Cash Management – How to Build a Bridge to Overcome the Crisis
Continuing the BFG Consult series “Impacts of the Coronavirus on Business,” we have the opportunity to share with clients, executives, and entrepreneurs our perspective on key topics for overcoming the crisis.
Our goal is to propose practical and feasible alternatives to maintain business health. As the philosopher once said, without a doubt, “everything in life passes.” This crisis will be no exception, but to overcome it, it is essential to build the bridge that will connect your business to the future, whatever that may be.
To guide us across this bridge, impeccable cash management is a matter of survival – after all, cash is king. Our approach suggests focusing on two central axes: LEADERSHIP and EXECUTION.
LEADERSHIP:
1- Resilience: This is an unprecedented situation; the moment demands calm and a strong posture to develop the adaptability and flexibility required for each challenge.
2- Attitude: The scenario is uncertain, but act quickly. It is time to make tough, even imperfect, decisions. Do not isolate yourself; positively engage your teams’ input in the decision-making process.
3- Focus: Create a short-term plan to overcome the crisis and sponsor its flawless execution, without losing sight of your long-term vision.
4- Proactivity: Crossing the bridge will be difficult, and there will be setbacks; however, your proactive role in building an attractive and achievable future for all stakeholders is essential.
5- Pragmatism: This is not the time to “sugarcoat” the situation. Communicate clearly and focus on practical success, while staying aware of very short-term changes among various actors (government, banks, legislation, markets). Adjustments may be necessary.
EXECUTION:
1- Prioritize (like never before) your working capital and liquidity. Conduct a detailed review of your cash flow for the next 90 days and have a clear, fact-based diagnosis of the situation.
2- Consider negotiating early receivables and assess availability and rates for each type of operation.
3- Evaluate non-operational assets from the perspective of selling them.
4- Reach out to clients and maintain an updated position on your receivables through direct communication. Go beyond spreadsheets.
5- Update your tax credit position. Understand the situation and its potential applicability at this moment.
6- Assess the possibility of taking credit for working capital through emergency lines of credit provided by governments via the financial system.
7- Accounts payable: Separate into two blocks – essential and non-essential to company operations, considering any operational idleness.
8- Renegotiate everything. Remember: renegotiate. Contact suppliers and propose feasible payment terms that, in the worst-case scenario, maintain cash flow neutrality.
9- Consider tax deferral options presented by governments.
10- Reorient OPEX/CAPEX priorities and disbursements according to the new business reality and your plan.
11- Payroll: Focus on preserving jobs. Critically evaluate recent provisional measures that allow changes to labor relations – salary reduction, reduced working hours, temporary suspension of employment contracts (MP 936) – as well as subsidized credits for this purpose.
BFG understands that there are multiple paths to overcome the crisis. We have the experience and expertise to help companies navigate the complexities they face.
Shall we talk?
Frederico Barbosa
Co-founder / Sr. Partner at BFG Consult Engineer graduated from UFMG, with an MBA from INSEAD (France). Extensive experience in management consulting, with a strong track record across multiple industries and geographies. I help companies overcome challenges and achieve tangible results by driving revenue growth, improving commercial and financial performance, enabling expansion into new markets and offerings, and enhancing customer satisfaction.