In light of the ongoing COVID-19 crisis, the depressed business environment is expected to last a few quarters. Companies of all sizes will need to be prudent with resource allocation to minimise the possible impact of COVID-19 on their business, people and operations.
Here’s how you can HALT and consider below steps to effectively deploy and monitor your working capital
- Estimate changes in costs
- Estimate changes in fixed and variable costs as well as due to increased automation and new digital strategy
- Build scenarios around capacity utilisation
- Estimate revised demand, alternate use of unutilised capacity and associated costs
- Deep dive into finances and available funds
- Determine borrowing requirements and negotiate cost of borrowing
- Project sales keeping in view revised operations and estimate the sales-to-cash conversion cycle
- Assess decrease in trade receivables during the impacted period
- Value inventory and assess credit limits/ terms
- Value inventory in any part of the value chain
- Assess increased credit limits to customers and credit terms from vendors/suppliers
The above steps can be used to create weekly cash flows along with sensitivities to plan working capital requirement, utilisation and availability.