Building Resilience with Financial Readiness
By ClearCycle Team

These times of the pandemic have been challenging for business organizations worldwide. With sales dwindling to a minimum in the last quarter, and large-scale disruptions in the commercial sector, businesses face unprecedented challenges related to cash flow, workforce management, and fluctuations in consumer demand and supply chain. Organizations are making all attempts to maintain business continuity even in daunting situations to minimize the impact. There is a unanimous consensus that all businesses need to return to their states of business growth and sustain their pre-pandemic financial health and well-being, long after the darkness has lifted.

Business Resilience: A Perspective

Business resilience, in simple terms, means the ability of a business to be able to withstand the financial pressures from an external environment. These pressures can negatively impact a business’s finance and assets and may bring its operations to a halt. Resilience is the need of the hour for most business organizations. The CFOs and Risk Managers of companies have to don new, more robust roles to guide their organizations successfully.

Resilience will require a tight build-up of resources via:

  • Dynamic planning– This means to readily identify and respond accordingly to sudden changes in the business environment.
  • Cash flow management-The organizations have to make sure that a continuous flow of cash is maintained in the business to cover operational expenses. Secured liquidity and safe credit risk measures in the system may ensure smooth business continuity.
  • Working Capital Management – This will involve the optimum utilization of the existing current assets as well as the liabilities of business for efficiently meeting the short-term obligations of the company. A fine balance needs to be made between safeguarding the company’s own capital resources as well as credit extension to buyers.
  • Human and System Resource Management – This should lead to efforts to sustain the remote working capacity of employees and ensuring the remote governance and secure access to resources and users.
  • Market and Risk Management– Interest rate changes and trading fluctuations govern market fluctuations. Inflation-related volatility of commodity prices should be kept in check.

Overall, a high dose of business resilience will require novel norms to restructure business strategies and staying financially ready.

To build up financial resilience in times of crisis, you can:

  • Adopt new cash flow models– Businesses need to adopt Cash flow management models that provide a sound backup in uncertain times. Operational strategies should be restructured around these models, which should be adopted and revised as per the business fluctuations. A better financial response can be prioritized based on short term cash forecasts. Similarly, business-critical payments need to be prioritized over other payments that can be temporarily deferred.
  • Monitor and track operating expenses – A vigilant eye on the monthly financial transactions of the business is necessary to know where all the money is going. In the event of an absence of influx of money due to unemployment or massive cut down in sales, it is always safe to embark on a budgeting strategy to identify and cut down costs, like dividend payouts, wherever necessary.
  • Eliminate Overall Debt– It becomes imperative to refrain from the creation of further debt to eliminate existing debts. Businesses can look up to low-yield investments as a quick means of liquidation to get rid of high-cost debts whose interest cost is higher than the current investment return. Businesses could try to trim down any existing line of credit to reduce the risk of bad debts. Right-sizing the credit line will help customers to prioritize payments on overdue invoices.
  • Speed up collections– In case of accounts receivables in the waiting period, the finance teams should backup on the collection timeline of the bills and speed up the payment collections. Unnecessary credit extensions to customers in an economic crisis may jeopardize the working capital.
  • Create reliable sources of income– This step calls for some major brainstorming. Companies can engage with key stakeholders to set up an interim relief fund. They can try to make use of several payment alleviation options and special assistance programs supported by the Government. CFOs need to expand its liquidity buffer to be able to support the company for at least 9-12 months. It could come from identifying opportunities to leverage cash pools or from unlocking trapped cash from the business system.
  • Employ Efficient Risk Management– Businesses need to focus on reliable inventory models and project-driven supply chains. They can negotiate credit period extensions to unlock the cash in such financial supply chains. In current financially stressed times, companies can adopt financing solutions like monetizing on current assets to reduce credit risks or invoice discounting and reverse factoring methods.
  • Build on coordinated employees’ community – With most companies focusing on work from home for their employees, it is time to build on a financially sound closed business community. Governance of remote jobs should focus on quality, accuracy, and timely retrieval of operational data to make sound business decisions. Efficient technological means should be employed to keep the finance and operations teams in touch and collaborate to make insightful decisions and deliver efficiently.
  • Access Governance– It is time to enforce new workforce models that can manage the work from home norms. With a significant chunk of the workforce being on remote working portals, access governance and information security require preference. Efficiency, cost, and safety need to become substantial to prevent any cybercrime or potentials for fraud.
  • Build valuable relationships– The company directors and CEOs should take this opportunity when the economy has taken a plunge, to lead from the front. Companies should keep in mind the safety and well-being of the workforce, shareholders, as well as the stakeholders, and make use of the best practices for corporate governance. Similarly, the board of directors should stay proactively in touch with government agencies and other governance and compliance authorities to seek help and guidance in difficult teams.

Summing Up

Financial readiness is the only way to come out of these choppy waters of this pandemic that affected the business environment. Businesses can use this opportunity to restructure their policies and operations and use both prudence as well as financial resilience to overcome these challenging times.

Get in touch with ClearCycle for robust automated solutions that can help you with cash flow management and cutting down on operational costs.


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