Addressing the financial impact of COVID-19

Working capital solutions for companies with urgent cash needs

Public policy measures put in place to contain the spread of COVID-19 are resulting in a significant operational disruption for many companies. Staff under quarantine, failing supply chains, stock shortages and sudden reductions in demand from customers are creating serious issues for companies, across a far wider range of sectors, than initially anticipated.

These days a number of companies face weeks, if not months, of exceptionally poor trading conditions. For many, the revenue lost in this period represents a permanent loss rather than a timing difference, and this is putting sudden, unanticipated pressure on liquidity.

Many companies across a multitude of sectors are finding that they need to approach their suppliers, customers and financiers to arrange short-term solutions to support their cash flows. The scale and urgency of short-term working capital requirements have taken many company management teams by surprise, emphasising the need to act decisively.

Addressing the financial impact of COVID-19

Reasons why companies may have working capital issues

Collapsing demand and supply chain shutdowns are straining companies’ cash and working capital:

  • Suppliers are unable to deliver critical components to manufacturers, delaying or halting the manufacturing process, resulting in a significant increase in work in progress;
  • A downturn in consumer demand leads to increased levels of inventory, which are more and more difficult to reduce; 
  • Collecting receivables in a timely fashion from cash strapped customers; 
  • Difficulties in paying suppliers, due to short-term cash flow restrictions; 
  • Challenges to deliver products to customers.

Cash flow forecasting

Prerequisite to a robust cash management is a disciplined cash flow forecasting, which enables visibility and a cash focus across the business:

  • Daily monitoring of cash balances; 
  • Implement a strict 13 week cash flow forecasting process, supported by adequate tools; 
  • Optimise internal cash transfers; 
  • Implement a cash centric culture across the business, focusing on cash, not P&L metrics.

Levers to release pressure from working capital


  • Communicate and collaborate with all your business customers to understand their pain, financial health and demand forecast
  • Raise invoices in a timely manner
  • Consider offering shorter payment terms in return for discounted payments
  • Review customer payment terms and identify arbitrage opportunities across customers 
  • Monitor cash collections daily by prioritising customers with large obligations 
  • Engage with customers and be proactive to minimise the risk of disputes and late collections
  • Monitor dispute resolution cycle time and address root causes
  • Enforce credit controls and credit hold 
  • Consider financing solutions such as debtor factoring or asset based lending


  • Utilise freed up capacity to increase production frequency and minimise batch sizes
  • Plan for factory shut downs and delay unwanted supplier deliveries where possible
  • Daily review market demand and update forecast and order bank
  • Identify disruption in the supply chain and plan for cash impact
  • Avoid early production and prioritise MTO and orders likely to bring in immediate cash
  • Plan for parts disruption to avoid building non-sellable WIP
  • Run promotions and enhance customer incentives even if profit is impacted
  • Dispose of slow moving and obsolete stock by offering discounts or leveraging e-auctions
  • Explore asset based lending


  • Communicate and collaborate with all your suppliers in this critical period
  • Eliminate early payments where necessary, striking the balance with early settlement discounts affordability
  • Map your business critical and struggling suppliers to determine priority of payment
  • Make sure that payment is performed through the agreed payment method
  • Calculate payment terms from invoice receipt date rather than from invoice date
  • Enable visibility to identify payment term arbitrage opportunities across your supply base
  • Explore Supply Chain Finance and Dynamic Discounting

Combating COVID-19 with resilience

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