Cash Flow Discipline for Surviving the COVID-19 Crisis

As the COVID-19 outbreak developed gradually, organizations are experiencing or anticipating considerable operational, financial, and liquidity challenges. Although we all know that the outbreak will end and the world will get back to “normal” at some point, it’s going to be a while.


In the COVID-19 world, companies need someone in the role of Chief Financial Officer who brings more than expertise for financial analysis or the ability to compare forecasts with actuals, to flag areas of overspending and missed sales.

It requires a CFO who can offer leadership, perceptiveness, and problem-solving skills. 


Given the importance of cash flow in times like this, it is absolutely critical to know how much cash the company has on hand and how long that cash would last if managers do not cut expenses. The key first steps are to improve visibility into the sources and uses of cash, take steps to unlock cash from working capital, and optimize capital expenditures. Cash is King. 

Based on our years of experience helping businesses to survive during times of adversity, we offer the following 5 guiding principles, that we believe can help businesses persist the current pandemic times and prevail stronger at the end of the crisis:


1. Improve visibility

Short and accurate monitoring of cash planning is essential in every business. In a period of uncertainty, gaining control over an emerging crisis is a matter of weeks, not months. If you have a clear view of your cash flow and you can adjust it quickly, then you keep control. Based on our experience, we advise our clients to develop different scenarios and perform what-if analyses and be prepared to monitor the monthly cash flow forecasting horizon on a more frequent basis. This will give you a “big picture” look at your cash so you can make better, more strategic financial decisions. 


2. Free cash from working capital

Even the best-run organizations have opportunities to free some cash from working capital. Our clients should take action to protect their position and identify measures to improve it. This might include:

  • Work closely with suppliers.  Some major suppliers are likely to be exposed to bankruptcy during the COVID-19 crisis. Make sure you have available alternative suppliers for your key materials/services. Negotiate penalties in case of contract violations to reduce the risk of irrecoverable payments for materials/services. Renegotiate deferred payment terms and conditions, or optimize the use of early payment discounts.
  • Monitor and manage receivables. Since the recovery is going to be delayed and protracted, keep a close eye on your receivables. Stay close to customers by analyzing how demand might be impacted in this new economic environment, both by the customer and by the end market. Thoroughly managing receivables and quickly dealing with disputes can help mitigate the risk of payment defaults and delays.
  • Streamline capital expenditures. Consider ways to minimize non-essential outflows, such as discretionary spending, and defer capital expenditures.  Managers must be prepared to cut them almost completely should the need arise.


3. Secure regular sources of extra financing

Expand your network of banks or financing sources to secure additional lines of credit. In the near term, you might consider taking advantage of government loans and grants, to strengthen your access to cash.


4. Reduce enterprise costs

Given the austerity of the decline in demand and the need to preserve cash, we suggest our clients begin enterprise cost-reduction initiatives. SG&A and procurement are two areas where companies can reduce costs and gain efficiencies. The COVID-19 crisis also provides an impetus to adopting a virtualized shared services model. Outsourcing major functions within the organization, such as financing, accounting, IT, or legal can allow companies to shift high fixed costs to variable costs that can adjust with trends in the economy. 


5. Improve pricing discipline

The current pandemic outbreak provides the opportunity to catalyze and implement a rational pricing and organizational strategy. Consider that a one percent increase in price can yield upwards of 10 percent in operating profit in many cases.

Make sure your pricing strategy is based on an accurate calculation of the costs involved in providing the respective product or service. Your prices need to be aligned with the sales strategy as well. By applying a rational pricing strategy you will be able to plan sales in line with market dynamics, while at the same time being fully compatible with the cost structure and operational processes in your enterprise.

Although it’s debatable when the economy will start to recuperate from the impacts caused by COVID-19, it is not too soon to think about your organization’s future plans. CFOs can play a vital role in financing and positioning their companies for recovery, not only by implementing cost-cutting programs but most importantly by keeping on the course of initiatives that support long-term growth.


At CFO Insights, we have supported many companies to analyze their financial position and identify alternatives to achieve profitability. With the right combination of expertise, preparation, and actionable insights, managers can successfully direct their company through a crisis—and arise stronger. 

Contact us:,

   0885 29 69 76