Overcoming the Cash Flow Challenge – Finance & Banking

South Africa: Meeting the cash flow challenge

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The advent of the COVID 19 pandemic has posed many challenges to an already complex global business world and has reinforced the idea that companies must “adapt”. The growing need for businesses to operate efficiently and be agile has never been greater.

Unfortunately, most companies have resorted to reducing their payroll by laying off staff to overcome the crisis. While this can be seen as an ideal cost-cutting measure, it doesn’t necessarily always translate into immediate savings (due to layoff costs) or better performance in the future.

This default cost-saving measure of “downsizing” in most cases could be a way to cover up the loopholes, as the real problems never really get solved. Here are some typical challenges that businesses are currently facing:

  • Obsolete business models that are no longer relevant to the emerging dominant environment,
  • Unsuitable and complex business processes,
  • Inability to innovate
  • Inflated overheads and
  • Therefore, the cash flow challenges

The result of all these problems can be summed up as follows:

  1. Inability to accurately allocate costs to products and services or determine the true cost of a product and service that a company provides to the market, resulting in inaccurate pricing,
  2. Inability to identify which solutions / products and which customers are the most profitable.

As a result, strategic decisions made by management are sometimes based on inaccurate information as companies attempt to contain unrealistic overhead costs due to inefficient operation.

Progressive companies are reviewing all of their operating models and cost structures. An example of a solution provided by the Covid-19 pandemic that some companies have adopted is the dynamic of working from home. Before the pandemic, working from home was mostly associated with senior executives or employees in the fintech and tech industries. Despite working from home, some employers appreciated increased productivity levels in some cases, which led them to rethink the traditional model of occupying large offices and adopt a leaner approach that would require only a small staff. in the office.

Adopting technology is essential to eliminate costs as a barrier to entry, fixed costs become less expensive, for example 3D printing makes component printing much cheaper, using digital technology can cost a fraction of previous manual costs, in our company we have moved to an electronic board pack for our clients’ board meetings which is recorded in the cloud, this has significantly reduced the cost of printing, binding and employee time.

Improved financial performance could be achieved by using advanced analytics to quantify, benchmark and optimize cost savings. Our model will give you greater control over your business performance, giving you the ability to make more informed decisions.

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Originally published March 17, 2021.

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.

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