A secret for business leaders!!
Almost 80% of Indian companies have witnessed cash flow difficulty and 114 million people have lost jobs during covid as per a study by world economic forum. The experts also believe that impact of the Covid 19 will be worse than the global crises in 2008.
The analyst believe:
“The worst hit businesses (like aviation, travel, entertainment businesses, hospitality etc) will reach the pre-covid EBITDA levels only by FY 24.”
I disagree! - A Team effort of a CFO and CEO can prove the above statement to be complete “Nonsense”.
The question is how? The answer is to generate cash and improve margins. The pandemic has given the opportunity to every business leader where he can question each line item and every business model. The business leaders of today has to ensure that business continues till the time normalcy is achieved and on the way work on improving the margins.
Stay alive by generating cash from all possible sources and live another day so as to solve your problems. Look around and look deep, you will be able to find the solutions:
1. Speedup the collections of debtors, tax refunds, sell off those slow moving inventories, recover loans/ advances that are non-productive etc. In other words look at your balance sheet and you will find sources of cash that no one focused on earlier.
2. Relook at the business modal and peel off those unwarranted cost, that have got added over years, to improve operating performance and margins. Just by doing finance clustering we were able to reduce the head count only in one vertical by 38%.
3. Re negotiate vendor contracts for additional credit period and reducing price.
4. Automate Automate Automate! Tremendous opportunity lies here. Automate operations, compliances, reporting, Balance sheet preparation etc.
5. Take benefits under the multiple schemes that the governments has issued to promote business and save/ generate employment.
6. Use those undrawn bank lines and take additional facilities, wherever possible, like the bank loan under the ECLGS scheme (one of the much needed support that government of India has provided). We raised around $ 45 million through this scheme at cost lower than our average cost of borrowing.
There are many more things that can be done and the list can be fairly long. The objective right now is to ‘Buy time’ with liquidity and additional cash in order to stay in business for a better tomorrow. While the revenue will take time to reach to the pre-covid levels, you can reach the pre-covid EBITDA levels much earlier with consistent efforts.
Friends, please share your thoughts also so as to get your prospective of how you have managed. This will help me further in my learning exercise.
Stay focused, stay safe and follow the government guidelines.
Regional Head -Transaction Banking, South India at Standard Chartered Bank
3yI agree with you. It’s a old saying but very true. Where there is A Will there is A Way. Pandemic is very important teacher, given a learning which will stay long. I think it’s on individual what he/ she perceive ......whether the glass is half full or half empty.
Area Director
3yfantastic article Rajat Mehra. Fascinating views. I am fortunate to be part of a team that realised your vision of the cluster.
Finance/Commercial/Audit/Compliance/Risk/ Taxation - FMCG & Retail
3yVery clear and insightful thoughts Rajat ,conservation of liquidity and rationalisation of cost is the only way to steer companies out of troubled times.
Alumnus Shri Ram College of Commerce, Global Chair UNCTAD ISAR , CCM, ICAI, Alumnus Delhi School of Economics, Alumnus FMS( Delhi), Director, Institute of Social Auditors of India, Member SEBI Advisory Committee on SSE
3yVery good thoughts
MAAN & CO. - Chartered Accountants
3yGreat start!! Hopefully we don’t need another Covid to keep critically looking at our business models. I believe That age old saying - that’s how we have always done it, has never been more redundant than now. Looking forward to seeing many more such thoughts.