Respond – Recover – Thrive

Webinar on Covid−19 − Addressing challenges

around working capital management and cash
flow during and after lock-down
April 2020
Resilient leadership in uncertain times

We are in the middle of the mother of all “black swan” events in recent times as COVID-19 takes the world by complete
surprise with an impact like one has never seen before. While the full effect of this pandemic on businesses is still unknown,
the current focus is primarily on protecting employees, understanding the risks to business and managing business
disruptions caused by efforts to contain the spread of COVID-19.

Finance and liquidity availability is the life blood of any organization. The key decisions that you take in this
regard during these trying times, would form the basis to secure your organization’s resilience.

Any organization would have to consider its actions in three stages:

Finally, when the recovery is

The recovery phase where the
The immediate time horizon, complete, building capabilities
businesses will be differently
where every businesses but that will help organizations thrive,
impacted based on the goods and
for essential services is including in better responding
services they provide and the
impacted evenly to any crisis that may arise
geographies they operate in
in the future.

In this session, we will touch upon elements of the response strategy that leaders may like to consider while addressing the circumstances facing
their organization. Recommendations are primarily focused on helping organizations putting in place the groundwork to enable them to develop
forecasts in an agile manner to keep the business running, generate and preserve cash and most of all keep the lights on through the crisis.
©2020 Deloitte Touche Tohmatsu India LLP. Respond – Recover – Thrive 2
Managing working capital and cash flows during crisis
Agenda for our conversation

Build structure and framework for agile Minimize supply side disruptions through
forecasting re-imagined payable processes
• Make it cross functional and collaborative • Identify suppliers essential to operational
lines of business
• Model the impact of all working capital
levers to assess cash-flow impact and • Prioritize share of business based on credit
preserve liquidity arrangements
• Build forecasts for expected crisis tenure • Maintain transparent communication with
across impacted lines of business suppliers
• Determine cash & cost saving levers to • Evaluate alternate financing mechanisms
minimize impact

Optimize liquidity through effective Keeping the lights on

receivables management • Activate continuity plans for finance
• Work with customers to maximize cash flows operations

• Enable with information and empower • Humanize payroll and employee

frontline salesforce to expedite collections reimbursements

• Evaluate alternate mechanisms to liquidate • Lite touch management reporting

receivables • Analyze contract obligations to minimize
• Consider tax reliefs provided by the exposures
government. • Understand insurance and residual exposure

©2020 Deloitte Touche Tohmatsu India LLP. Respond – Recover – Thrive 3

Build a structure and framework for agile forecasting
As uncertainty rises, it is important that businesses are proactive in assessing the impact and their capability
to withstand disruption. Adopt agile planning and forecasting as part of your Covid-19 response strategy.

Own your narrative

• Paint a data driven and collaborative picture of the current reality
• Chart a compelling future with a path forward that your stakeholders can support and rally around

Speed over elegance

• Rapidly articulate different scenarios and model projected financial impact
• Decisive action enabled through insight is more essential than getting it perfect

Embrace the long view

• Stay focused on what's on the horizon to instill stability and confidence in the ecosystem
• Plan for agile ways out of the valley faster and stronger

Get a handle on contract risk and other exposures to be mitigated

• Examine contract exposures such as penalty, lock in, and variable consideration clauses
• Understand insurance and residual exposure

©2020 Deloitte Touche Tohmatsu India LLP. Respond – Recover – Thrive 4

Build a structure and framework for agile forecasting
Seek an reinforce solutions that align to your purpose and yet protect financial performance

Establish cross functional teams

• Form a cross-functional core working group responsible for leading the organization's response

Work on a common platform for consistency, speed, and decisiveness

• Work on cloud to enable access to everyone and anywhere - even when working from home

Have the right balance between detail and agility

• Optimize granularity - focus on key actionable drivers
• Carry out agile forecast refresh for changes in demand
• Identify available levers and determine actions to take

Build scenarios for expected crisis tenure across affected lines/territories of business
• Carry out agile forecast refresh for changes in demand
• Minimize supply side disruptions through identifying essential and at risk suppliers
• Model working capital levers to assess cash-flow impact and preserve liquidity

©2020 Deloitte Touche Tohmatsu India LLP. Respond – Recover – Thrive 5

Minimize supply side disruptions through re-imagined payable processes

Cash conservation through compensation

Modify cash compensation programs and evaluate alternatives that help protect cash and retain talent. Equity
in lieu of cash, Incentivised bonus deferral, flexible structures to align with virtual working model, Encourage
employees to exhaust accumulated leaves etc.

Trimming overheads and diligent spending

• Stagger non critical procurements and agree special terms with suppliers for critical procurement
• Reduce exposure and liaise to defer committed costs (Rentals, asset leasing, service leasing etc.)
• Review standing instructions and recurring payouts based on criticality

Recalibrate capex spend plans

• Revisit capital expenses that can be postponed, extended (useful life), reconsidered etc.
• Convert fixed costs to variable. Identify commitments and engage with service providers to reduce exposure
• Liaise with the Government for sector specific support and subsidies

Assess insurance coverage as mitigation against contract exposure

• Examine penalty, lock in, and variable consideration clauses in contracts.
• Evaluate insured risks across the organisation and obtain additional insurance if required.

©2020 Deloitte Touche Tohmatsu India LLP. Respond – Recover – Thrive 6

Optimize liquidity through effective receivables management

Segment customers and engage from a receivables management viewpoint

• Segment mapping based on clusters and businesses not deeply affected by the pandemic
• Encourage cash discounts for on time / collection ahead of credit period
• Explore alternate and differentiated revenue models including Omni channel capability to keep engaging
• Pre book customer orders to lock future revenues and increase visibility

Rescaling operations to match supply and demand situation

• Rescale operations to optimise cost commitments for the short to medium term.
• Move outsourced activities in-house to supplement the wage bill and avoid cost to service providers
• Effectively manage the credit terms with the suppliers and customers to optimize cash availability
• Futures or forward contracts at competitive prices for currency / key materials basis market situation

Augment digital collection methods

Enablement of digital collections, information availability for early payment discounts, last-mile inventory
visibility, orders for driving planning efficiency and taking calculated risks on credit limits

©2020 Deloitte Touche Tohmatsu India LLP. Respond – Recover – Thrive 7

Leverage available channels to provide adequate liquidity

Explore deferral of certain statutory payments where possible

• Deferral of income tax payments given relief provided by the government by way of a reduction in
interest rate on delayed payment as it will not result in loss of tax deduction

Explore regulatory options available for efficiency in cash management

• Apply for a lower withholding tax certificate to improve cash flows
• Review the arm’s length price that may have been agreed earlier with related parties.
• Review revenue recognition for any downward revision on account of lockdown resulting lower tax outflow
• Evaluate tax effects of short-term supply chain changes - examine FTA options to rebalance imports.

Evaluate alternate fiscal mechanisms to improve liquidity

• Access instruments to improve liquidity like factoring, bill discounting and source credit from Banks/NBFCs
• Increase or maintain cash credit / working capital limits
• Explore debt refinancing at lower interest rates to lower interest burden and outflow
• Avail moratoriums on capital repayment and EMI deferment as made available
• Money market instruments - Commercial Papers and Banker's Acceptance
• Wherever critical, explore secondary loans / subordinate debts from NBFCs at high interest rates

©2020 Deloitte Touche Tohmatsu India LLP. Respond – Recover – Thrive 8

Keeping the lights on

Activate continuity plans for finance operations

• Ensure finance system readiness to effectively manage remote operations.
• Align outsourced service providers’ business continuity plan with that of the organisation.

Humanise payroll and employee reimbursements

• Revise calendar/process to simplify the process of reimbursements, CTC claims, and tax-proof
submissions.

Introduce lite touch reporting

• Agree on a lite reporting pack and revised period-end calendar to realign with business and finance
capabilities.
• Ensure compliance with the Companies Act – related-party transactions, deposit norms, loans and
borrowing, and transactions within group companies.

©2020 Deloitte Touche Tohmatsu India LLP. Respond – Recover – Thrive 9

Managing working capital and cash flows during crisis
Questions and answers

©2020 Deloitte Touche Tohmatsu India LLP. Respond – Recover – Thrive 10

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This material is prepared by Deloitte Touche Tohmatsu India LLP (DTTILLP) for the specific purpose of a webinar for Covid19 - Addressing
challenges around Working Capital Planning and Cash Flow Management on 2 April 2020. This material (including any information contained in it) is
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