COVID-19: Deploying and managing working capital

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.