Managing cashflow and working capital for South East Asia’s SMEs
10 June 2020: ICAEW’s South East Asia team explore how SMEs can recover and prosper in a post-COVID-19 world, with a particular emphasis on managing cashflow and working capital.
Hosted by Carlyn Lee, ICAEW’s ‘Managing Cashflow and Working Capital’ online session featured analysis of the macro and micro impacts of the pandemic on smaller businesses.
Guest speaker Tim Yu is a partner and head of financial advisory services at Mazars’ China operation, where he is responsible for deal sourcing and the execution of advisory and transaction support to capital markets in the Asia Pacific region.
During the session, Yu explored key challenges and opportunities facing SMEs throughout the crisis such as supply chain pinch points as well as several technological and online openings thrown up by the pandemic.
As a backdrop, Yu said that the region had been impacted like much of the world, with regional demand in the apparel sector witnessing a collapse of around 30%, while the automotive industry was hit hard following a 21-month decline in sales, but is now showing the first signs of a tentative recovery.
Yu outlined some of the financing initiatives SMEs may wish to consider, using China as an example. While the Chinese government is making funds available to businesses, so too are some of the country’s banks, which are pumping money into SMEs in the guise of working capital loans to help them overcome short-term challenges.
He also explored ways to accelerate cash conversion options such as factoring and supplier and customer renegotiations as a fresh approach to “recover together in this difficult time”.
Managing cashflow by restructuring staff remuneration, for example by tweaking taxable pay with lower-tax-rated allowances and benefits such as a car allowance or additional holiday, is one route to think about, said Yu, while an ongoing review of a firm’s asset management options can also be a useful way to throw up capital expenditure reduction wins. Companies should identify non-core assets potentially ripe for disposal to release funds, while another cash generator could be to exercise a sale and leaseback plan.
Yu encouraged SME owners to adopt the mindset of one of his favourite characters from history, French biologist and chemist Louis Pasteur, to benefit from his view that “chance favours the prepared mind”.