An Article by
Director – Texas Ventures ( www.texasventures.us )
COVID – 19, the viral infection has destroyed the world and has toppled the Economy. It has impacted certain sectors such as Service, Retail, Pharma, Health Care, Telecom, High tech office goods & Food processing up to 20%, Automobile, Construction, Infra, Consumer goods, Logistics, Apparel & Leather up to 30% , Oil and gas, Aerospace, Air and travel, Insurance and Hospitality up to 50% .
Humankind is in midst of a deep global crisis. Perhaps the biggest crisis of our generation. We must act quickly and decisively. We should now decide on short and long term action plan to overcome the threat & challenges faced in business. A big boom of opportunities will emerge in the year 2021 once the economy is back on track. For which we should gear up to restart the business with stronger systems and run with innovative ideas.
We have to perceive that we have not completely eradicated the COVID – 19 virus but trying to arrest the community transmission. As an organisation leader you are very important to the family and the company. Never ever attempt to overrule the safety precautions. Take utmost care to distance yourself. Avoid going to crowded places, social gatherings and meetings. Follow all the precautionary measures such as wearing mask & hand gloves, use sanitizers frequently whenever you move to other places. Avoid travel by public transport and strictly adhere to government guidelines.
Besides sticking to safety norms in work place, we have to follow certain norms at home to safeguard our family. When you return back home after work / travel, keep your footwear and other belongings away from others. Discard your clothes in soap water and take bath before you enter the house to prevent infection spreading to your family members. Ask family members to avoid going to crowded places, social gatherings and travel by public transport. Eat healthy food and do indoor exercises like Yoga. Buy and stock required food items and important essentials like medicines. Educate Domestic staff and ensure that they follow safety precautions.
It is necessary that the employees of the company to strictly follow certain precautionary measures. Employees who have already left for outstation and travelled back during or after lockdown, might be affected by COVID-19 which they / we may not know. As a precautionary measure every employee should be checked thoroughly on day one before entering the office/factory for temperature/cough/cold. The procedure shall be continued for the next 15 days and monitored. All the regular safety procedures like washing hands, wearing masks and PPE’s should be strictly enforced. Advice them to maintain social distancing inside and outside the factory. Daily meetings are to be conducted before the shift to educate employees about all the safety measures to be followed in and outside the factory. Check with all employees whether they have come in contact with any COVID-19 positive persons and is there any positive case within 5 KM radius of his/her stay during lockdown period.
There will be many challenges in business to face. Starting from cash flow disruption such as delay in payment from customers, demand for advance from employees to meet their family commitments, demand from suppliers to manage their start-up issues, payments to EMI, TNEB, ESI, EPF, GST and other Government taxes. There may be shortage of employees due to extension of lock down period in certain states / regions, absenteeism of immigrant workers due to travel to their native places, poor turnout of employees due to fear to re-join or resignation of employees and demand for settlement.
There can be shut down of suppliers and transport delays too. It is our duty to start now to clean the machines and keep them well lubricated, start warm cycle in case of CNC machines and other equipment, ensure availability of spares and service support from equipment suppliers.
It is the right time for the organisations to plan to face the challenges. Allocate budget and reserve cash for a quick start, anticipating poor receivables. Assign a contingency fund, anticipating poor order booking during next 3 months. Prepare a P & L budget for 2020- 21 forecasting poor revenue due to various uncertainties and under utilisation of capacity, this will help you to identify & plan for cost reduction in any non performing asset (Manpower / Materials etc.,). It will also help in approaching your bankers immediately for additional working capital. Build a plan to prioritize and protect valuable customers, understanding what matters to them and how their situation will evolve and change your production plan accordingly.
We have to adapt the changes in work place like identifying activities that can be executed from home, support this by providing facilities like Laptop & Internet. Improving sanitation and increase hand wash facility, insist social distancing during tea and lunch break, re-organise production lines with social distancing and bring in additional PPE to prevent transmission of virus.
There are certain initiatives related to cash flow that has to be followed such as focus on collecting overdue bills, factorise receivables (Bill Discounting), explore business which can give immediate realization of payments, understand current available cash flow and plan deployment for the next 3 months. Prioritize production in accordance to the customer needs , plan to buy smaller batches of raw materials to reduce inventory, liquidate non moving inventory, identify bad paying customers and stop working for them, identify products / process that can be out sourced to manage shortage of manpower and set up cash war room / dash board to improve cash transparency and implement tighter cash control.
On the verge of COVID -19 taking over the world, we have to take some hard decisions like fixing more deliverables with senior management, pay cut proportionate to reduction in sales / profitability, tough negotiation with suppliers to meet discount expectation from the customer, improving speed of decision making and implement discipline in all areas, cut in any kind of additional perks, entertainment expenses etc., and plan for automation to reduce manpower and improve efficiency. If any problem persists with the current supplier, now explore alternative source. We can also move from the comfort zone and explore opportunities in alternate business.
During this snag period, the entrepreneurs should ensure to engage the employees through online e-learning, group meetings, brain storming etc., and prepare them to jointly fight the crisis. Instruct purchase department to contact all the suppliers / sub contractors and ascertain the readiness to resume supply and also share with them the priority of supply required. Advice the sales department to redo the contract / PO, also tell them to be in touch with the customers.
Let us collectively fight this pandemic to win over this Economic Crisis.