Cash Flow is King in the Age of COVID-19

Companies across Canada have been forced to substantially alter their business practices over the past few months as they’ve grappled with the COVID-19 pandemic.

Their efforts have required insight, expertise, agility, partnerships and strategic planning — all aimed not only at minimizing the pandemic’s impact on their bottom line, but also to help them identify new opportunities for future success and growth.

At the onset of the pandemic, there was a lot of anxiety and uncertainty as many organizations rapidly shifted their operations in order to survive. Efforts were focused around employee safety, enacting business continuity plans and re-evaluating and eliminating unnecessary spending to help keep costs down.

A key part of protecting employee health and safety was mandating work-from-home measures. Now, nearly five months since most companies made the shift to remote work, this model will likely become permanent at some organizations.

That means businesses can and should be engaging in strategic planning for the “new normal,” focusing on how they can offset the major challenges posed by the coronavirus to reinvent themselves and thrive in the post-pandemic future.

Cash flow and liquidity management have proven to be critical during COVID-19. It’s become clear that no organization can succeed and protect their business from long-term damage without ensuring sufficient cash flow and making and receiving payments promptly and efficiently.

“Reduced liquidity and cash flow can bring unwanted impacts, including purchasing and production delays and halted expansion plans,” said Michael Klopchic, Country Head for Canada, Global Payments Solutions, HSBC Bank Canada. “Organizations determined to succeed amid COVID-19 must ensure consistent cash flow as they plan for the future.”

There are a number of ways that Canadian businesses can actively position themselves for future success by employing measures like 13-week cash-flow programs, scenario planning and cost-reduction measures.

“A 13-week cash flow period can be the key to understanding variances and gaining a clearer picture of your organization’s health,” says Klopchic. “Companies should have weekly accounts receivable and accounts payable schedules. This should help outline collections that have been paid and received, and ensures payments are being made in accordance with cash flow processes.”

Companies must also manage procurement expectations and maintain best practices when it comes to governance.

As the pandemic has continued, organizations have contemplated whether they should be seeking discounted pricing or looking to extended terms while trying to maintain the same level of service. They should also be looking at payment terms and discount policies to help their customers, and aim to do so in a strategic manner in terms of various customer segments and geographies.

On the governance side, businesses should get back to basics when it comes to workflow and document management to ensure the right processes are in place. Invoice processes in particular need special attention to ensure clients are billed accurately and completely. Follow-up communications with customers, clients and partners are also essential.

All of these basics were likely disrupted in the early stages of the pandemic.

Other areas not to be overlooked during and after the pandemic are reviewing dispute processes, understanding disputes with clients, customers or supply chain partners and doing root cause analyses in the event of disputes. Discount policies should either be created or adapted. Manual processes in these critical areas should be greatly reduced, with real-time information front and centre.

One thing is clear — with so many different areas of every business greatly impacted by COVID-19, few organizations can afford to fail at aspects as critical as cash flow and payments. The right strategies, the right solutions and the right partners can mean the difference between a company struggling to survive the pandemic and one that’s thriving after it’s passed.

Download our new report, Moving from Transaction to Action to find out more about how to overcome many of the most common cash flow and payment problems plaguing Canadian companies.

Contact us to discuss how to take control of your cash flow and payments needs and position your business to thrive today and in the future.