MORATORIUM IS ENDING, PLAN YOUR CASH FLOW NOW

Malaysia government has announced a six-month moratorium on loan repayments and the restructuring of outstanding credit card balances starting April 1, 2020 and will end on September 30, 2020. This is an initiative by the government to relieve the burden on businesses and households affected by the Covid-19 outbreak.

Cash flow is crucial to business or individual financing survival. Having ample cash on hand will ensure that creditors, employees, and others can be paid on time. If a business or person does not have enough cash to support its operations, it is said to be insolvent and a likely candidate for bankruptcy should the insolvency continue.

Let us figure out how we should plan our cash flow ahead to ensure we survive this post-moratorium period.

A. Control your expenses

Develop financial forecasts for both “best case” and “worst case” outcomes post-moratorium. Based on the forecast, you can plan on how you can manage your cash flow by controlling your expenses. The unnecessary expenses can be prevented by having the financial forecast. A good cash flow management plan starts with a wireframe to organize your budget. If you cannot measure it, you can’t manage it.

B. Manage your cash flow "Needs" vs "Wants"

One of the most challenging aspects of budgeting is separating wants from needs. Many people mistakenly categorize certain items as “needs” because they can’t imagine life without them. A good example would be consuming a cup of coffee from the branded coffee chain store that may cost up to five times or more of a homemade coffee. When push comes to shove, many of your needs are actually wants. Cut overspending to increase cash flow. Thus, it is crucial for you to identify what is needed to spend on. Differentiate your cash flow between needs and wants.

C. Manage cash flow by increase liquidity

Liquidity generally refers to a business’s ability to meet financial obligations as they come due. In other words, does the total cash flow of the business exceed its total liabilities, such as loan payments, on a month-to-month basis? Even if the answer is no, there are several ways a business can increase its liquidity to meet these obligations. Businesses can shed unnecessary assets to increase liquidity. Businesses often hang on to assets that no longer generate a profit. If your business is still holding on a vast number of stocks, the most straightforward route is to move excess inventories and put them on sale. Bring out the slow-moving items from your stock room, mark them down, and put them on the sales floor. Yes, doing so will minimize profits, but it will help you free up space and increase your cash flow. Thus, allowing you to restock on trending moving items and rebuild your profitability while maintaining competitiveness and relevance.

Thanks to the Government for their fast action on the onset of the Covid-19 Movement Control Order by instituting the automatic loan moratorium, which was helpful to both businesses and individuals’ tide over the impact of the Covid-19 at its peak to a certain extent. Now, it’s our role to plan for our cash flow ahead to ensure we survive through this post-moratorium period.

Visit our website to find out how jomSETTLE can be the solution for you to ease your cash flow.