Winning in a Downturn: Rapid Cash Generation

The current crisis demands from businesses to take a close look to their expenses. As capital markets drew up, it is more important than ever, to take measures to preserve the viability of the business. In several cases it is inevitable, to concentrate on cost savings.

Here a short article, which explains the needed steps.

“As the economic crisis worsens, speed is of the essence…. The key to generating cash quickly is to approach the problem from many different directions – leaving no stone unturned and taking fast action on a number of fronts at the same time” – Winning in a downturn, The Boston Consulting group

How to Rapidly Generate Cash

In their report  Winning in a Downturn: Rapid Cash Generation, the authors deal with measures to improve the financial stability of a firm. They observe that, as the global downturn deepens, many companies see a sharp decline in revenues and some of them face problems to maintain their cash position.

These companies need to find creative ways to cut costs and to generate cash, without putting the future viability into danger. They suggest a framework, which allows businesses to overall costs without putting their core business strength under pressure.

They suggest simultaneous actions on a number of fronts in a top-down effort driven by senior management.

The study proposes that initially companies should balance its cash resources with their cash consuming costs and expenses to identify the needed cost levels. With this information in mind they should calculate a series of downturn scenarios, and define reduction targets for each scenario. They suggest the following detail-level activities to identify cost saving measures:

  • Rethink current activities, with the objective to reduce cash consumption without harming the cash generating parts of the business.
  • Revisit strategic initiatives, as the basis for them might have disappeared
  • Remodel the R&D Portfolio, and make sure, that just the 1/3 winning ideas receive support, and perhaps some question marks. You should ascertain to stop the projects, which will not have chances to generate short-term profits.
  • Renegotiate supplier contracts, while you have in mind to not harm your supplier network.
  • Check and optimize assets, and make sure the operations work efficiently.
  • Streamline operations, and remove inefficiencies.

After you have defined cost saving needs and cost saving ideas, you need to create a prioritized action plan, and execute on it.

Weiterführende Informationen

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