The current global pandemic has resulted in much interruption to the supply chain and cash flow. As Business Leaders continue to devise adaptive and agile processes to keep afloat, it is important to breakdown the different strategies into quarters, bi-annual, annual and beyond. Without a doubt CASH will be key to short-term survival.
As demand continues to fluctuate because of COVID-19, cash flows will be affected, customers may require extended payment terms and some may not be able to pay at all (bad debts). Suppliers may not be able to deliver because they or their suppliers are worst hit by the pandemic, thus necessitating new supplier arrangements, which may require more readily available cash. Adjusting cash forecasts will consequently be important in the short run; said otherwise working capital will be key.
Here are some ways to optimize cash;
Stock/Inventory - as demand fluctuates, you may consider reducing inventory-holding levels and free some cash.
Cost of Goods Sold - with more online business presence and increased information flow, explore different suppliers and acquire products/inputs from the cheapest source possible, of course without compromising quality.
Overheads - As some processes are executed remotely, savings on the would-be overhead costs like utilities, hygiene, etc. can be used to improve cash reserves.
Payables - Re-negotiate payment terms with both inputs and finance suppliers. As part of COVID response, many banks are willing to reschedule loan repayments and the best time to discuss is now.
Remember - Cash reserves will be essential for future survival.