Stubborn inflation, interest rate hikes, supply chain disruptions and – until recently – collapsing banks. Market volatility is becoming a bit of an understatement. In this article, we’re looking at five essential tips for effective cash flow management in the face of volatile markets and how you can market your firm as the right accountant partner.
Read on to learn more and navigate the volatile markets of 2023 and beyond using insights from INAA.
1. Supplier surveys
Identifying and maintaining strong supplier relationships is integral to running a successful business. With careful investment, businesses can court favour with manufacturers or wholesalers to access new products, preferential rates and even the odd freebie.
However, suppliers are also a source of vulnerability. Unforeseen circumstances overseas can cause mass disruption in your market if your supply chain isn’t resilient enough. Data from the IMF found that more homogenous supply chains were at risk of losses when disruptions. So, advise clients to conduct an audit on their supply chain’s health and gauge its resilience in the face of sudden shocks.
2. Diversify suppliers
Following on from our first tip, if clients find that their current supply chain partners are less than ideal, it may be time to explore new options. Migrating to more local suppliers, even if at a premium, can present added advantages, like stability and the convenience of using the same currency.
Similarly, diversifying suppliers means clients can re-evaluate their current supply chain set-up and test whether they’re really getting true value for money. In fact, Asia (particularly China) is seeing a steady decline of its share in the global value chain as businesses look to establish new supply networks elsewhere.
3. Diversify revenue streams
When seeking refuge from volatile markets, clients should also explore whether entering or expanding their presence in new markets or verticals could be worth it. Some examples include offering subscription fees, leasing assets or developing new products or services.
While it may seem counter-intuitive, clients could find that new markets/verticals offer more consistent revenue flows that enable growth. What’s more, doing so means clients are able to withstand economic shocks in their home market more effectively and expand their brand awareness long-term.
4. Explore different payment methods
In the FinTech age, businesses have a wealth of potential payment options, meaning there’s more ways than ever to help customers pay on their preferred terms. For example, client contacts may have more discretionary spending powers when using their corporate credit card versus the usual invoicing process. Exploring different payment methods can mean unlocking new revenue streams and improving cash flow management thanks to instant payment technologies powered by open banking.
Similarly, according to the 2022 Worldpay Global Payments Report, digital wallets have overtaken cash and card payments in both e-commerce and offline POS systems. So, if clients want to stay liquid and cater to consumer needs, they need to keep up and offer payment methods that people know and trust.
5. Contingency planning
Finally, clients should create a business continuity strategy and plan contingencies if something happens to their organisation or industry directly. Essential features of business continuity strategies include:
- Impact Analysis: Specifying time-sensitive business functions and obligations.
- Recovery: Outlining steps to recover and resume critical operations.
- Organisation: Identifying who is responsible in such scenarios.
- Training: Defining how to execute the wider plan.
A clear contingency plan ensures stakeholders have confidence that the business can operate (if even on a reduced basis) and maintain consistent cash flow management during an emergency. This way, the business can cover essential operational costs and navigate a crisis with minimal impact.
Learn more about cash flow management with INAA
Volatile markets aren’t the only thing that make cash flow management difficult. There are a host of other business challenges that can affect an organisation’s cash flow and profit margins.
If you’re interested in finding out more about the current trends in the accounting industry and ways to market your firm as the right accountant partner, be sure to take a look at what the INAA can do for you. You can discover the benefits of INAA membership here, or apply for your membership on our join us page.