P. Ariram ACMA, ACCA Affiliate K.

Shujeevan ACMA, BSc (Hons) Computer Science

Co-Founder – Online Academy Co-Founder – Online Academy

The Direction we should pursue

The exact long term implications and the
repercussions of the seriousness of the
crisis are yet too early to be identified.
Businesses can take several necessary
actions to safeguard against the
outcomes by understanding the
historical occurrence of such scenario
and its outcomes.
Despite even if the virus is successfully
contained in a relatively short time
frame, it is likely to leave a number of
challenging problems for businesses of scales to manage in the short to medium term.
This catastrophic situation can be pursued as an opportunity by some businesses which will
enable them in emerging stronger & while experiencing revenue growth after crisis, while
others highly likely will have a fallout of revenues by big numbers.
Getting the Data right
A crisis like COVID-19 can have an impact on every aspect of a business. Therefore it’s critical
that we get reliable and accurate data which will undoubtedly assist in both crisis planning
and responding actions which needs to be taken in order to mitigate the situation at hand.
Any misinformation may lead to deeper trouble since the decisions made will be inaccurate
thereby the action plan as well. Strong data also reinforces a central element of crisis
planning—exploring different scenarios and how they could affect the business in the short,
medium and long term.
Working Arrangements of the employees
Based on the strategy of the business,
the first priority is to decide exactly
from where each staff are going to
work immediately after the curfew.
If you feel that particular staff can
continue to work from home and no
need for that staff’s physical
attendance to the work place, then
you can ask that staff to continue to do
so provided they have the necessary facilities to do so. There should be proper yard stick to
measure progress along with a proper chain of command and appropriate work allocations.
This mode of operation is very common for the folks in the IT industry where they are
accustomed to working from distributed environment.

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P. Ariram ACMA, ACCA Affiliate K. Shujeevan ACMA, BSc (Hons) Computer Science
Co-Founder – Online Academy Co-Founder – Online Academy

MNCs can consider interchanging staffs with their consent among different SBUs with
appropriate training provided to ensure optimum utilization of resources.
This will result in

Reduction in travelling/fuel/vehicle allowance pay

Reduction in office utility usage (electricity, water etc)

Improved productivity & flexibility in the work performed

It ensures that there will be social distancing in place for certain period of time

However if the entity doesn’t have any remote working model as of yet they can start to experiment
on this and see the changes incrementally even though its costly in the beginning though the benefits
will be realized in the long run.

“First take the slack off your processes in the business, then consider the slack in staff”

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P. Ariram ACMA, ACCA Affiliate K. Shujeevan ACMA, BSc (Hons) Computer Science
Co-Founder – Online Academy Co-Founder – Online Academy

Impact on Supply Chain

A clear understanding of your
supply chain will help you to
expose any potential
vulnerabilities which exists in
your business model. This will be
in terms of the critical products
to be purchased & looking well
beyond first and second tier
suppliers for each product,
thereby expanding your sourcing
base.
For example, if your raw materials are from a country that has been affected, is there a
secondary option available for supply? Or else can it be assembled or purchased locally at a
comparatively viable cost. If you try to purchase locally it will help the local suppliers to
overcome the crisis which might allow a synergistic benefit in the long term.
The major factor that affects the supply chain is Credit Period. At this critical junction it’s
mission critical for each supplier to generate cash flow. The big companies can afford to pay
early even though the credit period may not yet be met, which will be a helping hand for the
suffering suppliers.
When you take the decisions about your supply chain, following can be considered:

Pin Point • Identify the critical products and suppliers

• How can you address the change in demand & supply

Contingency Planning conditions?

• What will be the impact of supply chain disruption on

Financial Implications margins, cash flow, loan repayments and terms?

Inventory safety stock parameters will most likely need to be updated to reflect the increased
demand and supply-side volatility, which will have the effect of increasing overall inventory
levels, assuming it’s a viable option.

Balancing the demands for more buffer inventory and managing cash flow may not be as easy
as it sounds. Companies that still use simplistic approaches to inventory management might
be able to do a quick assessment and find some immediate opportunities to drive down
inventory with appropriate promotion techniques.

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P. Ariram ACMA, ACCA Affiliate K. Shujeevan ACMA, BSc (Hons) Computer Science
Co-Founder – Online Academy Co-Founder – Online Academy

However, many companies are likely to find that significant inventory cuts have an adverse
effect on customer service and production. Sustainable savings will most likely require
fundamental improvements in end-to-end supply chain inventory visibility, demand planning,
inventory and safety stock policies, production planning and scheduling, lead-time
compression, network-wide available-to-promise, and SKU (stock keeping unit)
rationalization.

How to manage your Business Cash Flow

01. Ensure your own financing remains viable

In these circumstances, don’t assume the financing

options you previously had are available to you currently
and will continue to be available. Undertake scenario
planning to better understand how much cash you’ll need
and for how long. Use this opportunity to actively engage
with your financing partners to ensure your available lines
of credit remain available, and to explore new or
additional options should you require them in the form of
additional OD facilities etc.

02. Focus on the cash-to-cash conversion cycle.

Under normal business conditions, companies primarily focus on the profit and losses–
growing the top line while managing the bottom line. Routine back-office activities such as
paying bills and turning receivables into cash are often taken for granted.

In the current abnormal business conditions, smart companies are shifting their focus from
the income statement to the balance sheet. The proper management of the three elements
of working capital–payables, receivables, and inventory will be the trifecta to ensure smooth
sailing during these times. But, in order to minimize working capital requirements during
challenging times, it’s important to apply a coordinated approach that addresses all three
areas. Therefore in most of cases cash based sales will help the business to overcome current
scenario rather than going for 100% credit based sales to capture the market. This will help
the business when purchasing goods as well.

03. Revisit your variable costs

Reducing your variable costs is often a quicker way to immediately reduce your cash outflows
than focusing on your fixed costs. Of course, there are the typical variable cost-reduction
levers, such as imposing travel bans and non-essential meeting restrictions (which might
already be in place as a way to manage employee safety), imposing hiring freezes, and placing
restrictions on discretionary spend like entertainment and training.

When labour is a significant cost line in your business, consider avenues that might help
reduce spend to avoid getting to a situation where layoffs are required. For example, look for

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P. Ariram ACMA, ACCA Affiliate K. Shujeevan ACMA, BSc (Hons) Computer Science
Co-Founder – Online Academy Co-Founder – Online Academy

opportunities to reduce contract labour and re-distribute work to your permanent workforce.
Some of the conglomerates such as Softlogic, John Keells have resorted to reduction in salary
overheads as well.

04. Revisit capital investment plans

With cash flow forecasts in mind, consider what’s really

necessary for the near future. What capital investments can
be postponed until the situation improves? What capital
investments should be reconsidered? What capital
investments are required to position for the rebound and for
creating competitive advantage?

05. Extend payables, intelligently

One way to preserve working capital is to take longer to pay your suppliers. Some companies
may unilaterally decide to delay their payments and force the extension on their suppliers,
especially when they are stuck with inventory they can’t deliver into impacted margins. Of
course, such an approach is likely to damage your relationships with the supplier. Even worse,
it might deprive supply chain partners of the cash they need to maintain their operations,
which could lead to late deliveries and quality problems along with the added negative strain
to supplier relationships.

We recommend working with suppliers to establish an agreement that enables both of you
to survive the turbulent times. There might even be situations where you need to accelerate
providing payment for a critical supplier that is on the brink of closure in order to preserve
the integrity of your supply chain and prevent a critical disruption in the supply process.

06. Manage and expedite receivables

Companies tend to get relaxed about receivables when the economy is booming, interest
rates are relatively low, and cash flow is not a life threatening concern. But, as supply chains
are affected and managing cash flow becomes more important, it’s worth taking a hard look
at how your receivables are being managed.

As you may be concerned about delaying payments to your suppliers, the same scenarios your
customers will be thinking with regard to your payment. It’s important to improve the rigour
of your collection processes. Focus on customer-specific payment performance and identify
companies that may be changing their payment practices.

Also, get the basics right, such as timely and accurate invoicing. Any errors in your billing
process can lead to costly delays in receiving payment.

07. Audit payables and receivables transactions

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P. Ariram ACMA, ACCA Affiliate K. Shujeevan ACMA, BSc (Hons) Computer Science
Co-Founder – Online Academy Co-Founder – Online Academy

Make sure your business is paying the correct amount for the goods and services you procure
and collecting the accurate amount for goods and services you sell. On the payables side,
double-check that you’re not overpaying duties and taxes on purchases.
Also, if you have the cash flow to support it, make sure you’re taking full advantage of all
available discounts. For example paying Rs.100, 000 and getting 30% as discount valued than
dragging payment of Rs.100, 000 and paying in 2 month time.

On the receivables side, look for situations where unearned discounts were applied and then
aggressively pursue the proper payment. Once the audits have been completed, look for
longer-term policy and process improvements that can prevent new problems from cropping
up.

08. Consider alternate or non-traditional revenue streams

If your scenario planning is showing pressure on your continued revenue streams, consider
ways you could temporarily or maybe even permanently replace that revenue. For example,
if your primary markets are international, how might
you pivot to domestic markets (especially if your
inventory is perishable)?

If you have assets you use to generate revenue, how

could you think differently about how those assets are
used to generate alternate revenue sources? Not only
could this reduce some of your top line pressures, it
could also mean not having to reduce your cost lines
as significantly.

For example if your office space can accommodate for

some other business you can sub rent out the place
and earn some additional income or you can cover up
your rental cost with the consent of the owner of the premise.

Also if your business has a transport fleet you can sub contract it to another business and earn
some extra revenue. This will help that business as well thereby mutually benefitting.

09. Convert fixed to variable costs, where possible.

In times of uncertainty, it’s generally a good idea to swap fixed costs for variable costs
wherever you can thereby preserving your core business while increasing your flexibility on
the fringes. Selling assets and then leasing them back is one way to raise emergency cash. You
might also want to consider expanding your use of practices such as contract manufacturing,
transportation fleet leasing, and third-party warehousing.

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P. Ariram ACMA, ACCA Affiliate K. Shujeevan ACMA, BSc (Hons) Computer Science
Co-Founder – Online Academy Co-Founder – Online Academy

Share the Pain

If you are going to cut backs salary to save job losses of your work force, you should lead by
example and do the cut backs that impacts your own day-to-day activities as well. If you don’t,
there is a danger that your staff will feel demoralized internally, doing sacrifices from their
end while the C-suite continues unaffected in their allowances and salaries.

Get a commitment for a pay cut from your senior level leaders. As owners of the business,
you should take the largest salary cut yourself. Several airline CEOs, for example, are
temporarily forgoing salaries or taking pay cuts amid looming cutbacks for the industry,
thereby showing their commitments to their organization while leading by example.

Review All the Options before opting for layoff

Before laying off, consider all your non-obvious options for reducing cost. A four-day work
week for roles where you have excess capacity will reduce staff cost by nearly 20%. Some
employees might agree to working half-time if they know that doing so will save jobs.

You can also offer employees the opportunity for unpaid leave if they so wish — framing this
leave as a “sabbatical” can help take some of the stigma of the absence away. In fact, you
might find that some employees welcome these options and wish they could have had them
all along.

By making it clear that one of your overriding goals is to avoid layoffs, you might find that
employees are amenable to the personal sacrifices inherent in salary-increase freezes, halting
bonuses, bans on overtime, pausing of payments into retirement funds, reduction of vacation
days, and other cost saving measures.

Consider decelerating pay decreases for lower salary ranges to protect employees who are
the most vulnerable. For example, you might reduce salaries of your highest paid employees
by 25%, midrange salaried employees by 20%, and everyone else above a certain threshold
by half of that.

All the above measures will ensure to minimize

the head count reduction.

Digitally Enabled Delivery Systems

Whatever the industry you operate in it’s pivotal

to move into the digital world rather than going
ahead with traditional marketing system. Here in
Sri Lanka we have clear evidence that most of the retail businesses have adopted their

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P. Ariram ACMA, ACCA Affiliate K. Shujeevan ACMA, BSc (Hons) Computer Science
Co-Founder – Online Academy Co-Founder – Online Academy

business to online ecommerce model during the curfew and social media thus they earn much
revenue than other business which were reluctant to move on. Some companies are directly
moving to the end consumer by passing the intermediate distributor thereby increasing their
profitability while providing the products required by the customer (Eg:- Maliban Biscuits,
Bairaha etc).

Alibaba’s Cainiao network, for example, supports the supply chains of the merchants it serves
via an AI-enabled digital inventory system that links the online and offline shopping worlds,
in which merchants’ physical stores serve an extended distribution network. As a result,
almost as soon as the lockdown was declared in Wuhan, Alibaba was shipping medical and
food supplies into the province.

The process might be costly for certain businesses during this period of time where they are
unable to generate adequate cash
flow, but they can simply use Facebook
and smart phone applications such as
WhatsApp, Viber etc to get the orders
and deliver it. There is no need for a
custom app to start off the business
model. Even the food suppliers can
partner with UberEats & PickMe to get
their food items delivered. This will
definitely ensure more revenue down
the line as well as provide enough
publicity about their commitment to
serve customers during challenging
circumstances.

Mergers & Acquisitions

While many organisations are struggling, there are enterprises with strong balance sheets and
good economic performance that are well positioned for exercising inorganic growth options.
These companies should find the current environment highly conducive to creating value
from acquisitions both horizontally and vertically.

In fact, acquisitions during a recession can actually create greater value and impact for the
following reasons.
Due to the lower values,
organisations are able to go after
targets that were formerly out of
reach. This allows them to make a
bolder 'strategic play', gaining market
and leadership positions that they
might not have had the resources to
do before.
Companies that are heavily reliant on
debt and equity financing, or that
have less favourable financial
positions, typically must sit on the
side lines, meaning far less
competition for an acquisition, and,
thus, fewer companies bidding up
the price.

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P. Ariram ACMA, ACCA Affiliate K. Shujeevan ACMA, BSc (Hons) Computer Science
Co-Founder – Online Academy Co-Founder – Online Academy

Help from Government of Sri Lanka

The Central Bank of Sri Lanka has issued a Circular dated 27 March 2020 to introduce a wide
range of fiscal and financial concessions for business activities including self-employment
businesses and individuals hit by COVID-19.

ELIGIBLE BUSINESSES/SECTORS

• Tourism, direct and indirect export-related businesses including apparel, IT, tea,
spices, plantation and related logistic suppliers that have been adversely affected by
work disruption and overseas lockdowns due to COVID –19.

• Small and Medium Enterprises (SMEs) engaged in business sectors such as

manufacturing, services, agriculture (including processing), construction, value
addition and trading businesses including authorized domestic pharmaceutical
suppliers with turnover below Rs. 1 bn.

• Self-employment businesses and individuals who have lost their jobs or income due
to COVID-19.

• Foreign currency earners (individuals and corporates) who have to repay loans in
foreign currency and whose incomes/ businesses have been adversely affected due
to COVID-19.

TYPES OF CREDIT FACILITIES

Leasing
Term Loans Pawning
Facilities

Trade Finance
Overdrafts
Facilities

Also DEBT MORATORIUM can be utilised by approaching your relevant bank.

Build a strong, cross-functional response team

A crisis of the magnitude of COVID-19 can have an impact on every aspect of the business.
Therefore it’s advisable to formulate a core team usually drawn from each Operational
business Unit and other parts of the business such as Human Resources, Marketing and
Communications. Internal coordination between these team members is the key.

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P. Ariram ACMA, ACCA Affiliate K. Shujeevan ACMA, BSc (Hons) Computer Science
Co-Founder – Online Academy Co-Founder – Online Academy

It is also advisable to appoint a Crisis Leader -one person should be given the clear mandate
and authority to manage the crisis in every aspect of preparedness, response, and
communication.

As this is the crucial time for each business to strengthen their team unity & spirit, it’s
important to manage this situation properly as an opportunity rather than wasting it.

What Employees should do?

The first and foremost thing

that each employee should do
is to stand with the
management to overcome this
critical recession time period.
It may be difficult for each to
survive with salary reductions,
curfew restrictions & work
from home scenarios.
However this is the time all
need to be united and work
much harder than ever before to get into a better position as one entity.

Following can be followed by employees during this time:

• Ensure proper facilities including an adequate internet connection is available.
• Work your schedule
• Protect confidential information
• Build a work place in home (a small one would do)
• Ensure proper progress tracking mechanism is in place
• Deliver everything on time with the expected level of quality
• Communicate regularly
• Set expectation and standards with the other people at home with regard to your
work

Distributed Working

The primary concern which is lurking in all our minds is how long this curfew situation would
continue, hence it is high time to adopt the approaches of distributed working pattern across
all disciplines. The employees in the IT sector are used to functioning in this manner but the
other sectors and SMEs don’t have much exposure with regard to this.
Initially it will take some time getting used to, since there will be a small learning curve
involved with identifying and navigating the tools that are available. The prime advantage of
this approach is the ability to work in your convenient time as long as the task allocated are
finished as expected.

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P. Ariram ACMA, ACCA Affiliate K. Shujeevan ACMA, BSc (Hons) Computer Science
Co-Founder – Online Academy Co-Founder – Online Academy

There many tools available to perform online video meetings, task allocation and
performance tracking, issue debugging, brainstorming etc which will be brought to knowledge
below.
Free Tools available to assist work

This article is brought to you by

Blueprint Consultancy

No 23, Mary’s Road,

Bambalapitiya,
Sri Lanka
0717179990
theblueprintconsultancy@gmail.com

We are here to assist you for any form of support in terms of consultation

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