How Nigerian Businesses can increase Cashflow amidst ongoing FX pushbacks and rising Inflation

Angela Obilom
5th September, 2022
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Rising inflation, surging devaluation, and a currency crisis have created an unprecedented situation for business owners in Nigeria-managing and growing cash flow is becoming tougher daily.

The combination of these factors has made it difficult for businesses to manage their daily operations, including paying bills, making payments, and dealing with vendors. to manage their cash flow.

The situation is more alarming than it appears. 

Businesses are struggling to meet their desired cash flow requirements as the dollar to naira rate keeps changing every time you turn around. 

As a result, many companies are:  

  • finding themselves struggling to cover daily operating costs in a bid to keep up with rising prices. 
  • are forced to keep increasing their prices in response to rising inflation rates.
  • becoming susceptible to even lower revenues.
  • saddled with increased taxes and increased interest rates.

In the face of these challenges, a business has to be innovative, creative and think out of the box. It is therefore essential that businesses seek ways through which they can increase their cash flow amidst ongoing inflation and FX crisis.

Here are some steps that businesses can take to stay afloat in this unpredictable environment. These tips provide insights on how to mitigate the effects of Inflation on their cash flow.

Leverage Overdraft to boost Cash Flow

Explore an over-draft facility with your bank, if you do not already have one. Nearly all commercial banks in Nigeria offer overdrafts to businesses. From Wema Bank to Providus Bank, Standard Chartered, Stanbic, First Bank, UBA, GTB, etc. Overdrafts are good for backups when rainy days happen in your business. 

Use Technology to Monitor Expenses and Identify Inefficiencies.

You're bound to miss certain details if you're working manually, no matter how diligent you are. Automate key processes, especially receivables and payables. Why is this important? Because you’ll be able easily to detect oversights and omissions and decrease the number of errors in your process. You’ll also increase employee productivity since automation speeds up work. A good example of this is the use of accounting tools to automate financial operations. See how finance teams integrate Duplo with accounting software to automate payables and receivables. 

Identify and Remove Bottlenecks in Revenue Collection

It’s not enough to close deals and make sales. Shaking hands at the negotiation table does not automatically mean money in the bank, in the same way, having a large subscriber base, does not equal actual revenue. It is essential that your clients, customers, and business partners pay you with ease. Therefore, reduce to the barest minimum whatever issues they may experience when it’s time to pay for your goods and services. 

Reduce or Eliminate Bad Debts 

You may recognize that your business has a bad debt problem. Bad debts can occur when a client is yet to pay for services, goods, or products and you end up having to write it off as bad debt. 

Be proactive about retrieving debt collection even if it means giving discounts on debts that are about to go bad. 

Consider Invoice Financing 

Invoice financing is a short-term loan that allows businesses to run their operations for a short period of time. It can be a great way for businesses to improve cash flow and reduce the amount of debt that they have. In fact, it’s one of the most popular forms of merchant cash advances in the world today.

Invoice financing can be used for a variety of purposes, including:

  • To purchase inventory
  • To make payments on existing debts
  • To cover temporary cash shortages

The process involves tendering a verified invoice for cash advances. The main reason for this is that invoices can be used as collateral in many cases. This means that you don't need to give up any equity in your business when taking out an invoice loan, which is normally the case with other types of loans.

Duplo is testing out a Cash Flow Financing product. Join the wait list here.

How can companies quickly recover from the impact of forex issues on cash flow? 

Foreign exchange policies in Nigeria are daily becoming more stringent and organisations are finding it more difficult to get the needed funds to transact with international partners and suppliers. No one can promise a permanent fix to these issues. A few companies are rising up to proffer solutions to help as many businesses as possible. For example, Duplo now offers an International Remittance service for companies that have passed certain compliance requirements. 

Click here to request this service.

The Nigerian economy as seen even on the global scene is going through a rough patch as the global economy is experiencing a major slowdown. Our advice to businesses against the backdrop of financial market challenges is to remain steadfast. Don't lose sight of your business goals, and don't be tempted by short-term profits that may prove to be detrimental in the long term. 

As long you stay flexible and open to new ideas, you should be able to stay afloat no matter what challenges arise. Ultimately, business sustainability is heavily dependent on the ability to adapt to the times.

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