COVID-19: Deloitte on how to manage cash flow during periods of crisis

In the face of the unprecedented challenges brought about by the COVID-19 pandemic, businesses are being forced to reevaluate their strategies and operations to ensure survival in the current economic climate. One of the key considerations at the forefront of this crisis is the need for cash preservation. Cash flow management has emerged as a critical component in how companies respond, recover, and ultimately thrive in the midst of the ongoing pandemic. CNBC Africa recently spoke to Jo-Anne Mitchell-Marais, Africa Restructuring Service Leader at Deloitte, to gain insights into effective cash flow management strategies during periods of crisis. Mitchell-Marais underscored the importance of preserving cash through various measures, including working capital management policies and procedures, a robust cash management framework and governance, as well as scenario planning. She emphasized the need for businesses to move beyond testing one or two scenarios and instead focus on detailed scenarios that evolve on a daily basis. By anticipating and adapting to these changing scenarios, organizations can make informed decisions to safeguard their cash position. Liquidity was highlighted as a key metric to monitor during this time, as well as understanding the entire value chain, including both supply and demand side challenges. Mitchell-Marais stressed the significance of open communication with key stakeholders such as customers, suppliers, funders, shareholders, and employees, to instill confidence and ensure transparency in decision-making processes. Although the path to economic recovery remains uncertain, businesses are advised to embrace flexibility and agility in their operations. Mitchell-Marais urged companies to assess their fixed costs and explore opportunities to convert them into variable costs, enabling nimble adaptation to shifting demands in a post-lockdown environment. While the long-term impact of the pandemic remains unknown, Deloitte anticipates a prolonged recovery period lasting potentially 12 to 24 months or longer, depending on various factors such as production capacity and job market dynamics. Drawing parallels to past economic crises such as the Great Depression of the 1930s and the global recession of 2008, Mitchell-Marais emphasized the importance of proactive planning and robust cash management practices. Businesses are encouraged to develop disaster management and business continuity plans, as well as instill a cash culture within their organizations to facilitate effective response to crises. By maintaining flexibility and adaptability in their strategies, companies can prepare themselves to navigate the economic fallout from the COVID-19 pandemic and emerge stronger in the face of adversity.