As a perilous ‘BLACK-SWAN’ situation — The COVID-19 has wreaked havoc across countless communities, ecosystem and supply chains, and with its threat rising with every passing day, the prime focus for most businesses is protecting their employees.
The scary part of it all is that still there is uncertainty on how much of an impact this pandemic outbreak will have on businesses and their supply chains. The only thing which is known is plenty of financial and economic ramifications will be experienced all across the globe — right from raw materials to finished products.
“It is no secret that supply chain disruptions often lead to cash flow implications.” However, Dynamic Project Advisory Ltd; your reliable financial advisor and tax consultant in London will suggest you ways to mitigate damages to your business undertaking during this imminent virus threat.
In Response to the Existing Challenges:-
Considering the importance of cash flow- more so in adverse times like this, we believe that it is always important to have a treasury plan as a part of a risk continuity plan for cash management. And having learned lessons from previous catastrophes like SARS in 03’ and Recession & Credit Crunch in 08’- WE SUGGEST YOU TO:-
- “Keep A Robust Framework For Handling All Your Supply Chain Risks.”
We believe that managing your supply chain is always a challenge, and if any financial issues come about, it only adds more complications. If you produce a product and wish to sell it out to a customer beyond your borders; you will need a letter of credit from a notable bank which affirms the buyer is capable of paying.
This letter of credit also comes handy in securing inventory financing when your products are in transit. So it is essential for you to ensure that such letters of credit are trustworthy. Being aware of these risks of your buyers/trading associates/suppliers is key, especially in adverse times as the on-going one!
- “Make Sure All Your Business Finances Stay Viable.”
With this imminent virus, threatening to devour everything that comes in its path, do not for a second assume that your previous business finance options will continue to be available with you. What we suggest is to use this opportunity to engage with all your reliable financial advisors and make sure your credit lines stay available. Also don’t back away from exploring additional or backup options- should the need arise for them.
- “Re-Analyse All Your Variable Expenses.”
You should quickly look to lessen your variable expenses. It is one smart way to reduce your cash outflows. Other steps such as reducing non-important meetings, imposing bans on unnecessary travels, restricting discretionary spendings such as training and entertainment- can also be implemented.
Also considering that labour cost is one important cost line for your business set-up, look for avenues that assist you to lessen expenses and avoid situations where layoffs are needed.
Take for example: — Seek opportunities to lessen contract labour, and look to re-assign work to mainly your permanent or in-house employees. Also, encourage your workers to take leaves that are available to them (and not more) to limit liabilities on the company’s balance sheet. Also, if the need arises, present voluntary (and even involuntary) leave without pay to keep cash at hand.
- “Look to Revisit All Capital Investment Initiations.”
If you have a forecast of your cash flow, look at what’s really important for the near term. Also, look for capital investments that have the scope of being postponed until this perilous situation gets better!
Other key aspects include sussing out which capital investments can be reconsidered, which ones are needed for a rebound or for achieving a competitive advantage.
- “Diligently Aim To Extend All Payables.”
One way to save your business working capital is to stop paying to your suppliers for the time being. Yes, this approach does risk compromising your relationship with them or worse could lead to delayed deliveries, quality issues and more such complications.
What we would suggest is to work things out with your key suppliers and come to a mutual agreement where both can survive. And the reason being, there may come a situation when you may require to speed up their payables for that critical supplier who is on the verge of failure, to preserve your supply chain integrity and avert a crucial disruption.
Our Final Say to RECOVERING & RETURNING TO NORMALCY
As an integral part of every company’s COVID-19 risk cash flow management, proper assessment and action plan is necessary. This is crucial even for those firms who have not been severely hampered.
For any form of assistance, call @ 02077151945 and speak to our team of online accountants serving remotely across London. They will help you properly evaluate your cash flow requirements and even tax return to ensure smooth operation.