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Mohit Daga, Founder – Mohit Daga & Co shares his advice on how to manage cash flow during the period of Covid19 crisis

The COVID-19 pandemic is rapidly putting startups in a novel situation. Needless to say, thelockdown has affected businesses across the country. At this time of crisis, entrepreneurs should consider the following practices and strategies:

Do a reality check on your Business – The companies who are profitable and scalable are often funded more. At this point in time, you need to see where your business belongs.Entrepreneurs should analyze their businesses, what operations they are doing, and what kind of working capital they will need to run the business. Approach the VC’s only if you can convince them that yours is a scalable and profitable business. The chances of such companies getting funded are more. Companies who don’t have scalable model as of now should avoid looking for funding.

Classify the expenditure into three parts – ‘Necessary’, ‘Good to have’, and ‘Luxury’. Examine each cost and identify the Luxury costs, which while adding to the burn, are no longer creating value. For Eg if the rental is not necessary cut down on the rental cost as now we know how to work effectively from home. This is an opportunity to make your company self-sufficient. Cutting down on the non-essentials expenditure is the need of the hour.

Cutting jobs should be the last option – Decide under what conditions you can retain employees. For the resources that are “good to have” rather find out creative ways to utilize them. Try to share the resources with the other startups. This way you can maintain the cash runway which is very critical at this point in time. Discuss unpaid leave, salary cuts, etc only in the worst-case scenario. Salary roll out should be the priority. EMI and loans can be paid after three months. Re-distribute work to your permanent workforce.

Keep the communication Active and Transparent – Communication is now most important between all the parties. Keep your employees informed about all major decisions. Any impending shifts in the organization’s strategy should be shared with the team proactively and with clarity to avoid anxiety. You can pay your logistics staff a little more if required to boost up their morale as they are out in the field serving people and helping your business to run during this crisis situation . They need more appreciationduring this time.

Re-do your strategies for next three months – Focus on the strategies on how to scale up the business, how to retain customers and how to cope up with the cost. Focus only on the variable cost and avoid fixed costs. Not all capacity creations require money – some require time, effort and management bandwidth. So re- looking at the strategies is very important for the future. Try and innovate with your current sector and come up with products/services that can be relevant. Don’t suddenly jump into essential goods/FMCG because it’s in demand. Make sure you have the right expertise and there is a requirement.

Debtors Management – Don’t go legal for the next few months in case of any delay in high ticket payments from your customers. Just stick to following up over email and calls. Chasing is the only best approach in this situation. You will waste time and money if you seek legal help.

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