- Prepare your cash flow statement and use same as a tool for decision making.
- As an entrepreneur, you should constantly monitor your cash flow and the first thing to get on track is indeed the preparation of your cash flow. You can then use same to take informed
- Ensure your own financing remains viable.
- Engage with your financing partners to ensure your available lines of credit remain available, and to explore new or additional options should you require them.
- Focus on the cash-to-cash conversion cycle.
- Under normal circumstances companies primarily focus on the Income Statement- growing the top line while managing the bottom line. Routine back office work, paying bills and turning receivables into cash. In crisis times, smart companies focus from the Income Statement to the Finance Position. Three elements of supply chain Working Capital-Payables, Receivables, and Inventory-, supply chain executives tend to focus on inventory. In order to minimize working capital requirements, it is important to apply a coordinated approach that addresses all 3 areas.
- Talk to your debtors.
- Most businesses are going through the same tough times. One solution would be to communicate. Talk to your debtor, see where they stand and agree on workable solutions for both of you. Also look for unearned discounts were applied and then aggressively pursue the proper payment.
- Talk to your creditors.
- With the cash flow cycle becoming an alarming issue, please take the initiative of talking to your creditors too and just like with your debtors, agree on workable solutions for both of you. Make sure that you take full advantage of all available discounts. Extend payables, intelligently.
- Take loan as a last resort! – Revisit your capital Investment plans
- It’s tempting to take loan facilities offered during this crisis period, please bear in mind your level of gearing; there is a risk that it can cause more harm than good. Look at your accounting figures and with the help of a Professional Accountant, take wise decision. Revisit your capital investments requirements. Which CI should be reconsidered? What CI is required to position for a rebound and creating competitive advantage.
- Think of other streams of revenue.
– If your primary markets are international, you may pivot to domestic markets.
– Alternate revenues sources generation on existing assets generating revenue
– E.g. Investing – for those who afford that investment- to reap dividends in the future.
- Convert fixed to variable costs, where possible
- Selling assets and then leasing them back is one way to raise emergency cash.
- Consider contact manufacturing, transportation fleet leasing and third-party warehousing
- Think beyond your four walls.
- Need to think of your entire ecosystem and supply chain.
- If your supply is at risk, you may even need to buy a stake in the company or acquire the business outright.
- Understand your business interruption insurance.
– Breath of coverage varies significantly by insurance policy, industry sector, and coverage. Due to the insurance losses from the SARS epidemic, some insurers have included specific exclusions for losses arising from epidemics and pandemics, which you’ll need to, understand if this is the case in your policy.