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Introduction
The worldwide spread of the novel coronavirus has had drastic effects on the economy. To think we’ve all had to live through such unprecedented change ranging from massive quarantines, school, and border closures, worldwide deaths to physical distancing in just under two years is overwhelming, to say the least.
Large enterprises, too, have had to make significant changes to protect their workers and financials to ensure business continuity. With most enterprises losing a share of their expected revenue, having accurate finances isn’t just an important task but critical to ensuring survival.
Amidst all the confusion, CFOs should suitably position the business by working closely with all stakeholders to identify and mitigate problems. This will help address larger issues across departments and optimize and fix broken processes. In addition, this would mend workflows and improve those needing attention with the transition to remote work.
But where do CFOs make that start?
This blog covers just that. So, let’s dive in!
1. Actions for immediate recovery
With the onset of COVID, businesses almost instantly suffered financially, operationally, and non-operationally. For example, a massive 140,104 companies stopped operations within the initial months. In addition, with supply chains getting disrupted, recurring revenue also took a hit. Hence, a CFO’s top priority for immediate recovery should be stabilizing cash reserves for the uncertain duration of the pandemic.
Listed below are three main actions items CFOs can implement for immediate recovery:
- Stabilizing the current financial position
Quickly quantifying the organization’s cash on hand and any forms of accessible capital is a great way to begin understanding one’s financial position. CFO’s should map out cash collections to their associated sales forecasts. If numerous customers/vendors delay payments, doubling down on these collections will ensure the company remains solvent.
If and when working capital becomes insufficient, CFOs need to consider tapping into lines of credit while also reviewing other opportunities to raise capital either through joint investments or, in worst cases, divestitures. Additionally, CFOs can seek relief on outstanding debts at the earliest to strengthen the balance sheet well before it becomes a matter of survival.
Another essential element for survival would be to tighten existing operational costs. With cash shortages becoming the new normal, saved money can significantly impact your margins.
- Evaluate and predict multiple risky scenarios
At a time of such heightened uncertainty, predicting multiple risky scenarios to prepare the entire organization would be a smart move. For instance, CFOs can predict the different directions in which the pandemic would progress and how this would affect each department in the organization.
Timely forecasts and predictions can help identify disrupted supply chains, employee distributions, and cash leakages. In addition, covering every micro and macroeconomic factor concerning the company would aid the executives greatly in making bold and informed business decisions to stay ahead of the competition.
CFOs can then train a few employees to interpret data accurately and regularly report triggers or new disruptive scenarios in the making. This can further aid in identifying broken processes that would not stand the test of durability when adapting to changing times.
- Over-Communicate to encourage internal compliance
CFOs need to take the lead in developing and enforcing a cash culture within the company. A cash culture refers to sustaining cash with a dynamic deployment method to help companies during a crisis. These practices and procedures must also be made clear to the board of directors/investors.
The goal is to enable every stakeholder to understand the pandemic’s predicted and actual effects. This would allow them to prepare for what lies ahead rather than being overwhelmed when it happens. Additionally, CFOs can ensure department heads relay the necessary counter-measures the company has taken to prevent the breakdown of operational and non-operational systems. Considering how many employees are remote, it’s best to invest in software to host webinars to make sure that CFO’s can communicate properly.
It would also be wise for CFOs to convey company happenings to investors. This would help them stay in the loop when addressing immediate needs.
2. Actions for Short-Term Stability
Once the company recovers from this immediate crisis, CFOs can position the organization to take on the new normal. The most crucial tasks here would be to ensure productivity improvements, clean up business financials, and strengthen financial planning and analysis.
- Start with improving financial productivity.
Companies need to pursue productivity improvements during this phase because it paves the way for growth during the recovery stage. A good to begin is by reallocating resources based on evolving needs of the business. Another would be to automate time-consuming and tedious processes like expense management, invoicing, and payroll processing. This would boost employee productivity, increase accuracy, and decrease errors and cash leaks.
Also, as a practice, huddle with your Finance and Accounting teams to understand the roadblocks they face. This could concern processes, workflows, tasks, and even sub-tasks in any financial operation. This will provide insight into what’s broken, what needs mending, and what to double down on to mitigate said roadblocks. Finally, map these challenges with business goals and priorities, and you’ll have yourself a list of things to boost financial productivity.
- Follow with cleaning up business finances.
When every saved penny could make a difference, businesses need to relook their financial situation and operational decisions to match the newly revised business goals.
While CFOs can lead this process, here’s a handy list to get started:
- Ask your Finance teams to regularly perform and report deep dives into your balance sheets. This ensures you are in the loop at all times.
- Guide peer executives in reviewing significant R&D, IT, and capital allocations to optimize investment portfolios.
- Ask department heads to present their departments’ expenses and take steps to optimize the spending.
- Automate crucial accounting and financial processes like spend management and payroll processing to ensure error-free reporting in expense data.
- Nudge Finance teams to go through the little nuances of expense data to derive cost-cutting mechanisms.
- Encourage teams to shift to automation technology to drive productivity and sustainable growth.
- Encourage teams to go beyond the available legacy software in the market. While legacy software stands out due to their brand, new and budding software genuinely understand and solve business problems.
While manually handling all this can be difficult for your Finance teams, modern spend management software can decrease some of these burdens. An expense reimbursement software adds a layer of accuracy and provides Finance teams 100% control and compliance over all things expenses. It also comes with advanced data analytics features that help Finance teams find cost-cutting mechanisms and prevent financial leaks.
- End with financial planning and analysis
Financial planning and analysis are at the core of any healthy business. Thus it is highly encouraged that CFOs drive change and process improvements here. A good start would be the introduction of FinTech tools into your business.
These tools will not only help you have a birds’ eye view of your finances at all times but will also provide you with critical insights to aid with planning and analysis. In addition, these collaborative tools and software can also monitor and manage key performance indicators and provide high-level metrics that can guide the decision-making process.
If your organization lacks executives who can train Finance employees to rise and take over these roles, you have two options:
- You can scout in the market for energetic and proactive people who could excel in the task. With the dramatic increase of unemployment in almost every sector, Finance teams might just be able to recruit the best talent out there that would’ve been harder to find previously.
- You can consider automating this process by adopting the appropriate technology at a fraction of the cost of employing someone. This would help save costs and bring an additional layer of accuracy to projects and the overall financial planning process.
3. Actions for long-term stability
Every company would want to move forward once the crisis has passed. Thus, CFOs would need to sit down with other team leaders only for strategic planning based on every insight gained from financial planning. Then, with support from the board, the team can plan to approach more investors or other channels that the company might want to explore in the future.
How can CFOs push for long-term change?
- Have a transformational mindset
Crises pose opportunities to reorganize parts of the business that require transformation. This one is no different.
The CFO and Finance department would greatly benefit from adopting a transformational mindset when setting targets, managing performance issues, allocating budgets, or setting expectations on business growth or revenue.
In addition, the Finance team should launch a review of each department to help them achieve the full potential of each business unit. The time is perfect for suspending incremental thinking and exploring transformational plans to boost revenues or reduce costs—not by 10 to 15 percent but by 50 to 60 percent!
- Adopt digital technology to boost productivity
This is the first economic disruption that has required entire workforces to perform their duties remotely, making digital collaboration tools a must-have. As a result, the Finance team’s digitization is not a one-time passing event but a mark of how an organization can ensure its sustenance.
CFOs would play a crucial role in helping teams leverage technology to automate and streamline financial processes. This active approach towards digitization would be invaluable for ensuring accurate reporting, sound decision-making, saved operational and business costs, and business sustainability.
Quick list of process automation CFOs can start with:
- AP and AR automation can free up cash flow while ensuring that invoices can be generated, reported, approved, and paid for within a single platform.
- Embracing cloud technologies like an expense report software can ensure more accountability in expense reporting, improve compliance with expense policies and reduce expense fraud.
- Payroll automation can help save Finance teams immense amounts of time by calculating all forms from payment, namely salaries, benefits, deductions, hourly wages, commissions, overtime or double-time charges, and raises in a matter of seconds.
Conclusion
CFOs need to lead with empathy and a sense of optimism in hopes that the organization and its employees will find ways to navigate through the crisis.
Establishing a financial decision-making framework backed by data and communication across the company ensures people are less distracted and aware of achieving business goals.
How long will this pandemic last? That is something we cannot say. But for what it’s worth, as businesses and employees try to adapt to the pandemic, a CFO can ensure that they thrive.
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