Faced with market fluctuations in corporate finance, how do you adjust your working capital strategies?

Understand your current cash position through financial analysis and working capital metrics. This will involve reviewing the balance sheet, income statement, and cash flow statement. After identifying key metrics, set target thresholds for cash reserves and monitor these levels daily to make sure the business keeps enough cash on hand to be sustainable.

Trying to balance the liquidity and cost dynamic, is extremely interesting, if not without its challenges! Liquidity risk is an asymmetric risk, in that the cost of being short liquidity far outweighs the cost of surplus liquidity. As a result this tends to drive behaviours towards retaining too much liquidity (with a cost). Ensure that you have a minimum level of base liquidity and improve internal reporting to ensure sufficient both cash flow visibility and sensitivities. One thing that is overlooked, is structurally setting up payment/receivable terms such that one can has sufficient flex valves for times of need. Alternative back up lines of credit/approaches (trade finance in particular), with a low/nil holding cost are invaluable.

Keep a close watch on customer receivables to make sure the business is streamlining payment collection. Establishing a clear (and preferably automated) invoicing process is critical to ensuring on-time payments are received from clients. Implementing customer credit limits and worthiness checks will also help protect your organization from lagging in working capital metrics. Offering incentives for early payment and flexible terms is also a great way to ensure timely collection. These strategies will help strengthen your company's overall cash position and reserves.

Renegotiating payment terms is a valuable measure, however wouldn't suggest doing this in "volatile markets" unless imperative - start the process in benign markets ready to face volatility. Also having alternative ways of helping suppliers to extend payment terms (Supply chain finance, deferred letters of credit and other payment instruments) will ensure that an optimal solution is achieved between you and the differing objectives of suppliers. It is imperative that it is a shared process, or ownership is with the people who have the ongoing relationship with suppliers to ensure optimal outcomes and goodwill is maintained. Using the payment tools above should make win/win situations viable.

Strengthen customer/supplier relationships by working closely on payment terms. This helps ensure a steady flow of goods and services for the business. Also, developing partnership programs to provide volume discounts to preferred suppliers is a great way to strengthen an existing relationship.