Millions of people worldwide practice social distancing to stop the overall spread of Corona virus. Many companies experience or anticipate important constraints on both cash and working capital in particular liquidity challenges. Well experienced business people are aware the ever-increasing requirements for the cash flow scrutiny in the days and months ahead. Finance departments have the responsibility to manage the cash pressures during a crisis.
Consider important things at first
Almost every company nowadays sees the low revenue and gets less cash flow along with other problems like the delayed receivable collection and requirements to step up payables to leading suppliers. These companies expect to become much more nimble for the purpose of managing the inventory in the supply chain with maximum uncertainty and demands on working capital. This is worthwhile to follow the best guidance from experts to manage the cash and liquidity position in the business during the high uncertainty times.
As a business owner or administrator, you have to test the overall incoming and outgoing cash flows as comprehensive as possible at first. You can spend enough time to be aware of worst case financial scenarios as well as downsides such as the impact of foreign exchange on the overall cash position. This is because you must act in the measured way. If you know about the status of the cash and liquidity runaway in your business today, then you can estimate what changes your business get during the next three to four months.
A proper assessment of existing cash and liquidity headroom is the first step for successfully managing the cash pressure. You have to be conscious about how much cash you have on the whole and make certain whether such cash is readily available for use or restricted. A good awareness of the cash shortages or reserves together with the existing liquidity position is very important to make a well-informed decision and develop the business further.
Make a good decision on time
Smart and successful business people understand as well as plan for the overall financial reporting considerations especially from COVID-19. They have to inform their stakeholders regarding their overall responses to this virus. They consider so many things related to the financial reporting of their company. For example, they evaluate the financial reporting requirements, assess the needs of internal and external audit, analyse the business models and estimates, consider the broad impact on the public disclosures and other things.
Business executives are advised to balance such pressures against the prospects for better relief. They have to be conscious about how to use the best tax provisions and other favourable things designed to assist businesses during the pandemic. They must find and ensure the minimum cash as well as liquidity needs. They have to establish the robust nature of the short-term cash flow forecast and then run the multiple scenarios. They are advised to take essential actions and protect their good position. They must stand up a central point of control, communications and also visibility. They have to design and develop the contingency plan required for accounting operations workforce.