Governments of various countries and states are trying to balance the effect of the global pandemic on an organization’s capital. Some several states and countries have sanctioned traveling permits for residents or are completely discouraging foreign travel. Maintaining security protocols for health safety is essential at this point. That is not all. Companies today should focus on the way the global pandemic has impacted its fiscal, employees, tax, and legal implications. And most importantly, organizations should also get proactive in managing the cash risks that might occur in the future. Working capital and cash management are essential factors for successful business operations.
Mike Giannulis points out working capital risk and managing guidelines
Right at the start, companies must highlight the working capital and cash challenges, such as:
- Can your organization manage payroll liabilities?
- Can your company collect outstanding receivables and cater to the suppliers?
- Are you prepared for unexpected costs?
- If your cash inflow is less than the outflow, are you prepared to manage the situation?
Several organizations are merely surviving now. They don’t have the scope to ponder about these questions. Also, several companies are unable to cater to the increased customer demand and affected supply chain issues. Keeping in mind, the problems that companies are witnessing, if there’s the scope, it’s essential to enhance the working capital’s condition to survive in the future. Mike Giannulis, an entrepreneur, suggests the following guidelines for this:
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Instant initiatives
Does your business have a vast presence in affected regions? If yes, then you need to opt-in for instant actions to examine company exposure. It will help you to decide on how to assist the employees, customers, and relevant stakeholders.
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Monitoring risks for working capital
You must develop a response team for having access to correct data between the essential stakeholders. It will help to retain stakeholder confidence and also updating your consumers about your business status. You should also develop a team that will concentrate only on supply chain management and credit collection. This team should also assess the contracts with the leading suppliers and clients and have a clear understanding of the liabilities and obligations. Furthermore, it would be best if you outlined the business exposure by recognizing the buffer and existing inventory. Additionally, you should create short-term action plans and create tier transparency.
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Make sure to secure people
When it’s about securing people, you need to accomplish a series of tasks, such as:
- Making the most of the HR expertise for ensuring your employee’s mental and physical wellbeing.
- Leverage the accessible external and internal technology for helping the collaboration between employees. It would be best if you also equipped your staff and employees with the required tools to work from home, in the affected areas.
- Create a back-up plan of action for the affected staff. And it can add contingencies for increased automation, flexible outsourcing, and remote working scopes as a response to personnel limitations.
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Manage the tax implications
You should pay close attention to the VAT and corporate income tax consequences based on changing business costs and income. You might want to request a payment plan and apply for any refund when there’s a need.
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Check the legal implications
The completion of the contractual obligations might become weak. It’s essential to decide the actions required from the corporate law point of view, for instance, annual accounts, shareholders-meeting, and the annual report.
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Planning for mid to long tern actions
Other than the instant actions, the companies should take the scope the global pandemic has given to assess its capacity to fight a crisis. And this is an excellent way to come up with ways to maximize agility and develop more resilience for the future.
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Supplier and customer identification
The real-time supplier and customer data should get managed, reviewed, and assessed. It will help to monitor the suppliers and customers who are at risk. Make sure that you communicate with the key stakeholders so that the company performance doesn’t get affected. Also, make sure to fulfill all the conditions that they have. Additionally, outline the risks and legal consequences that might result from any doubtful suppliers and debtors.
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Scenario planning
Companies should develop and execute improved risk management practices. It will help organizations to concentrate on scenario planning and its benefits. The scenarios allow companies to look at the end goal and come up with useful trade-off decisions. You can run the simulations fast to recognize the low hanging fruit scopes fast. And by assessing and reviewing the past happening and creating a hypothetical future scenario, companies can realize the focused and strategic suppliers and customers who are at risk.
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Assess the pandemic impact on business processes and operations
Assess and analyze the impact any sudden event can have on your daily operations. It will influence your business process, but also the process management and workforce planning. Have you already assessed your manual and automated process? If not, you need to get this done at the earliest.
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Manage ongoing reporting and systems
Your organization might miss out on ample weaknesses and scopes when the transactions, processes, and operations are monitored manually. And if the lead-time between various steps are high, it can lead to a lengthier cash-conversion cycle time. Hence, the IT system should assist you to allow ongoing reporting for tracking all the processes.
Last but not least, you need to set-up a visible and agile working capital framework! Simply put, there’s more to working capital management. You can measure working capital by assessing the financial KPIs (Key Performance Indicators). However, just in case if you wish to enhance these KPIs, you must optimize the underlying method. It’s an operational problem that influences your organization’s income statement, and you can enhance it up to 30% through process optimization. And it will lead to enhanced balance sheet position, better cash flow, and cost reductions. With your increased cash status, you will enjoy a better business financing position as well.
Working capital management is an essential tool that companies need to look into for managing unwarranted situations, such as a global pandemic. The steps mentioned above will prove helpful.
Mike Giannulis was born and raised in Tarpon Springs, Florida and still lives in the Tampa Bay area. In 2012, he appeared on ABC’s Extreme Makeover: Weight Loss Edition which later became Extreme Weight Loss. He is an entrepreneur and business owner. He is the CEO of BPO USA LLC – This is a business process outsource management company.know more about him https://www.crunchbase.
Working capital stock photo by StockEU/Shutterstock
