Plan your cash flow in crisis
Çağdaş Yıldırım, IUE Secretary General, and Emre Öztürk, CFO of Vansan Water Technologies, were guests of the series of webinars titled, “Transformation in Tough Times”, co-organized by Izmir Chamber of Commerce (IZTO) and Faculty of Business, Izmir University of Economics (IUE) to support companies in the difficult period caused by the coronavirus. Yıldırım and Öztürk delivered the “Financial Continuity in a Crisis” titled seminar.
In the seminar, which is available at IUE’s https://www.youtube.com/watch?v=QrgWHmcQ9Jc link, Yıldırım stated that
the citizens were accustomed to living with crises in Turkey, however, the period that occur with pandemic was unlike the earlier crises.
Yıldırım said, “How long the crisis environment will last is uncertain. We don’t know what we are going to be up against after the crisis. There is a serious uncertainty. Sustainability and survival become the most important factor for companies in these uncertainties. In the survival of the companies, it is more important to manage the cash flow correctly and effectively instead of the targets such as profitability and growth in this period.”
Noting that many companies have difficulty in following their cash flows properly and that some companies follow traditional methods, Yıldırım said that traditional methods do not work very well in crisis situations.
Yıldırım stated that companies should create their scenarios and not make optimistic forecasts and that it would be beneficial to establish an open communication with the banks. Suggesting that state supports should also be monitored in times of crisis, Yıldırım said, “Dispose of inactive assets. Effective communication is very important in this period. We need to be in touch with whomever we interact with. Because every crisis is a test of relationship. While managing the crisis, we should be careful not to damage our relations. We should also explain our situation to the suppliers and banks. A team must be created to monitor cash flow. One official from each unit in the company must be determined and a leader must be created. Prioritize cash creation from the operation. Cash flow management is a cycle. Doing it once will not be enough.”
“Update your predictions constantly”
Vansan Water Technologies CFO Emre Öztürk pointed out that the cash flow in the enterprises may narrow during crisis periods. “Firms need to establish their scenarios well. You need to update the forecasts and adjust the cash flows. Because banks can cancel their limits in times of crisis. It is very important to study your limits, to confirm at one-week intervals,” said Öztürk.
Stating that companies can prepare themselves for uncertainty, Öztürk made the following recommendations:
“If the collections are delayed, review contracts. Do not make non-critical expenses. Negotiate and communicate well with the suppliers. Make the payments by prioritizing and pull the payment days into one day. Negotiate and communicate with customers. Make the sales by prioritizing the collection and accelerate the collection with discounts. Make your plans for how to direct the cash flow. Avoid panic. This makes things worse than they are. Make alternative plans. Knowing who does what, as in a fire drill, is a must.”
