From a Financial Leader’s perspective, their role is arguably one of the most important during a crisis; not just from a strategic business perspective, but a people leadership one too – it is potentially one of the toughest. The Coronavirus pandemic has taught us that quick thinking and fast acting is essential during a crisis, to stabilise and control financial assets and ensure that the business recovers quickly. And all of this has to be done whilst the situation is fast changing, complex and volatile.
There are so many uncertainties to navigate through and eventualities to plan for. This is not just in terms of immediate cash availability, other key considerations include; the impact on supply chains, the security of the business, changes in customer demand, what government assistance there is, debt funding, capital investments and sale of assets.
Finance leaders are a crucial part of navigating an organisation through a crisis of any kind. They need to be prepared, plan as much as they can, whilst remaining agile. They must be flexible to try and forecast for all eventualities, communicate with stakeholders at all levels internally and externally, whilst leading the organisation through critical and challenging times.
Coronavirus has highlighted some critical things that finance leaders need to do in order to prepare themselves for any future crisis that may arise. It is vital that they build resilience within the finance function to try and mitigate the risk of any future uncertainties. We have taken a look at the market, what finance leaders have been doing during Coronavirus, and considered what practices finance leaders can put in place to ready themselves for any unprecedented crisis that they may find themselves in in the future.
Whilst the Coronavirus crisis was fast in its approach and its effects thrust upon businesses without much warning, what it did teach us was the need to step back in times of uncertainty to try and plan as much as possible when a crisis hits a business.
It is important that when any organisation is faced with such a situation, that finance leaders take the time to map out what the key threats are to the organisation, operationally, financially and from outside market influences. They then play a key role in influencing and sharing these finding with the SMT and relevant stakeholders. As a finance leader, you may have different opinions to other leaders on what the immediate threats are and what key actions need to be taken. That is why these should be discussed and agreed as soon as possible.
It is important to understand who will make decisions and what your role as finance leader is, in developing an action plan. Find out what information the CEO will need and what you need to prepare in order to make informed decisions.
You need to be able to think outside the norm here and develop plans that are agile with the full knowledge that they may need to change as the situation develops. What you plan for may never happen or what actually happens might be so unforeseen that you couldn’t have prepared for it in advance. It is important therefore to build an agile plan, be prepared to deviate from it or change it and stress test it to ensure that it can withstand the difficulties that you and your team might face.
Focus on cash flow
Optimised cash reserves and reduced costs have been a key focus for finance teams throughout the Coronavirus pandemic, and they will always have an important part to play during any crisis.
The phrase ‘Cash is King’ is never more important during times of uncertainty. Cash flow forecasting should be done regularly, if not daily and finance leaders should be keeping an eagle eye on cash reserves. It is vital that you understand sales forecasts, cash collections, what payments are due to be collected, what outgoings can be deferred and where you might be able to raise capital should cashflow become a problem.
Knowing this information in real time will enable you to make decisions on sales and marketing, operational activity, and resourcing during the challenging and uncertain circumstances.
Financial Planning and Analysis
Financial Planning and Analysis was key for many businesses in helping them continue to navigate through the vastly uncertain times that were brought about by Coronavirus.
When a crisis hits, budgeting and forecasting must be at the forefront of activity in your team. This will ensure that you have continually updated information on how the business is performing in order to make informed decisions. Pre-crisis budgets and forecasts will need to be revised and continually updated as the crisis unfolds. Real time, in depth reporting will be crucial for you as a finance leader to be able to react quickly to any shifts in business activity or market conditions and help you to guide the business through the coming months.
During a crisis, it is likely that there are multiple possible outcomes, risks and scenarios that the business might face. In order to be able to act quickly to changing circumstances and any threats to the organisation that may arise, it is imperative that you plan for multiple eventualities.
You should prepare at least two scenarios for each eventuality that your organisation may face. Consider what might trigger each key action so that you have clear, pre-planned interventions ready for when changes do occur.
The use of technology to automate processes and help provide the finance function with real time information is nothing new to the world of business. However, it was perhaps something that all businesses were not considering in their immediate pipeline. What the pandemic has taught us, is that the speed at which that information can be provided to business leaders is critical in a crisis situation.
Whilst it does surmount to investment in the short-term, the long-term savings of building automated forecasting and collaborative dashboards, could be invaluable in times of uncertainty and crisis, providing finance leaders with the ability to react rapidly to swift market changes. It is an investment worth making, and one which will likely save you money in the long run.
Open conversations with the entire organisation
As a finance leader, your voice is probably one of the most important in the business during times of uncertainty. You will be making decisions on department budgets, operational activity and possibly resourcing. And some of the decisions you will make or assist in making, will be tough. The likelihood is that these times of crisis will be very unsettling for employees within the organisation.
It is vital that you communicate plans to try and overcome anxiety, but also to ensure that your team, and the rest of the business know what the plan is for moving forward. They need to know the importance of cash flow and cash reserves. This will help them understand why it matters and what part they play in your future plans.
Lead from the front
At a time of crisis, managing the psychological impact on your employees is crucial. It not only ensures that they are of sound enough mind to be able to do their job efficiently, it also lets them know that you care and that they are looked after. It is important that you consider the challenges that your team are facing as a result of the crisis and what you can do to support them.
Make sure you are checking in with your employees, not just about their workload, but also just how they are doing in general. Encourage a supportive environment within your team and provide opportunities for employees to speak up in a trusted environment if they are struggling. Be flexible where you can and provide clarity, not just on your expectations, but on how the crisis is unfolding too.
And make sure you take care of yourself too. The uncertainty of a crisis can make you doubt your own abilities and can lead to a large amount of fatigue and stress, making it difficult for you to process information and make sound judgements. Be kind to yourself, even when things don’t always go right. Confide in your line manager and make sure you take time to look after your own wellbeing too.
Post crisis analysis
It is important for you and your team to constantly learn what you did well and what you didn’t, after every intervention if possible. Don’t be afraid to make mistakes, especially if you are taking a few risks. The situation is likely unprecedented, and you can’t and won’t always get things right. The important thing is that you evaluate both the good and the bad so that you can learn and improve from it.
A well-managed crisis can improve share value and some of the most successful businesses that emerge from a crisis evaluate their methodology and interventions so that they are continually learning and improving.
For more insight into how Covid-19 has effected the Accountancy & Finance sector, or to discuss any recruitment requirements you may have within Accountancy & Finance, please contact Lee Bhandal on 07590 529 274 or firstname.lastname@example.org