Managing your cash flow during the crisis

• Unclear cash forecast – present prevailing uncertainty will result in an inability to assess how committed cash outflow will be fulfilled.
• Volatile currency fluctuations- this will result in a mismatch of actual cash inflows and cash outflows.
• Unavailability of financing arrangements – this will result in uncertainty and put undue pressure on procurement and operation cycle.
• Customer credit risk - prevailing market condition will trigger liquidity issues with customers who are struggling with financial instability.
• Government restricted movement – this will have a direct impact on businesses and companies will no longer be able to operate “business as usual” way.

Present time has post challenges that companies cannot ignore reality. We need to consider one step at a time and realigned priorities.

Following three-step model should be considered by management to stabilise cash flow.

• Assess
• Plan
• Execute

Assess

• Medium- and long-term financial commitments
• Review critical and non-critical tasks
• Ensure financing remains a viable option
• Revisit CAPEX planned
• Effective inventory management
• Extend payable cycle
• Manage and expedite receivables collection
• Consider alternate supply financing options, innovate business offerings to stay relevant in current market space

Plan

• Deploy plan to manage supply chain risk – ensure effective and alternative procurement and delivery channels
• Variable cost review – revisiting commission model, placing restrictions on non-essential meetings, restricting discretionary spend on entertainment and hospitality
• Alternative funding arrangement - In these circumstances, do not assume the financing options previously had available will continue to be available. Undertake scenario planning to understand better how much cash will be required and for how long
• Communication with stakeholders - Use this opportunity to actively engage with your stakeholders to ensure your available lines of credit remain available, and to explore new or additional options
• Financial covenant waivers or relaxation – Negotiate with lenders to obtain consent for waiver or relaxation on financial covenants
• Economic stimulus by the government – remain aware of various initiatives that are implemented by government and conditions required to qualify for such benefits. Such measures will assist companies in bringing short term stability
• Designating team – designate a separate team that consists of leaders from each business function and business lines to monitor development on a real-time basis
• Seek professional advice – management should seek professional advice to ensure smooth functioning of business operation

Execute

Execution is critical – delivering upon what you have agreed with stakeholders will help to alleviate pressure and give you time to manage the situation. Management should carry a robust mechanism of regular review and strict monitoring.