Managing Working Capital after lockdown brochure

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1. Focus on cash and cost control

Protecting cash flow and minimising the risk of bad debts will be critical as businesses navigate through the disruptions caused by COVID-19.

Crucial steps include carefully forecasting cash-flow requirements, leadership being clear on the importance of cash, and controlling who can spend. 

Businesses should also avoid focussing too much on revenue as this increases the risk of overtrading – educating sales and procurement teams on managing both price and payment terms will improve the focus on cash flow. 

2. Manage uncertain demand

COVID-19 has changed both discretionary spending habits and negatively impacted capacity, as workplaces have changed to ensure employee health and safety. This uncertainty will make forecasting demand harder. 

Forecasting demand needs to be a regular part of business planning to enable the business to adapt quickly to changing sales volumes. 

Lead times and payment terms must be updated to reflect the current trading conditions in order to model the working capital requirement of the business.

3. Address supply chain disruptions and delays

We can expect continued delays and disruption to supply chains as the world recovers at varied pace. 

Stockpiling in preparation for Brexit has been depleted due to COVID-19 and many companies do not have the working capital required to rebuild.

This has highlighted the risk of ‘just in time’ inventory practices and companies are re-thinking inventory strategies for the future.

Sharing your business forecast with business partners will enable better inventory management. This will ensure that sub-optimal buying decisions and excess cash tied up in inventory are minimised.