Seven Tips To Improve Working Capital For Your Business Through The COVID-19 Crisis
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A couple of months into the COVID-19 pandemic that struck the world unexpectedly (and with full force), causing uncertainty and instability for both companies and individuals alike, we all learnt that the first challenge in keeping our enterprises running was cash flow. Most industries were hit hard, and consequently, businesses were forced to lay off employees, especially in the oil and gas, hospitality, retail, travel, and entertainment sectors. Others, such as tech companies, benefited from the lockdown.
Therefore, only the strongest and the fastest action takers survived, and for survival, the first point to tackle is always the cash flow. Cash is king for any establishment. Overall, this pandemic has forced all businesses to rethink their strategies, and focus on determining how their business will look like once the world economy emerges from this crisis. Here are some of our tips from BMB Group to help businesses improve working capital:
1. Drive change by identifying your priorities Firstly, understand your financial situation, and, secondly, prepare a thorough assessment of the business and where it currently stands.
2. Prioritize cash flow Focusing on cash flow optimization can help companies reduce unnecessary costs, improve the customer experience, and regain profits more quickly once markets stabilize. Start focusing on quick win opportunities within the company, and promote cash culture across the organization such as:
- Cash flow forecasting, which is making adjustments that help ensure you have more money coming into your account than going out.
- Setting right controls on avoiding early payments
- Avoiding unnecessary purchases, and motivating the team to reduce costs and optimize cash
- Monitoring customer payment performance
- Encouraging the team to focus on selling products lying in inventory to generate quick cash
3. Improve visibility Ensure KPIs are available for business leaders to use in order to drive action plans. Provide your managers with real-time, intelligent dashboards that equip them with the insight they need.
4. Consider customers and suppliers Monitor the financial health of customers and suppliers. Work with customers to set a good incentive for payments. Prepare a set of payment priorities to suppliers, so that your operation will not be affected, and focus on settling all the important payment to suppliers that you may need currently.
5. Look for new customers Businesses should focus on generating new leads which will help with bringing new clients, even at a time when every other business is going through a crisis.
6. Products diversification Adjust your products/services so that they are not only useful during the pandemic, but after it as well. Various businesses should look for the emerging trends that will come out of this pandemic to make them stronger than before.
7. Focus on digital transformation Optimizing online presence can significantly improve efficiency and effectiveness, drastically reduce transactional work, and help in reorganizing processes.
In conclusion, keep in mind that, in times of crisis, company leaders need to create a detailed contingency plan that will help the business consider various scenarios in advance. This approach will improve peace of mind among team members and prevent panic when the next problem occurs. It is important to always empower your employees to respond more effectively and minimize the losses in resolving the issue. Human beings are adaptive creatures by nature, and the current pandemic should be considered a means towards further evolution and growth.