The pandemic has changed global business practices, possibly forever. Some aspects of how we do business have changed. Whether it’s for good or bad, only time will tell, but one thing for sure is that we are moving ahead, albeit differently. Businesses now need to find ways to bring themselves out of the slump while the government needs to find ways to resuscitate economic activities from a macro standpoint.
With recessionary conditions organisations fear about various issues; their cash flows start taking a hit, collecting receivables may become challenging, supply chains need to be refixed. The risks are real. Now it is no longer a question of avoiding these risks, but rather mitigating them.
These three risks have affected almost every business organisation in the country, and here are the countermeasures to lessen their impact in your organisation.
1. Business Continuity
When business activities come to a halt, customers get affected and sales decrease. At a time like this, only one solution holds good to maintain business continuity i.e. automation. Automation is a necessity to ensure your
business does not get left behind. Be it automating business processes in terms of supply chain management, or automating services such as accounting, taxation, finance, legal, HR and IT services. The options are abundant. Leading FinTech companies offer the best in terms of cloud computing where business needs are met from accounting to tax return filings to legal compliance. Everything is digitised, with the much-needed social distancing maintained, and also work can be done faster. Not to mention, at lower costs.
2. Cash Flow Management
The second major focus should be on cash flow management in times of a crisis like this. Effective cash management mitigates overall business risk, and reduces untoward implications on both the business and the consumers. Low cash reserves could be one of the reasons your business needs to devise an urgent and effective cash flow management plan, with the other reason being unreliable future earnings.
Some of the areas to target while minimizing financial risk are,
- Inventory management – One of the most important parts of the supply chain process is inventory management. A shortage in raw materials can affect the entire supply chain, whereas a shortage in finished goods would result in losing customers to competition. However, financial prudency should be maintained when securing additional stock so that cash flows do not take a hit. Sufficient consideration should be given to perishable products and wastage too.
- Receivables and payables management – At a time like this, effective receivables and payables management is important. Improving the collection process with receivables while delaying variables is the ultimate strategy. However, this needs to be tactfully done. Customers can be incentivised to make payments quicker, perhaps in the form of short-term relief options or staggered payment plans.
- Minimizing variable costs – This is one of the easier ways to reduce cash flows. At a time when a majority of the workforce across organisations have been working from home, it has become easier to not just cut down on variable costs, but permanently reduce fixed costs in some areas as well. Some measures could include travel bans for non-essential travel, freezing the recruitment process for new hires, asking employees from certain functions to permanently work from home, etc.
- Keeping suitable financing options open – To reduce cash outflows, one of the means could be to reduce or restructure borrowings. Debt on the balance sheet translates into high interest payouts. With several major lending institutions offering attractive interest rates on borrowings at the moment, refinancing debt can significantly reduce cash outflows. Conversion of debt to equity might be an option, to reduce long-term interest payouts. Finding alternate credit options can also be something to be discussed with financial partners.
3. Employee Motivation
An organization comprises its employees. If the employees are unhappy and unmotivated, it will directly impact their productivity. While guaranteeing employment may not be possible, certain perks can be offered to make the employees feel secure and to boost their morale.
The Indian government has made health insurance mandatory for employers who have resumed operations post the lockdown. Hence, providing an adequate health benefit plan is requisite. For employees working from home, the work-life balance takes a hit and starts to blend into one. Ensuring a proper work-life balance is maintained for the employee is of key importance. This can be enforced through fixing no meeting hours and allowing some forced time off.