COVID-19: KPMG urging UAE companies to improve cash flow
As the effects of COVID-19 continues to impact organisations around the world, KPMG urges those in the UAE to improve their cash flow.
Following a recent report conducted by KPMG in Saudi Arabia, the leading provider of audit, tax and advisory services in the Kingdom outlined four fundamental steps for companies to make in order to build a robust cash management strategy and safeguard the future of businesses.
The report highlights that companies, regardless of industry or size should gain visibility and control over cash flow. KPMG explains that companies should make use of 13-week rolling cash flow forecasts prepared on an expected receipts and payments basis, by business line and jurisdiction.
“During the current challenging times, a robust level of preparedness and proactive response can help businesses navigate through these unprecedented times. Though cash management often is regarded as complex, it does not have to be this way, commented Fuad Chapra, Head of Family Business at KPMG in Saudi Arabia.
Chapra also advises that companies consider working capital needs for overall business requirements for the foreseeable future.
“Consider your working capital strategy holistically. Our experience indicates most businesses can drive improvement and unlock cash from at least one, if not two areas of the working capital cycle, which includes trade receivables, inventory and trade payables,” added Chapra.
He also recommends that companies address slow-moving and obsolete stock by examining forecast production requirements, the need for buffer stock and SKU assortment, in order to avoid unproductive inventory tying up cash. Companies should also review trapped and illiquid cash within the group structure and use treasury pooling structures for more effective use of available cash.
The document further recommends companies to review the tax efficiency of operations and make use of any opportunities offered by the government to defer or reduce payment, while ensuring potential refunds are pursued.
“Cash is key to the survival and growth of any business. Gaining visibility and control of cash flow, and optimizing working capital can help a company to provide a buffer against unexpected market shocks and release cash to deal with rising costs,” Chapra concludes.
SEE ALSO:
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- Read the latest issue of Business Chief, EMEA edition, here
For more information on business topics in the Middle East, please take a look at the latest edition of Business Chief EMEA.
