Cash in, cost out and bold moves


April 2020


Building on what we have seen and learnt from past crises, we’ve gathered key insights on how to safeguard cash, adapt your cost base and potentially make bold moves (if you have the financial strength) to help your organisation through the COVID-19 crisis and beyond.

Safeguard your cash position

Organisations face hard realities and tough choices during a crisis. Experience from past crises has shown us that liquidity is one of the first issues to arise – indeed many small and medium-sized companies have cash reserves on hand for less than 30 days of operation when revenue disappears. Employees, suppliers and creditors all need to get paid, even in a crisis. Being fast and persistent is key in terms of your inventories, payables, receivables and CAPEX budget.


The majority of companies are too slow at adjusting their sales forecast and keep producing finished goods that they can’t sell. However, even with an adjusted sales forecast, there is often a lag in supply chain replenishment, meaning that many companies continue purchasing raw material as if nothing was wrong. Creating a pessimistic sales forecast and driving this back into the supply chain early on is often a prudent way of avoiding excess inventory.

Thinking innovatively about your inventory can also help you get cash in hand fast. In the past, Junckers – a Danish solid wood floor manufacturer – took a creative approach to their inventory when times were tough by turning slow-moving stock into an opportunity to launch a direct-to-market channel. These items were pushed out directly to consumers at an attractive price to avoid excess stock. Junckers increased cash reserves fast while launching a new sales channel.

Payables and receivables

The principle and rationale are simple: pay your suppliers later and get your customers to pay earlier. But this is far easier said than done and requires strong leadership as well as close dialogue with suppliers and customers. You can ease these negotiations by increasing the frequency of contact points. Set up a team to clarify who your priority suppliers are, which suppliers should be approached (based on their payment history and terms) and ensure close supplier dialogue. If there is a continuous dialogue with your suppliers, it will be easier and feel less confronting to negotiate later payments. At the same time, ongoing contact with customers will make it easier to be rigorous about collecting receivables.


Review your budget, investment needs and approval processes. Do not continue investing CAPEX as planned. Instead, take a granular approach to CAPEX by splitting it into maintenance (what you need to keep running) and efficiency and growth (what you can defer). Do not sign off on investments in efficiency and growth and review all investments on a case by case basis. This approach can reduce your capex by two-thirds during a crisis and make a huge difference to your cash flow.

Control and align costs

Being vigilant about adjusting your cost base to your business activity level and expected revenue drop is essential to keeping costs aligned and under control.

Variable costs

Companies are often quick to adjust their variable costs. Start by creating a cost overview and establishing central governance of all costs. Prune your cost items and adjust them to new revenue levels, for example by reviewing shifts and deciding on new stock levels in alignment with new projected sales levels.

Fixed costs

In reality, even fixed costs are variable. But this is an area that many companies struggle to find a quick and optimal solution for – particularly in terms of fixed salary costs. We’ve identified three generic forms for salary cost reduction:

Salary cost reduction - when to use which methods

In addition, now might be the time to be bold in terms of pushing digital and virtual solutions to drive efficiency and cost reduction in the fixed salary domain.

Making bold moves

Some companies are fortunate enough to enter a crisis in a financially strong position. For these companies, the crisis could be an opportunity for driving an M&A agenda, winning new customers or being a good citizen and helping more vulnerable suppliers and businesses stay afloat.


M&A is a big bold move. Industry consolidations that were previously difficult could now become increasingly plausible as counterparts are more willing to enter talks and merge to benefit multiple parties. If you have strategically important suppliers that are struggling, this could be the time to consider vertical integration to create a win-win situation, if your company has the financial strength to do so.

Ensure long-term loyalty and capture commercial opportunities

We often see companies with financially strong positions helping suppliers and maintaining customers by being generous in their offerings, particularly payment conditions, and not asking for anything in return short-term. This builds good relationships for the long term. Long-term loyalty relations are often built during a crisis, because companies typically remember when you help out in tough situations. So, it’s worth considering the customers and suppliers you want to keep long term and investing in them – particularly in the crisis. The crisis could also create specific opportunities to win new customers or secure favourable discounts from suppliers, for instance by renegotiating purchase time and frequency or guaranteeing to purchase a certain volume.

Speed and proactivity are key

In summary, a crisis can be a powerful catalyst for improving cash flow management, fixed cost alignment and even gaining commercial ground – but you will need to be fast and proactive. And even, a little creative.