In this pandemic period, managing cash flow and strategizing growth factors is crucial. Here are few tips that I learnt from my experience and can help you in addressing covid19 financial issues.
Managing cash flow: The corporate world is in the grip of panic mode in the wake of deadly COVID19 outbreak and it has hampered the functioning of several sectors, including pharmaceuticals. Faced with uncertainty around when the pandemic will end, the pace of recovery is expected to be a long and painful one. This pandemic has made the entire world realize the need to reimagine their supply chains. The union government has already announced investments to incentivize production of APIs in India with a clarion call for “Atmanirbhar Bharat”. The rapidly spreading Corona virus has compelled companies to re-strategize their methodology of work by adopting innovative methods to keep the business going effectively and profitably.
The normal business jargon “cash is king” is just correct in the current scenario. Management of cash flow is the essence for company survival in this liquidity crisis time and the strategies are:
- Prioritise crucial payments such as salaries and contractual obligations and avoid statutory defaults and penalties.
- Focus on the cash-to-cash conversion cycle.
- Review debt retirement schedule and covenants.
- Incentivise debtors by offering discounts for earlier settlement of receivables.
- Revisit variable costs.
- Revisit capital investment plans and ensure your internal earnings are adequate to finance the CAPEX.
- Focus on inventory management.
- Review Forex exposure.
- Ensure that there is a robust review process of calculating financial loss due to supply chain risks.
- Ensure statutory dues and taxes payables are adhered to.
- Periodically checking the feasibility of the business model.
- Plan policies for next 3 months/ 9 months/ 18 months.
If we consider it as a 3-month problem, an instant halt on variable expenditures like hiring, marketing, travel, etc. can help. However, if the crisis continues for more than 9 months, company will have to reconfigure its business strategy to reduce the variable expenses, renegotiate fixed expenses (rent, salaries, equipment lease payments, etc.), and focus only on the crucial essentials for survival. It may be a good idea to revisit sales strategy – selling online versus in-person. Some serious reconsiderations would be required if the effect of the pandemic continues for 18 months or beyond. Businesses will need to strategize, communicate, and act with compassion. They would require a revision of sales revenue goals and product timelines along with a new operating plan.
Management will have to keep the communication transparent as much as possible with its investors and employees.
Few tips to stay connected and afloat during the shutdown:
1. Communicate transparently with your customers: Customers can empathize with companies facing a crisis, as long as the communication is transparent. Communicate with customers to understand their perception of the product/solution offered by you.
2. Maintaining healthy relationship with contracted parties: It would be helpful to give your vendors, suppliers, landlords’ etc. sufficient notice in case there is going to be any delay in payments so that they can also be prepared and there is no bitterness in this already difficult time.
3. Managing employees & related optimization: For large companies considering layoffs, the primary option should be to cut the salaries of the higher paid exec/employees and to retain people who can’t afford to lose their jobs.
4. Keep your team engaged: The team relies on the team leader to keep them updated about every development and it is the responsibility of the Team Leader to keep the team members engaged and stay connected with them through video conferencing tools like Zoom and Google Hangouts. It is very important to maintain high spirits within the team and understand the general mood within your remote workforce.
5. Communication to stakeholders: The Leader to have an honest conversation on the situation and its impact on your business with the entire leadership team. Any negative message should be delivered with utmost empathy along with transparent reasons. Entire world is coping up to this challenge so why can’t we? Let’s address impact of covid19 positively by applying our basic principles and execution by new digital ways. Stay safe!