Six Tips from UAE Accountants to Improve the Cash Flow of Businesses Post COVID-19

We must accept that the business community has quickly learned to adapt to and live with the challenges posed by the COVID-19 pandemic. We have successfully managed to stay afloat during the first wave of the pandemic by significantly cutting down unwanted costs such as travelling, shopping, higher rents on the lavish offices, and other entertainment expenses. The lessons that we learned to contain the shockwaves extended by the COVID-19 is a lesson that we can apply in times of uncertainties, especially for managing the cash flow.

Professional accounting firms in Dubai advise businesses to focus on efficiently managing the cash flow issues within the organization to wither the storm created by uncertain times. Cash flow is a major concern for business on a day-to-day basis, especially for SMEs. The issue warrants high attention if the times are not too rosy as the business owners may have a tough time handling their working capital to order new supplies and products, pay for employees and contractors, and cover overhead expenses while still investing in the business. The task is tough but you can still manage to sail your boat ahead with good control if you can manage to incorporate the following cash flow tips:

1. Analyze the Cash Position

The owners need to understand the real cash situation in the company and also analyze how it might change in the future. This accurate understanding of the real cash position in the organization gives the ability to pay for any arrangements or loans. This understanding involves cash flow forecasting and you not only need to know the operating margins but also how much cash will be left at the month’s end. This recommendation is particularly applicable to businesses that opted to defer payments such as rent that may have resulted in huge liabilities.

2. Focus on your Supply Chain

Supply chain issues pose a huge risk for businesses of all shapes and sizes during unusual times. You may be working with a manufacturer or attempting to order finished products from third-party firms and a crisis like COVID-19 could easily disrupt the cash flow.  What you need to do is to look closely at the supply chain risks and minimize their impact on your business. Your suppliers may be experiencing delays or maybe running out of stock. Such issues need to be detected and addressed at the earliest. Work with the best accounting firms in Dubai to ensure that you have a robust system to manage the supply chain risks.

3. Liquidate Obsolete Inventory

Have a look at your inventory and take a stock of what assets you have and what you don’t need. You need to focus on getting rid of the products that are unlikely to sell such as novelty items. Offer big discounts on such products or sell such items by grouping them with other high-demand goods. This strategy will give the customers a higher motivation to make purchases when supply chains are having major issues. Chartered accountants in Dubai also recommend reselling such low-demand items to other vendors or even a wholesaler at a discount.

4. Delay Payables Smartly

Delaying the payment to suppliers is often a recommended way to efficiently manage the working capital in your company.

However, there is a risk inherent in this approach and this strategy needs to be implemented with careful consideration. If your company decides to delay the payments your relationship with the supplier is likely to turn sour. A bigger risk yet is that the supply chain partners would be deprived of the cash they require to maintain their operations which may lead to issues in delivery and quality. The best Chartered Accountants in Dubai advise you to talk with your suppliers in situations like these and reach an agreement acceptable to both parties.

5. Expedite Receivables Urgently

During normal times companies don’t bother much about the receivables especially if the economy is booming and cash flow is not a big thing to worry about. However, if supply chains are facing a risk, then cash flow management assumes significance and you need to be concerned about how your receivables are being managed. You may be thinking about delaying payments to the suppliers, but your customers may also be thinking of doing the same to you. What you must do at this point is to enhance the intensity of your collection process. Think about customer-specific payment performance and watch out for companies that are likely to alter their payment practices. Stick to the basics such as timely and proper invoicing because errors in billing lead to delays in receiving payments. Outsource your accounting needs to experienced accounting firms in Dubai as professional assistance would add greater value to your business when you most need it.

6. Look for Alternate Revenue Sources

Businesses need to try all the best available options to keep their cash flow healthy during trying times. Chartered Accountants in Dubai recommend you to look for non-traditional or alternate revenue streams that may minimize the risks in cash flow. If the strategies you implemented for the company’s growth are under pressure now, you could replace the revenue sources either temporarily or permanently. For instance, if international markets are no longer bringing you revenue, you can focus on the domestic markets. The hospitality industry in Dubai is a bright example of this strategy as the domestic tourists turned out to be a great source of revenue for the sector during the COVID-19 pandemic. The hotels in Dubai also successfully experimented with ‘staycations’ instead of ‘vacations.’

Recommendations from Best Accounting Firms in Dubai

COVID-19 has changed the business landscape around the globe forcing the companies to devise strategies to keep their cash flow healthy. The businesses in Dubai have quickly adapted to the situation by incorporating efficient cash-flow management strategies. The companies need to make cash flow management an integral part of their COVID-19 risk assessment and action plan. Outsourcing the accounting process to the best accounting firms in Dubai such as Jitendra Chartered Accountants (JCA) is the best solution for this.

JCA has the best auditors and Chartered Accountants in Dubai and has years of experience in delivering high-quality accounting & book services to businesses of all sizes. JCA’s accountants extended robust support to the clients by helping them manage their cash flow efficiently. JCA recommends the companies to actively evaluate their cash flow requirements, develop robust actions under various scenarios, and assess potential risks in and to their customer base and supplier network.