Companies in every sector in the country are being tested, unlike ever before.
Yes, global economies, including India, are on the rebound, showing signs of recovery, but nobody is out of the woods yet.
With a cataclysmic shift in consumer behaviour, several businesses are likely to experience a sustainable slump in capital generation and profits.
The country is already experiencing a growth slowdown.
Over 50% of Indian companies saw their operations impacted due to the pandemic, with nearly 80% witnessing cash flow declines.
In order to bounce back from this slump stronger than before, businesses will need to manage their finances proactively.
Cash flow management must be an integral part of risk assessment and contingency planning for any company in this situation.
How Can Businesses Ensure Stable Cash Flow Amidst The Pandemic?
Advance Payments With Smaller Invoicing Tenor
In challenging times like these, getting paid quickly is the key to maintaining a stable cash flow. Quicker invoicing will make a huge difference in controlling cash flow and generating working capital.
The time difference between generating invoice and receiving payments can severely thwart operations, especially during a pandemic, when the overall cash flow cycle is slower. After all, you can only work with the money you have.
Send the invoice to the client immediately after the work is done. If your business extends the 30-day invoicing, reduce that to 15 days and ask for advance payments on high-value jobs. Companies can also opt for e-invoices to streamline the process and decrease paper trail.
Adjust Product Prices To Accommodate Fewer Sales
One key takeaway from the first wave of COVID-19 and subsequent reopening is that discretionary spending takes a dip during lockdowns. However, sales go right back up once movement restrictions are lifted. However, if your prices do not reflect your product’s worth, cash reserves are going to dry up sooner rather than later.
Businesses can introduce limited-time offers and discounts to promote customer spending and general awareness. However, do not shy away from maintaining your prices or even increase them if deemed worthy. Undercutting your competitors is not sustainable in the long run.
Adapt With Alternative Revenue Generation Policies
Lockdowns and movement curbs across the planet disrupted normal operations. Existing revenue channels suffered in more ways than one, especially for brick-and-mortar stores. To combat this slowing sales rate and maintain a stable cash flow, businesses need to explore alternate revenue generation streams.
One of the most common trends observed in the last couple of years is the shift to online marketplaces. If your business heavily relied on in-store sales, you could invest in shifting your business online and offer pickup and delivery services.
Communicate With Your Creditors
Cash flow is not just about generating more revenue or speeding up income. Smart cash-flow management involves a thorough dedication to preventing the outgoing costs from spiralling out of control. Stable cash flow means that your business generates money at a pace equal to or higher than the rate of spending.
Communicate with your creditors on your current situation surrounding the accounts payable. Ask for a longer repayment tenure or negotiate for a better deal on the cost of repayments. Keeping the communication channels active will prevent you from souring professional relationships that took years to set up.
Up Your Inventory Management Game
Proper knowledge of your inventory is crucial to maintaining a stable cash flow throughout the pandemic. Periodic inventory checks should help predict the demand-supply gap, analyse the things in demand, and prepare a contingency plan for further slowdowns. It will also help you stock on products in demand and get rid of unnecessary goods at a discounted rate.
In case your business is going through a cash flow crisis and you find yourself in need of quick funding, explore alternative lending options like bill financing. Several banks, NBFCs, and fintech platforms like KredX extend the invoice discounting facility, where you can leverage your company’s accounts receivables to borrow funds. Therefore, you can avoid a liquidity crunch and maintain a stable cash flow even through a pandemic.