"Everything counts during tough times"

Ramesh Subramanyam, chief financial officer, Tata Power, on five ways to conserve cash during a crunch

Published 9 years ago on Sep 26, 2015 1 minute Read
Soumik Kar

Explore all options: Determine which expenses can be questioned, reduced or eliminated without inconveniencing your established customers. Raise cash by selling obsolete inventory and non-performing assets. Eliminate low margin products or services. Outsource jobs if it makes sense or centralise functions to best utilise your people.

Scan every expenditure: Cutting back on discretionary spending is crucial. Expenditure should be incurred for only three purposes — unavoidable routine organisational needs, increasing productivity and investment for growth. For every expenditure question: Will the money spent yield a quick payback? Unless there is a quick return on investment, consider curbing all such expenditure.

Cash in on your reputation: For an organisation in crunch times, reputation can be its best friend or worst enemy. It can open doors in a difficult phase if it has lived up to stakeholder’s expectation in easy times. Stakeholders will remain with corporates which behave in an ethical manner when other companies’ products and services are available at a similar cost and quality. Stakeholders will always support your organisation in crunch times and keep availing your products or services when they have seen you through cycles.

Leverage your goodwill: Flowing from above, if your organisation’s reputation in the financial marketplace is intact, raising money wouldn’t be too difficult. If your reputation is sterling, service providers including banks would love to partner with a safe borrower and that means they would be willing to settle for a lower spread. Thus, you can negotiate better terms during a downturn.

Reward right behaviour: A company can face any tough situation if its employees rally behind it. It is important to define expected behaviour and then encourage that behaviour by rewarding it both with cash and in kind and in many cases just through praise. It’s like a virus which spreads across the organisation and the message goes out loud and clear that everyone is expected to do his bit. Whether it’s a big bang change or a simple everyday idea that save a couple of thousands — everything counts during tough times.