The document discusses managing finances during an economic crisis. It notes that the present scenario includes an economic slowdown, falling stock markets, potential liquidity crises for companies, and high debt burdens. This will impact businesses through cash flow issues, managing overhead costs, achieving competitive sales prices, and recovering outstanding customer payments. The document provides advice on dealing with the crisis by eliminating emotions, stopping cash bleed, getting help from professionals, budgeting and implementing plans, focusing on cash sales, managing pricing, controlling costs, and exploring alternatives to generate income. Case studies demonstrate using marginal cost concepts to improve pricing and profits.

1. Managing finance during the crisis
handling present scenario
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Organised by Al-Tijaarat al-Raabehah

2. Present scenario – economic situation
• Economic slow down
• Stock market index – 25% down
• Many companies will have liquidity crisis
• Huge debt burden
• Possibility of layoffs and salary cuts across
• Rampant filings under Insolvency and Bankruptcy Act
• Creditors to take a major hit
• Situation during lock out and post lock out

3. Impact on our business/finances
• Cash flow crisis
• Managing overheads
• Achieving sales at competitive prices
• Recovery of customer outstanding
• Handling debt commitments
Manage Overhead costs
Increase sales by competitive pricing
Recover outstanding's

4. Different business levels – Different problems and solutions
• Tier 0 : Day to day business - Persons operating without shop – bakra/thela
• Tier 1 : Small shop – 1 to 4 employees
• Tier 2 : Midsize Business trading/supplies 4 to 8 employees
• Tier 3 : Large trading business with agencies and distribution – 10 to 16 employees
• Tier 4 : Midsize manufacturing / processing / service business 15 to 35 empoyees
• Tier 5 : Industry / Supplies / Agencies with services /huge inventory etc above 50 employees

5. Characteristics of the present crisis
• Physical damage – health concerns
• Staff may suffer from confusion, friction, pressure or stress
• Key staff may not be available
• Difficulty in carrying out usual daily activities
• Financial constraints

6. Characteristics of the present crisis – Positive side
• Will bring about immense opportunities
• One needs to capture opportunities
• Opportunities are never lost – someone takes it
• When market opens up after lock down, demand surge
• World came out during GREAT RECESSION
• Government spending will boost economy – funds injected in the system
• Deficit financing

7. How do you deal with the crisis
Eliminate emotions
• No need to brood over loss opportunity
• have positive approach
• Don’t be depressed – you cant make good decisions
Breathe
• Be calm and relaxed
• Take the bull by the horn

8. How do you deal with the crisis
Stop the bleeding
• Cash flow analysis
• Find out cash bleed areas - expenses
• Areas where losing
Get Help
• Professionals to guide
• Funding options

9. How do you deal with the crisis
Budgeting and Implementing the plan
• Budgeting is half done
• Identify essential and non essential expenses
• Cut down non essential expenses
• Eliminate wastage
• Trim cost
• Set priorities
Focus on Cash sales rather than credit sales
• Recovery will be challenge
• Lower sales vs Bad debts

10. Key factors to be considered
• Cash flow management
• Income generation – explore alternatives
• Pricing mechanism in crisis situation
• Cost control
• Credit management

11. Cash flow management
• Plan strict cash flow budget for the next six months
• Sell unused or unwanted assets – no emotional attachment
• Create liquidity – Cash is king
• Focus on recovering old debtors
• Try barter to settle customers outstanding dues

12. How to finance the Business requirements
• Carefully plan the financial budget for the venture
• Keep initial infrastructure cost low – Rental vs Self owned
• Smaller place/Smaller scale
• Expand as your grow
• Keep overheads – fixed cost - minimum
• Keep contingency
• Check available savings
• Plan should keep in mind the resources available
• Start at a level which can be managed within means
• If need be take financial partner who is willing to invest
• Risk is distributed

13. Income generation – explore alternatives
• Give surplus premises on rentals
• Outsource/lease excess capacity to other manufacturers
• Take work on job work basis – reduce working capital requirement
• Think of backward or forward integration – Example Talcum Powder
• Think “Out of Box” for new ideas – Ola, Flipkart
• Try franchisee arrangements – Take or give – like KFC

14. Pricing mechanism
• Sometimes lower prices fetch higher sales
• Improved bottom line
• What is important is the bottom line
• Marginal cost concept to be used for pricing
• Ensure that overheads are covered
• Keep you afloat

15. Case Study – Marginal cost concept to improve bottom line
Item Qty Rate Amount
Sales 10000 10 100000
Raw material 10000 6 60000
Factory Rent 5000
Fixed Salaries/wages 45000
Loss -10000
Scenario 1
A manufacturer has following sales prices and costing and overheads

16. Case Study – Marginal cost concept to improve bottom line
Item Qty Rate Amount
Sales 40000 8 320000
Raw Material Cost 40000 6 240000
Factory Rent 5000
Fixed Salaries/wages 45000
Profit 30000
Scenario 2
A manufacturer decides to slash price by Rs.2 to Rs.8 and can then sell 40000 units

17. Cost control
• Zero based budgeting
• Retain essential cost only
• Weed out non essential cost - reduce level of transport facilities – train against air travel
• Reduce working hours if idle time for employees – you save on electricity and other office cost
• Give option to employees – shorter hours reduced pay – as against no pay at all.
• Enforce leave rather than encashment
• Tax savings – GST – by proper planning - Compositing scheme

18. Moral of the story
• Have faith
• Need determination
• Be Honest
• Believe in Yourself
• Invest in Yourself
• You can’t go wrong