Enterprises strictly manage cash flow and make use of all financial resources

Friday, Sep 17, 2021 09:00

Work is carried out in Thanh Thanh Cong Group's sugar plant in Thanh Long Farm in Chau Thanh District, southern Tay Ninh Province. With a planned finance backup, the group stay strong even when it had no revenue for the past three months as of COVID-19. — Photo courtesy of the

As the Delta variant of COVID-19 spreads, significantly disrupting production, firms are either experiencing or anticipating constraints on cash and working capital.

In this regard, enterprises have to strictly manage cash flow and make use of all financial resources.

Mohammad Mudasser, Deals Director of PwC Vietnam, said cash flow scrutiny was crucial for businesses which were seeing their revenue decrease.

In addition, PwC Vietnam said delayed receivables collection and earlier payment settlements have resulted in tightened cash flow for many businesses. Therefore, managing cash pressures in uncertain times is vital.

Mudasser said: “We are living in extraordinary times where business as usual is being redefined. In a disrupted world, cash flow control becomes critical. A Treasury function can help prioritise future spending based on operational necessity, evaluate alternate financing mechanisms (like supply chain finance) and use data and analytics to enhance transaction/credit risk management."

At a seminar to seek solutions to manage cash flow and maintain liquidity in difficult times, many experts and entrepreneurs agreed that tight cash flow management, creating good liquidity along with mobilising all financial resources are very important for businesses at this time.

Nguyen Thai Hanh Linh, deputy general director and CFO of Bibica Joint Stock Company, said that in the past few months, Bibica's revenue has dropped sharply, while production costs under the "three on-site" model, logistics costs and employee support costs have increased.

Considering liquidity and cash flow management as key, then firm has applied a centralised cash flow management model, where subsidiaries transferred all cash flows to the parent company which would divide into two to serve the current production and business demand and to reserve for investment and development after the pandemic.

Linh said: “We cannot use up the existing money to maintain operations, and then when the pandemic is over, there will be no capital for development, reopening businesses and subsequent strategies. So we always have a reserve.”

In another case, Phu Nhuan Jewelry Joint Stock Company (PNJ) had to close 90 per cent of its stores and had almost no revenue for the past two months.

CEO Le Tri Thong told local media that cash flow to maintain the company's operations in the past few months was not small, however, thanks to the forecast and provisioning of scenarios in advance, the firm has solutions to turn cash flow quickly as it has worked with domestic and foreign partners to make them pay early since April and May.

Thong said though there was no revenue, it has completed the annual plan from June.

Also thanks to the forecast from the beginning of 2020, Thanh Thanh Cong Group has restructured all business activities, especially corporate governance. The company has also created provisions and reserves to be able to use during the pandemic.

Dang Van Thanh, chairman of group, compared the back-up to dry food that helped the firm stay strong even when it had no revenue for the past three months.

Thanh said: "When the market was stable, the group participated in bonds, promissory notes of banks and we sell them to solve shortfalls in cash flow and create good liquidity for subsidiaries.”

Thanh said in corporate governance, financial management was important, helping to manage financial resources for businesses.

He added: “A leader who controls and manages good corporate governance will not let businesses fall into too difficult a situation.”

As not many enterprises can create backup financial sources themselves, Nguyen Quoc Bao, chairman of Thanh Cong Mobile, said: “Businesses need to create good liquidity to access banks,” adding to create good liquidity they could reduce profits and prices of items so that partners could more quickly pay for them.

Economist Le Tri Hieu said the lack of cash flow has impacted liquidity of hundreds of thousands of businesses, leading many to close.

Besides the backup funds or bank access, the more important thing was to have a plan in the next six and next 12 months, said Hieu.

At the same time, Bao, chairman of Thanh Cong Mobile, said firms should exploit all other financial resources like friends, partners, joint ventures or equitisation of capital.

Bao said: “Working with many people is better than working alone. That's a way for businesses to save themselves instead of relying too much on bank loans."

He added businesses should create close relationships with investment funds, large customers, and securities companies so that they can support businesses. In addition, businesses also step on the stock exchange to create cash flow for businesses in the long run, not only to deal with the current pandemic. — VNS

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