Managing Cash Flows in Uncertain Times

By Joanne Vaz

Navigating your business through this ‘black swan’ event will be one of the most challenging experiences a business will ever face with ramifications felt globally throughout the entire supply chain.

The focus of businesses is to survive and continue in these uncertain times while ensuring the safety of their employees, mitigating supply chain risks and most importantly managing their cash flows.

An important task for an organization to manage their cash flows is to understand how their cash flows are effected and try to correct or increase the cash flows from alternate sources. Additionally, an understanding of how key suppliers and customers have been effected will support the decision whether to continue stay in business with the respective party or to formulate an alternative strategy.

To increase payment of invoices it may be beneficial to introduce alternative payment options to past or present contracts, offering early payment discounts or negotiating a payment plan. Early payment with a discount would support maintaining the cash inflow and may prevent complete forfeit of the full amount. Invoicing parties for partially completed work, reducing or altering payment terms are a few ways to increase cash flow in the short term.

Further, to increase cash inflows, a business may acquire new customers by developing creative marketing and acquisition strategies. Some businesses may have to evolve to stay competitive and to successfully weather uncertain times.

A benefit of the current situation is that many companies have developed robust IT systems that allow employees to work remotely from home. These companies may consider renting a more economical office and therefore reducing costs.

An alternative short term solution is to ask your employees to accept pay cuts or take voluntary leave until cashflow and business allows to go back to a more stable situation.

Depending on current cash flows, another method to improve cash flows would be to take a loan either through a bank or privately. If this fails, a costly option would be factoring your accounts receivables.

Further, business insurance policies include disruption clauses. There could be a potential payout in case a pandemic is mentioned. Legal support may be able to assist with the formalities and actions.

We recommend that all businesses evaluate their business structures, suppliers and customer base which would have an impact on cash flows and to develop appropriate response plans to avoid risking working capital.

Senat MEA is a full service platform, founded in 2014, with roots in Dubai that go back as far as 1984. Dedicated to trust and efficiency, at Senat MEA we ensure that our clients are equipped with leading counsel in navigating the region while taking into account the global nature of business and the importance of developing long lasting relationships.

Senat MEA’s team of lawyers, accountants and business consultants are highly qualified and come from a variety of backgrounds enabling us to supply you with incomparable expertise and outstanding services.

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