The Coronavirus’ Impact on Outsourcing Critical Cash and Liquidity Processes – And What’s Coming Next
With the exception of a few, the COVID-19 outbreak has been unlike any other previous crisis any of us have ever lived through. These are, in fact, unprecedented times.
As a result, companies are likely to have already seen:
- Substantial revenue disruption
- Liquidity concerns, despite the promise of funding from the Coronavirus Aid, Relief, and Economic Security (CARES) Act and the Paycheck Protection Program (PPP)
- Fear and uncertainty among employees, customers and other stakeholders, which is likely manifesting in irrational behavior and/or rash decision making
Because of the unique circumstances, traditional crisis response protocols will simply not be enough, and the recovery may be a lot slower than most would like or had initially anticipated. Preserving capital, therefore, is a number one priority, as it should be, for most businesses right now. And while this can come in a variety of forms, all of it comes down to how an organization tracks and manages their finances.
The first thing most companies have done (or should do) is ensure their revenue cycle – that is, their order-to-cash process or cash conversion cycle – is sustainable and that their outflow of cash – things like their accounts payable, payroll and debt service – is tightened. These seemingly simple financial protocols are harder to control, however, if those services have been outsourced to an offshore provider, particularly to India or other countries where the work from home infrastructure is making it hard for companies there to support critical business activities they had previously been contracted to provide.