash conversion cycle, and some basic estimating skills, it is easy to predict the amount of working capital required for a “normal” growth cycle. What is less clear is how much difference there will be in the historic customers’ payment processing as they too rebound. Sales improvements will end when the cash required to support that growth is not available.
Without this knowledge in hand and without the support of financial institutions, a business can get into a debilitating cash position at the wrong time. So, plan for the growth you want and understand the cash you need to support that growth. Ask your banker and vendors for the flexibility required to regain your previous revenue operating levels. Otherwise, you may find yourself running out of cash, which is something you always must avoid. You should have some expectation that the pressure banks are under will change on the upside of any downturn. Consequently, borrowing will eventually become more difficult.
Expect to see more of the lending problems business customers may have experienced in the past. In summary on this point, know how much cash you will require to survive and reinvent your business and then ask for what you need! Do not be shy! Ask with sensory acuity. Ask with a confident smile. Keep asking until you make the required combination of arrangements to “not run out of cash”!