The world is going through an extraordinary challenge. With uncertainty in the market, it is difficult to predict when the full recovery will happen, which is leading to working capital cycle getting extended for various sectors. It is critical for firms to regularly monitor their working capital requirements to effectively mitigate this crisis.
Given below are some measures that can play a critical role in ensuring the smooth running of a company’s day-to-day operations.
1) Cash Conservation & Cost Control
In current times the biggest challenge faced by companies is to effectively manage their cash flow & liquidity requirements in the coming months.
Companies need to reduce non-essential expenses & find newer ways of conserving cash. They will have to find ways to unlock their trapped cash and even evaluate government support programs.
Work from home can be the new normal for staff in service roles since it leads to savings in rental & administrative costs while also ensuring workers’ safety.
We will also see a cut down on general Capex investments & dividend pay-outs spending as a measure of cost control
2) Assessing Funding Requirements & Reviewing Debt Agreements
The Lockdown has resulted in disruption in the payment cycle, and market conditions are not amenable to raise capital.
While the govt efforts to ease the credit availability issue of MSMEs (Micro, Small & Medium Enterprises) via a slew of govt. schemes have been appreciative, many MSMEs are sceptical about taking such loans for several reasons, including high-interest burden, credit-worthiness and effort & time spent in going through a lot of checks & paperwork, etc.
A company must assess the adequacy of its current funding sources & prepare quick & cost-effective funding. This will provide flexibility as well as improve the working capital requirements for the company & its suppliers.
3) Robust Supply Chain
The current pandemic provides a unique opportunity for companies to put in robust processes and bring in efficiency in their key operations. With uncertainty in demand & possible supply-side disruptions, the company should work with their suppliers to ensure any delays are informed well in advance & a backup plan is timely implemented.
Using Innovative digital solutions in the supply chain today will go a long way in boosting the working capital requirements of the firm in the future. Companies that take proactive steps in this area will emerge as winners, while the others will be forced to adapt as per the change in business climate.
4) Maintaining Healthy Relationships With All Stakeholders
Establishing clear communication channels with suppliers, employees & customers and providing all sorts of possible support should be the priority of any company if it wants to navigate through these critical times. A digital solution to set-up this communication channel with stakeholders is the need of the hour.
5) Addressing Demand Uncertainty & Inventory Forecasting
With an unexpected drop in demand/spending, it may take quite some time before we see the production levels reach their optimum level. Forecasting would be a major challenge.
Companies will have to regularly assess their Inventory levels & Procurement plans to prevent excess stock pile-up & locking of the working capital.
6) Having A Contingency Plan
It is an absolute must that companies assess each & every possible scenario that can influence its liquidity in the next 6-9 months. Moreover, it should also have a clear plan of action ready on how to maintain its financials for each of these scenarios.
How Can Xpedize Help?
Xpedize’s fully automated Technology Platform provides Smart Working Capital Financing Solutions to Corporates while delivering profitability & efficiency in its Supply Chain Finance.
Using Xpedize, Buyers and Sellers can align their respective working capital objectives where Buyers support their Suppliers by making the working capital available to them with a completely digital process. Corporate Buyers can earn a higher yield on their surplus funds with no additional risk and may also choose to finance early payment requests from Suppliers through Banks and NBFCs available on the platform to meet their own DPO (Days Payable Outstanding) objectives.
More than 20+ leading corporates in India belonging to diverse sectors are currently using our platform. Many of their Suppliers have leveraged it amidst the lockdown to improve their working capital and keep the Supply Chain strong.
Conclusion:
Over the months ahead, which company will be able to navigate through this crisis with a minimal impact will depend upon how efficiently it is able to handle its operational challenges and manage its cash flow & working capital.
As a leading provider of Smart Working Capital Solutions, Xpedize will be happy to assist you in achieving this Goal. For more information, please contact us at info@xpedize.com.