Sarah Ghosh4/28/2020 16:14:44

Cash Flow is Reality


The impact of coronavirus continues to cascade through our personal and professional lives.  The after effects can only be imagined, but one thing is still true : regardless of what businesses are grappling with to build future resilience – cash flow is still a reality.


The focus has to be on managing cash flow on a daily basis, and taking the necessary steps to maximize cash and reduce or defer costs as much as possible in the short term.


So how do you manage your cash flow in these unprecedented times?  


Re-forecasting


Your cash flow over the next 12 months needs to be scrutinised and re-forecast.  Being able to estimate a breakeven position where you can still pay all of your full cost commitments with what you are bringing in on a daily basis will not be straightforward. We have seen over the last few weeks how Government announcements to manage both the economic and health impact have opened up avenues of financial support but also changed the nation’s consumer behaviour.  All of these external influences have a direct impact on cash availability.  As a starting point estimate your cash flow excluding any support packages.  This will give the true extent of your cash position, and the size of any shortfalls.  The focus will then be how to manage the shortfalls, but be aware that taking decisions that erode assets will have a medium and longer term impact.   


Access to Loans


Investigate all of the avenues open to your business to secure a loan, be it through banks, personal cash injections or government support packages. If you have existing loans in place, re-negotiate terms and repayment plans based on what you know today.  The government wants to preserve capacity in the economy and the policies they have put in place are geared towards enabling more companies to come out of this crisis.


Negotiate with Suppliers


In ‘normal’ situations you would discuss payment options with your suppliers and re-negotiate payment terms over a longer time period, perhaps with a fee for doing so.  However, supply chains are under immense pressure and suppliers themselves will be facing the same dilemmas you are.   You will need to agree which payments can be made within the payment terms.  Depending on your cash position, it may be that you want to help a trusted supplier at this difficult time and pay early.   Whatever agreements you come to with your suppliers, it is important to keep in mind that offering any support to them will benefit your ongoing relationship when things start to get back to normal.


Negotiate with Customers


Review your list of customers who currently owe money to you.  Focus on recent monies owed rather than on older debt at this stage.  You need to work through the list and contact each customer to confirm when payment can feasibly be made.  Unfortunately some companies are not likely to survive this uncertain period because of their own cash flow challenges, so be realistic about what can be recovered.


Re-negotiate Contracts


If you have contracts with agreed deliverables and payment schedules it is important to start the conversations now on what can realistically be achieved. Revisiting staged payments requires an open and honest discussion on what is feasible, as it is also likely that the company you are contracted with will also be struggling to meet their obligations.   For service contracts where hours of support are stated on a weekly / monthly basis this may not be achievable with a reduced workforce.  Ensure that the negotiations are clear on carrying over the hours that could not be delivered.


Payment Holidays


Take advantage of payment holidays.  The government has put in place a number of schemes that will alleviate the pressure on short-term cash flow.


For detailed information on Government schemes available:


https://www.gov.uk/government/publications/guidance-to-employers-and-businesses-about-covid-19/covid-19-support-for-businesses


These are a few areas to consider when re-thinking your cash flow position.  Above all, this is a time for collaboration across your business ecosystem.  Learn from others, negotiate to keep supply chains moving as much as possible.  Everything we do to keep a sense of normality in these unprecedented times will speed economic recovery and minimize the fallout. 



Sarah Ghosh

Director - Onyx AI


Subhashis Ghosh3/31/2020 17:47:50

Leading in Unprecedented Times

It is said that leading an organisation in a steadily growing market is relatively straightforward, and that leaders are truly defined by their decisions taken during more turbulent times – whether a declining market, unfavourable regulation or even a rare event like a market shock.


Well, there can be no more turbulent and shocking period than this current 1st quarter, as the Coronavirus negatively impacts all countries, markets, and organisations. I originally wrote this piece as guidance to the many young and dynamic start-up CEOs with whom I have recently met and exchanged ideas. In the midst of this crisis, I now realise that it is relevant to the most experienced leaders at medium-sized and large companies too.


The following thoughts are informed by my 30 years of leadership experience in one of the world’s largest corporations, having successfully navigated the 1997 Asian financial crisis, the 2001 terrorist attacks in the USA, and the 2008 global financial crisis:


1. This time will define you


Leading in unprecedented times will challenge you like never before. You will have to draw upon all of your resources: keeping calm while many people around you panic, thinking rationally in a sea of irrational behaviour, managing ultra-short, medium- and long-term priorities simultaneously, and showing maximum flexibility in adapting to a dramatically changing macro and micro-environment. How you react to these challenges will define you. You will be “judged” not only on the final outcomes, but on the path that you navigated to achieve them – the decisions you took, how you behaved, and how you treated people along the way.


2. Look after the team


This global pandemic is unprecedented. Even typing the words makes me shudder. As a leader, it is critical that you think about your team first. Their health and wellbeing – and that of their families – is paramount. In large organisations, ensure that all staff are accounted for; in start-ups or as a line manager, take a personal interest in making sure that your team is safe and feels supported. Showing basic human empathy and doing what is right for the individual are crucial. 


3. Support your customers


If your organisation is feeling the turmoil, you can bet that your customers will be too, perhaps even more acutely. While securing your own organisation and team, remember to reach out to your key customers. Try to identify their pain points and reassure them that you are there to support. You will have to do this in a very short period of time – maybe during a truncated phone call or even by email, where details will be sparse. Reassurance during a global pandemic may be to guarantee business continuity, or to mobilise support to directly address these acute pain points – supplying more face masks and PPE, for example!


Or, as we have seen this week, you may have to completely re-focus your design capabilities and production capacity to manufacture ventilators, when your core business is actually Formula 1 racing. Mercedes, McLaren, Red Bull and Williams have all stepped up to the challenge, amongst many others. Do not wait to be asked! Several of my start-up contacts are now seeing how their innovations can be adapted to help in the NHS’s battle against Coronavirus. It is not being opportunistic; it is mobilising and supporting customers at their time of most critical need, and shows great adaptability.


4. Cut your cloth accordingly


This is not a sequential list. You will need to juggle customer and team concerns with the financial health of your own business. During and after any market shock (yes, plan for the aftermath too!), demand will reduce, dramatically in some cases. If you are in the airline & travel industry, you will have to cut deeper than businesses in the food retail, or healthcare supply chains. As a start-up CEO who may not have been in this situation before, what can you do? Firstly, you should seek advice from your lead investors and business mentors. If your funding is currently only from public grants (i.e. you do not have a VC investor to provide input), make sure that you have a good business mentor – probably through an accelerator or incubator organisation. If you don’t have this, feel free to reach out to me.


Essentially, you need to forensically analyse and manage your funding runway. How many months are you able to survive in this current environment? Try to rapidly understand the science and modelling behind the virus and your government’s responses. If you are UK based, the current authoritative publication is this report, led by Professor Neil Ferguson at Imperial College London:

https://www.imperial.ac.uk/media/imperial-college/medicine/sph/ide/gida-fellowships/Imperial-College-COVID19-NPI-modelling-16-03-2020.pdf


In these unprecedented times, you should only work on what is essential to meet your already defined Commercial goals (these will vary depending on the nature of your business and development stage). For example:


- Completing CE Marking and/or other regulatory approvals; Supporting ongoing trials / studies which aim to provide the necessary data / proof points to substantiate your (clinical) claims and validate your solution; Continuing commercial pilots – as long as your customers are in a position to do so; Using the new capacity available (through not travelling or exhibiting) to work on developing your commercialisation strategy and go to market plans.


Cut all expenditure which does not help you get to revenue in the shortest possible time. Advertising and Promotion, although necessary in the long term, is the first expense to be cut in a large organisation. How does this translate to your situation in a start-up? Obviously staff costs are next. Again, this will differ depending on your size, stage of development, and funding situation, but the principle is the same: hiring staff who will not add short-term commercial value should be put on hold. As a CEO, you may have to look at taking a pay cut or inevitably losing some of the team around you. Your decision must be firm; your manner should be fair.


5. Over-communicate


This is a rapidly changing situation. The clamour for the British Prime Minister to provide daily updates was because the general public wanted transparent, open, and direct communication. They also want to put their faith in the executive leadership and be led through these difficult times as safely as possible. This is no different for your staff, customers, and business partners. With most staff working from home, set-up a regular (even daily) communication rhythm – not only to update them on the current situation, but also to keep them focused on the new goals ahead. Keep customers updated of your progress in helping them to get through the next few months. Utilise your business network as never before, sharing ideas (and maybe even resources) in order to minimise disruption to your company.


Above all, look after your own physical and mental health. The road ahead will be long and unpredictable, but as CEO, you need to provide clear and coherent leadership throughout this chaotic time.


Subhashis Ghosh

Director - Onyx AI