Fixed asset businesses are used to long gestation periods for arranging capital, buying assets (land) over a period of time, consolidating that into a larger more commercially viable sales. However the current Covid crisis will significantly slow down my business and the topline concern is cash flow.
Liquidity for operating expenses, payrolls, insurance this summer leading into the end of the year. Project/s will be delayed but there is uncertainty by how much. At the moment government approvals are already late because offices are closed and capital from private equity funds are in a holding pattern. This means impacts the downward stream o of the business; sales channels are shut down. No off-plan selling and therefore no revenue.
Is There an Upside? Bottom Fishing: Your existing liquid reserves if adequate, may mean your business; the people and operations survive the onslaught. In case your war chest is brimming (an analysis most CFOs would either know or be working on), then it’s a great time to bottom-fish and pick-up some more undervalued assets.
Supply Chain Disruption is a key concern for CFOs. Despite having strong supplier relationships; their businesses are affected which will impact bot delays and delivery of good and services; This domino affects our ability to produce and create problems for customers if on-time sales are an issue. Switching to other suppliers is not viable for many businesses because developing relationships takes time; may weaken the existing network and most importantly may not be worth the focus right now – given that we don’t know how long this crisis will last.
Legal Ramifications In the face of multi-level disruption, CFO’s will need to manage legal ramifications; buying/selling contracts have to be reviewed and vetted again. Businesses are facing numerous delays, defaults and broken promises currently – and most arrangements only consider natural disasters as force majeure; not black swan events. The Corona Crisis may not be considered as an ‘Act of God’ from a legal perspective.
Shareholders: Our shareholders specific guidance in the face of this crisis – a visibility plan which businesses need to manage and communicate carefully. With limited visibility on the horizon some businesses may only guesstimate its top and bottom line.
‘Abundance of Communication’ maybe the most significant value addition for businesses (apart from cash) one can focus on right now. Communicating with employees, suppliers, customers and shareholders, so that everybody in the ‘family’ understands we are in this crisis together, will come out of it and build again – together.
