Rachit Chawla, CEO, Finway

Besides being SEBI registered investment advisor, Rachit Chawla is also a certified Investment Advisor from the National Institute of Securities Markets and also a holder of the Insurance Regulatory and Development Authority (IRDA) license. At Finway, Rachit’s responsibilities revolve around to envision organizational goals and create plans and strategies that help to achieve these goals. He is the inspirational force to all team members for achieving individual and group targets. He wants to establish Finway a system-driven organization rather than only person-driven by the optimum deployment of the latest technologies. In addition, Rachit has made commendable efforts in harvesting a congenial atmosphere which helps in the evolving right work culture in the organization. He plays the role of MENTOR for the organization so that overall growth could be achieved. Also, Rachit is the Co-Founder, Start-up Mentor, and Director – Finance & Technology at Risers Accelerator to nurture and empower aspiring entrepreneurs to run their business successfully. Being a finance trainer and stock advisor, he aims to provide them with mentoring and complete assistance to scale their businesses to the next level, ultimately contributing to India’s GDP.

In the world of boxing, they say the punch that knocks you out isn’t the hardest one; it’s the one that you don’t see coming. The situation that we’re faced with today is somewhat similar. The reason why Covid-19 has been so disastrous is that no one saw it coming. But let’s not forget that every crisis is an opportunity in disguise. It exposes the flaws in our systems and gives us a chance to fix them and make ourselves stronger and better. While rampaging all around the world, it has caused major upheavals in almost all the industries. While some have been hit worse than the others, no industry has been left untouched. Those organizations that have survived the lockdown are now faced with a new crisis – maintaining liquidity at a time of plummeting demand and profits.

While some organizations have foreseen the oncoming crisis and have set the parts in motion to mitigate it, some common missteps are being observed. The company executives need to come up with a proper strategy, keeping in mind how unpredictable the future has become. Let us take a look at five steps that the organizations can take to avert a liquidity crisis.

Step 1: You need to establish a central cash war room

If you have an existing war room, this can be an extension of it; if not, then you need to create a new one for handling all cash related issues. Having a war room can help maintain liquidity because it allows you to make decisions in real-time and focus on the most urgent liquidity needs and the actions you can take to preserve liquidity.

Step 2: Conduct a thorough analysis of your current cash flow position. 

You need to create at least a 13-week cash-flow forecast. This will help you understand your current cash flow position much better. Having a forecast also allows you to closely monitor the cash inflows and outflows. For more accuracy, you should update the forecast weekly and compare the forecasted data with real-time data to ensure that your predictions are on point. 

Step 3: Don’t just think – act!

Once you have an idea of what your current cash flow position is and what it could look like in the near future, you need to take some decisive actions accordingly. If you notice that a crisis is just around the corner, you need to immediately implement mandates to reduce your expenditure. While doing all this, you must keep in mind that speed is of the essence. There wouldn’t be much time between spotting a crisis and finding it at your doorstep. Even if the measures seem extreme, you must remember that they’re only temporary. 

For instance, you could freeze hiring until the crisis resolves to save your precious resources. You can also cut down on your marketing budget or at least send it to executives for approval. When you’re faced with a crisis of this magnitude, you must put growth on the back burner and focus on survival. Once you’ve successfully negotiated your way through dangerous waters, you can start focusing on growth and development again.

Step 4: Control as much cash outflow as you can.

If you want to prevent your organization from falling victim to a liquidity crunch, you need to start putting your expenditures – no matter how small – under the microscope. Conduct spending review sessions daily to examine all the pending requests and only approve those that are necessary.

  • Deny all the expenditures you can without damaging the operational capacity of the organization.
  • Delay whatever can be delayed.
  • Make investment decisions very wisely. Remember that this isn’t about growth and expansion. It’s about survival. So approach all your expenses with a survivor’s mindset.

Step 5: Chart out action plans based on the best and worst-case scenarios. 

These are confusing times, and without a roadmap to guide you, you can easily get lost. So prepare two action plans – one for the best-case scenario and the other for the worst-case scenario. A worst-case scenario would mean that everything that could go wrong would go wrong. But in the current situation, even the best-case scenario would involve missing some targets. This type of modeling would help the executives get a clearer picture of the threats the company might be facing and they can then stress test the P&L and develop contingency plans.

  • Assess the headcount and extra expenditures to identify opportunities for saving cash.
  • Study all your ongoing projects and initiatives to decide which of them could be delayed or canceled.
  • Get in touch with finance experts to explore your options, and if possible, try to renegotiate the credit terms.

Keep the channel of communication open

With your organization undergoing such drastic changes, it is necessary to reassure and reaffirm the stakeholders that you will continue to provide your services, albeit at a reduced capacity.

  • Keep your suppliers updated about the changes you’re making in the processes for smoother functioning.
  • Keep your lending institutions updated about your current financial health so that they may know in advance if you might need any sort of concessions in the future.
  • Stay connected with other people/organizations that have been supporting your company through this difficult period.

Keep one eye on the present and other on the future

While your short term goals might have suffered a setback, you can still keep working towards your mid-term and long-term goals. It’s understandable that it’s difficult to think of growth and expansion amid a mega-crisis like this, but it is worthwhile to take the time out to think about the future of your company. The leaders and executives who are looking beyond this pandemic and are planning for the post-Covid scenario would have a competitive edge over those who are simply trying to stay afloat. Once you figure out how to keep the boat afloat, you need to start rowing.


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