Neil Robertson Jun 9, 2020 4:04:00 PM 14 min read

5 Steps for CFOs on the COVID-19 Commercial Front Line

Today, every senior financial manager is focused on ensuring the long-term health of their business and wherever possible, the retention, safety and wellbeing of all of their staff.

This is a very challenging task and whilst the best strategy will be different for every business, conserving and managing cashflow will be at the top of almost everyone’s agenda.

There is no longer any doubt that the global economy has already entered a severe and deep recession and the severity will continue to grow until “lockdown” restrictions are eased over time. Until then, no one can accurately forecast which businesses will rise from the “lockdown” ashes or how many of those will survive in the longer term.

CFOs are now on the commercial “front line”, and the business decisions they make over the coming weeks will, for some, be the difference between survival and failure.


Reducing costs:

Unless you happen to be one of the fortunate few that are fully insulated from the recession, CFOs must make the painful decision to reduce corporate overheads to extend their cashflow runway. For many, this will start with reviewing the payroll costs, as whilst furloughing helps in the short term, it may be simply delaying the inevitable and consumes available cashflow in the process.

The real challenge is trying to estimate the likely corporate revenue stream over the coming weeks and months and the level of staff resources each business will require to support it. The more cost that is removed, the longer the cash runway, but cut too deep and the business may struggle to meet the demand.

The first critical step is to make a decision and do it now. For many, this will have to be a judgement call as there is simply not enough information to do anything else. The goal is to save the corporate patient whilst retaining as many people as possible. Delaying the decision simply reduces the available cashflow with each day that passes.


Step 1. Micro-management of cashflow and payments

For many CFOs, their cashflow predictions of future revenues will be, at best, an educated guess.

As a result, accurate and timely financial management and cashflow information have never been a higher priority. The pre-epidemic monthly financial reports – delivered one to three weeks after month end – are not going to suffice.

In the ideal world, CFOs need to gain real time visibility of their cashflow commitments and take control over all corporate expenditure before it takes place. This enables them to keep their finger on the cashflow pulse and avoid all unnecessary expenditure.

Unfortunately, for many businesses, the implications of remote working have disrupted their predominately manual accounts payable processes, forcing the implementation of “workarounds” to keep the wheels turning, but this has resulted in less robust processes and considerable delays.

Find out why accounts payable management is so important during COVID-19

These issues are being compounded by increased supplier credit control (calls chasing payment) and a growing reluctance of suppliers to increase their exposure to the growing risk of bad debts. Based on previous recessions, many suppliers will mitigate their bad debt risk of late-paying customers by demanding cash-with-order, which is always detrimental to cashflow management.

The second critical step is to review how well your accounts payable process is performing with staff working from home and the impact that is having on the ability to control and manage all spend, pay critical suppliers on time and deliver timely financial and cashflow information.


Step 2. Working from home

Every business has a responsibility to protect their staff. It is clear that COVID-19 will be with us for a long time and until either an individual has contracted it and survived, or there is an effective vaccine available in sufficient quantity to protect the masses, there will remain a large number of individuals that are high risk, or live with family members that are high risk.

Forcing these staff to commute and come into work becomes literally a “life and death” decision for them and, irrespective of the moral implications, the jury is still out on any potential legal liability that may represent.

Every individual will make a decision on the level of risk of exposure they are prepared to take and businesses must review their current working practices to accommodate that decision, wherever practical.

For most office-based workers, the new SaaS technologies and applications will facilitate remote working, usually extending the functionality of existing core applications to achieve this (including current ERP / accounting software). More importantly, most of these applications are inexpensive, fast to deploy, easy to use and usually increase productivity for everyone involved.

Find out how to ensure your AP function is ready for remote working

The third critical step is to recognize that, however unwelcome any additional expenditure may be, every business must evolve to the new world order to keep their staff safe.


Step 3. Increasing productivity

Every recession, historically, has provided the catalyst to increase productivity, prompting businesses to achieve more with reduced resources or postpone the need to add additional headcount through automation.

In times of growth, every business accumulates a certain amount of “fat” as they focus on delivering revenue growth (it offers the best returns on investment). As a result, other areas of the business often lose out on automation, reflecting available funds and resources.

In a recession, the reverse is often true as every CFO recognizes that reducing costs wherever possible is now easier and faster than finding new sales and most will have already started working through all of their suppliers, contracts and other expenditures to find those savings.

Often, investment in back-office processes like purchasing and accounts payable has been overlooked, seen as just a necessary cost of doing business through the good times.

Find out how technology has changed the role of finance from a cost center to a revenue creator

However, as businesses look to achieve end-to-end spend management, address the need for key staff to work from home, deal with growing pressure for timely payments from suppliers and meet the board’s requests for more accurate and timely financial management and cashflow reporting, every manual purchasing and accounts payable team is going to struggle to deliver on these increasingly business-critical demands.

The fourth critical step is to review and identify areas of the business where relatively low-cost investments, both in terms of time and money, will deliver significant productivity benefits to the business in the short, medium and long term.


Step 4. Maximizing and managing the effectiveness of spend

As with productivity, the commercial good times lead to less focus on getting best value on what the business purchases. This results in multiple suppliers that offer the same goods and services – reflecting individuals’ preferences – and an ever-increasing workload for finance to account for them. The larger the business, the more this trend applies.

CFOs should now consider a far better way of working: buying more from online suppliers.

We all know why we individually buy online from organizations like Amazon: it is convenient, offers better choice, highlights similar products from the “marketplace” competitors to get best pricing and, more often than not, products are delivered in the next day or two.

For smaller businesses, a very significant proportion of the high and low-value purchases can be bought from Amazon Business and other suppliers, and the benefits of this approach are considerable.

By setting up or using an existing Amazon Business account, registering users and automating the entire online buying and accounts payable process, businesses can radically reduce the number of suppliers they use (and the associated work), pay less for the majority of what they buy, delight users with a great purchasing experience and significantly increase the productivity and visibility of the entire process.

Should you be buying more online? Click here to find out

Most importantly of all, it provides the CFO with total control over every purchase before it is made and incorporates the cash commitment into the cashflow reporting as soon as the order is placed.

For larger organizations with revenues above $10m, CFOs should also investigate the benefits that “digital procurement” now offers them.

Historically, unless a business had revenues above $50m, it took too much time and effort to try to identify exactly what it spent in each category to tender for lower costs, as the only source of this information was held on invoices (specifically line-level information) and usually stored in a filing cabinet. The investment in time and resource outweighed the savings available.

But by digitally capturing the header and line information from every invoice processed, it is now both much faster and easier to identify significant savings across almost every aspect of spend. Whether businesses have their own procurement specialists or use external resource, every business can both identify and then deliver substantial and recurring savings.


Step 5. Rethink purchasing

So the final critical step for CFOs is to rethink the way their business purchases high volumes of low-value items (that consume so much of their accounts payable resource) to:

  1. take total control over all spend before it happens,
  2. to save money on what they already buy and
  3. increasing the productivity of everyone involved.

Whilst there is no single magic bullet to help CFOs meet the current challenges, every business will benefit from decisive decision-making that ensures a rapid business evolution to meet this brave new world we are all entering.


Want to learn more about cashflow and spend management and ensure your business is able to weather the current storm? Download our free white paper: Top 6 ways finance professionals can control spend to find out more.

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Neil Robertson

Neil has a 39-year track record of building successful direct and channel global software businesses predominately in the financial software market place. Neil Robertson is Executive Chairman of Compleat Software. A 39-year veteran of the financial software marketplace, Neil has a long track record of building disruptive start-ups into successful businesses, including his time as CEO EMEA of Great Plains where he built the business outside of the USA from 1995 - 2001. Compleat is no exception and perhaps the most disruptive of them all.
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