Now more than ever, businesses need to have a robust cash forecast to provide clear transparency on liquidity. We look at several key actions business can take.
COVID-19 is having far-reaching implications for the global economy with organisations experiencing significant operational, financial and liquidity issues. We know that organisations are facing potentially significant challenges to which they need to respond rapidly.
Now more than ever, it has never been more important to have a robust cash forecast to provide clear transparency on liquidity.
During this challenging time, there are several key actions which PWC recommend businesses could take.
1: CASH Forecasting
- Rapidly develop 13-week cash flow forecast or challenge
robustness of existing forecast.
- Perform sensitivity analysis, modelling worst-case scenarios and downsides.
- Ensure forecast provides visibility at the right level (e.g. daily vs
weekly cash flows), forecasting below EBITDA for true cash
position and informed decision making.
- Challenge input assumptions and incorporating additional data
sources (e.g. WHO and Government guidance).
- Raise awareness on the importance of cash and accurate forecasting across the business.
2: managing stakeholders
- Develop a clear communication plan to ensure consistent
messaging to key stakeholder groups (e.g. customers,
suppliers, lenders, HMRC on time to pay arrangements).
- Engage stakeholders early and be clear on the ask.
- Understand their current position, how they may act and issues
which may arise.
- Ensure additional stakeholder groups are not overlooked (e.g.
pension trustees, credit insurers, credit card companies).
3: Cash conservation
- Prevent the commitment to further expenditure across the business.
- Challenge all uncommitted spend and the value it actually will
- Immediately review all delegated authority spend levels.
- Daily cash calls to challenge at a devolved level and hold business units accountable.
- Consider offering early payment discounts to customers.
- Assess trade-off between delayed payment, service delivery and
- Move from a daily to weekly payment run.
- Consider surge resources (internal/ external) to support cash
4: directors responsibilities
- Consider whether professional advice is needed, especially if
there is a risk of insolvency.
- Establish a clear view of cash flow, alongside balance sheet position and trading performance.
- Maintain evidence of decision-making process – ensure all
material decisions and the associated considerations are
documented in detail.
- Consider appropriateness to continue to trade.
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Adaptive Insights - Cash Flow
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