For .pdf copy, Pl click here -> Financial Priorities Post Covid-19
Financial Priorities of businesses Post COVID-19
Complied by: CA. Santosh H. Doshi
A. Have a proper stock management :
- Dos :
- Have a proper counting of stock & separate your stock in A-B-C-D categories :
– A category : goods with small quantity but of high value
– B category : goods with moderate quantity with moderate value
– C category : goods with larger quantity but of lower value
– D category : Scarp / no-demand / slow moving items
- Sale off Category D items on priority to ease cash liquidity followed by goods belonging to other categories as per demand from customers.
- Also, check out if you have any capital asset (machinery / furniture / vehicles / equipment etc.) which are of no longer use &, if not required, sell it off.
- Have a planning of minimum & maximum level of goods to be kept in stock & follow the same for proper inventory management.
- In case of factories : In addition to above, have a proper focus of inventory in work-in-progress category / jobs under preparation to cut cost overrun.
- If possible, try to add new line of related business / variety of goods / related service in your business to attract new customers / retain existing customers.
- Don’ts :
- Don’t sale all of your stock / assets in panic mode to realize much needed cash
- Don’t place new orders for goods arbitrarily.
- Have proper analysis of exact requirement of goods in business, check payment terms, verify projected cash flow & then only go for booking of new orders.
B. Improve your cash flow :
- Dos :
- Check out status of your outstanding / receivables in pre-Corona stage. Break it in age-wise analysis. Start to recovery from your regularly paying customers instead of just chasing oldest dues.
- If possible, give attractive & appropriate cash rebate / discount for receivables yet due in pre-Corona as well as for receivables that were already due on same date.
- If possible, accept lower amount of receivables if you can get all of your dues released at a one go. Pl. don’t your ego (not to accept discounted / lower amount) override your business requirement.
- Lower your business profit margins to assuring levels till normalcy restores in your business.
- If possible, revise / change your business terms for new Prefer new sales on cash or near cash basis only.
- If required, go for availing bank loan / top up of existing bank loan for smooth running of your businesses. More importantly, observe strict financial discipline to improve your creditworthiness in business.
- Don’ts :
- Don’t hold your payables unnecessarily for a longer period. Release them in committed time.
- Also, you may ask for cash discount in payment is released before its due date.
- Be in touch with your debtors for recovery of your dues. But don’t follow / chess him madly for release of your dues.
- Never, Never go for private funding / private moneylender – with interest at too high rates or are accepted on abnormal terms.
C. Increase productivity of factory / business cycle :
- Dos :
- Don’t change your business – Change style of working of your business.
- Go for adoption of latest technology required for your business –
- – If you are having a lathe machine, go for advanced CNC machine.
- – If you are taking orders by telecalls, go for booking of orders through WhatsApp / your own business App.
- – If you are having physical counting of stock in business, go for bar coding of stock etc.
- Identify areas of bottlenecks in product processing cycle / goods inward & outward cycle – It may be transportation of material, non-availability of space, non-availability of workers / labour, non-supply from raw material supply vendors, containment zone area etc. etc.
- Try to overcome factors within your control to improve productivity of business.
- Standardize, as much as possible, operating processes in business / production facility, implement it, continuously monitor it & update it appropriately to increase productivity in business.
- Focus on lowering of wastage, pilferages & trimming of unnecessary expenses in business as well as lowering of processing cycle period taken & related cost at each stage of production in business.
- Have continuous research & development in your business. Check if you can fetch good value for your by-products / co-products etc.
- Have a more & more number of times rotation of business funds in a year.
As an example, a bakery owner – who purchases a raw material in evening, processes it in morning & sells all produced items on same day & once again goes out in evening for purchase of raw material required for day 2, is effectively rotating his funds for 365 times in a year.
- Use technology to generate business leads & place your business / services in social media / on online platform for knowledge of all stakeholders.
- Don’ts :
- Don’t go for aggressive expansion of your business till you are not sure about future cash flows in business as well as changing trend of business.
- Don’t take heavy & blind bets in business. Also, don’t speculate in business.
- Don’t have tight & rigid production schedule. Have some space for unforeseen as well as out of control issues in businesses.
D. Lower your T-A-T (Turn around time) & strive for X + 1 services :
- Dos :
- Lower your turn-around time i. e. time taken to complete business / production completion cycle so that more output can be had in give timeframe.
- Be in touch with your customer & understand exact what type of support does he require ‘at the moment’?
- Strive to deliver one step ahead of what has been committed. So, if you have committed to deliver X, strive to deliver X + 1.
- It can be, say, in the form of earlier completion of work than committed deadline by 1 day / 1 week etc. or delivering one additional service than committed in the same package of fees or lowering of fees due to some genuine commercial reason etc. etc.
- Don’ts :
- In a zeal of lowering of T-A-T, don’t compromise of quality of products / services.
- Don’t present yourself as confused while explaining rational behind X + 1 service concept to customer. So, while communicating to customer that he had been delivered X + 1 service, sound convincing & confident.
E. Have a balanced & motivated workforce team :
- Dos :
- Take all workforce in confidence that the management is with them & nobody is going to lose their job.
- Explain staff about the exact situation of business, ground realities, business plans & strategies as thought to be appropriate by management to bring its business on normalcy as we as to take it to next level & seek inputs from staff.
- Offer non-monetary promotional options to boost morale of employees like involvement in decision making process, chance to participate in company sponsored skill development programs, coverage in employee with his family in group insurance scheme, special recognition on achievement of targets pre-fixed by management, early promotions, foreign trip, ESPOs, appointing in foreign branch of business, providing better infrastructure & social security to family members of employees etc. etc.
- Set proper systems in organization to evaluate performance of employees.
- Set proper feedback system that reaches from lower level employee to top management level. Many times feedback from ground level employee is more crucial for top management.
- With due deliberations with employees union & after unanimous consent, change `fixed salary’ pattern to `fixed salary + performance based remuneration’ model of salary to motivate deserving workforce.
- Follow all labour / workers related applicable Laws of Land.
- If required, help also can be had from professional free-lancers.
- Don’ts :
- Don’t allow to continue that staff who is averse to changes taking place in business / are proving to be obstacle in business change process.
- Don’t have over dependence for execution of job/s on particular worker/s. Always have substitute staff ready – at least for critical operations in businesses.
- For private circulation only.
- The above information is provided with a view to create general awareness amongst readers about how they can handle various important financial aspects of businesses that may, ultimately, be useful in bringing back quick normalcy in their businesses. Usage of information is at the discretion of the reader.
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