As COVID-19 spread, with rising infection rates and lockdowns leading to the closure of all businesses (except essential ones), many companies faced a battle for survival as cash, the lifeblood of any enterprise, could be wiped out overnight. Should businesses maintain operations, operate at a reduced capacity, or close down? How should they manage and plan to cope with COVID-19? What preparations and strategies are needed for the economy's recovery? Many questions arose for businesses at this time. This article shares some perspectives to suggest answers to these questions.
Coping with Covid-19 - The Importance of Cash
The first step should be managing liquidity to ensure businesses have enough cash to get through the crisis; this requires a clear vision of what cash needs will be and a firm grasp of cash management to cope with the impact of Covid-19.
Although the end of the Covid-19 crisis remains unclear, for now, it means maintaining accounts receivable from existing customers, managing inventory, accessing government incentives, tax deferrals, tax payment extensions, insurance support policies, and closely monitoring payments to creditors.
Companies also need to examine each item on their balance sheet to determine if there are assets they can sell – for example, old inventory – to generate cash.
Currently, every business needs to pay attention to its cash flow, expedite the collection of accounts receivable, monitor overdue payments, and request advance payments from new customers or contracts. They should also negotiate with suppliers and landlords to either reduce recurring payments in exchange for timely payments or extend payment terms. Furthermore, they need to manage monthly expenses and reduce unnecessary spending.
Businesses need to know their cash flow in the near future based on cash flow forecasts to make informed decisions and develop appropriate goals and strategies. Simultaneously, they should adjust forecasts based on actual circumstances to provide a more accurate picture of cash flow.
Develop a response plan and create an implementation strategy.
We need to think about possible future scenarios and access support packages. COVID allowance and contingency plans for all eventualities. Businesses should not let the current difficult situation prevent them from seeing the optimistic future, and should plan for the transition period when the pandemic is gradually brought under control, finding ways to restart operations after shutdowns and reduced growth.
Planning and implementing contingency measures for all situations helps businesses proactively respond, minimize risks and losses, and maintain operational resources in the long term. Once lockdowns are lifted, businesses will once again need to consider how to restructure their balance sheets, as resuming operations means increased costs, such as salaries and employee wages, which may significantly increase. However, sales and revenue may not reach pre-pandemic levels and may not recover, while fixed costs will remain unchanged, and businesses will face the pressure of meeting debt obligations as the economy recovers.
Improving and applying technology to business.
Reducing labor costs, production and business expenses, increasing productivity, improving product and service quality, minimizing errors… aren't these the goals every business desires? In the context of the Covid-19 pandemic, with the pressure to cut expenses, attract customers, work online, and conduct business online, more and more companies have sought out applications of new technologies to leverage their benefits for business operations and maintain stable cash flow.
Technology is subtly permeating modern life. Every aspect of life is enveloped by technology, especially in the business sector. Traditional businesses are giving way to online businesses, e-commerce platforms, and online shopping apps. In particular, the timely technological support from the government for small and medium-sized enterprises (SMEs) has been a lifeline during this difficult time of dealing with Covid-19.
Covid-19 presents both an opportunity and a pause for businesses to reflect on themselves, assess the challenges and opportunities ahead. What needs to be done to continue developing, innovate, or remain committed to the old model? A new generation of businesses with a fresh mindset is emerging through the pandemic, and mastering technology is key to their success.
With proper and sufficient preparation, a calm and knowledgeable attitude in all planned situations, any business will surely find its own way to cope with the Covid-19 pandemic, and all confusing questions will be answered. For any questions requiring consultation, please contact EXPERTIS for detailed answers.