Over the past several months of the first waves of disruption due to COVID-19, CFOs and finance teams have worked nonstop to lead organizations through the immediate crisis. But while we’ve flown through the initial turbulence, there are indications that more dips and bumps are coming.
The coronavirus has changed so much of the economy and business landscape that it will be nearly impossible to return to business as it was; that pre-COVID landscape no longer exists. Instead, changing market conditions should drive companies to adjust traditional planning and budgeting activities to plan for the next normal.
Influenced by the last several unsettling months, financial leadership should look to build permanent speed and flexibility into forecasting, planning, and resource allocation processes by incorporating new tools and decision-making protocols into F&A’s daily work. It’s time to shift the focus from uncertainty and reactive cash conservation moves to building resilience and preparing for resurgence. Get started with these five tips for accounting management.
- Set Multiple Business Scenarios
While many companies already perform some level of scenario planning, a post-COVID world will be easier to navigate if scenario planning is embedded into the existing accounting management and core planning processes. Build three or four scenarios that can guide the team with more agility and flexibility in the planning process and company response as the effects of the pandemic continue to unfold. Consider a scenario which includes a rapid rate of recovery for greater market share, and another with a slower rate that prevents the company from growing any faster than the economy does. From there, create operating plans with clear KPIs that can help guide the team if you reach specific crossroads between scenarios that indicate a need to switch tactic.
- Maintain Gross Margins
It’s a strong knee-jerk reaction to want to slash prices in order to achieve the desired sales volume. However, this will not protect gross margins, which are critical for the long-term success of the organization. Tighten pricing controls instead, sacrificing volume for margin where it makes sense. Business volume will eventually pick back up; if margins are cut too soon, they may not return to pre-COVID levels.
- Reinvest Savings in High-Impact Business Areas
Resist the urge to put all the company’s savings toward the bottom line; a smarter move is to invest in the future of the business by looking for strategic investments that can help accelerate a rebound when the economy is ready. This is the time to look at technology upgrades—such as digitization for accounting management and beyond—as well as investments in marketing efforts and staff training.
- Replicate Good Disruption Practices as Best Practices
Many finance teams switched from a monthly or quarterly cash forecast process into a weekly process to maintain oversight and agility in a rapidly changing environment. Several are finding this weekly process so helpful they’re making it a standard practice rather than a crisis response. Catalog all the new processes put in place to manage during COVID-19 and consider optimizing and operationalizing them into ongoing best practices. Consider weekly collections, accounts receivable aging, and cash forecast reviews that will let you see trends earlier and react before there is a cash issue. Institutionalizing best practices adopted during the crisis can help finance leadership ensure company success in the next normal.
- Progress Digital Transformation
Many companies fast-tracked their digital transformation plans when quarantines and shelter-in-place orders forced workers into remote setups. If you haven’t done so already, now is the time to make progress on your own digital transformation plans, such as adding a cloud-based ERP and other accounting management tools. Refining various elements of the finance function’s navigation system—tools, KPIS, and protocols—can support changes in forecasting, planning, and budgeting.
Course Correct With the Right Accounting Management Software
Even once your recovery strategy is established, finance leadership needs to ensure it remains constant or, if necessary, changes to fit emerging new directions. Continue to check in early and often with management on strategic direction and outcomes from other initiatives. With the right information from accounting systems, CFOs can continue to evaluate liquidity and risks in order to support new initiatives or prop up existing ones, providing better insight into how much longer until the company emerges on the other side.
It’s not too late to stand up new solutions to help your business navigate the current and coming turbulence. The right business software services can be powerful investments into your business’ future, saving money long-term while reducing inefficiencies and growing revenue. Let the experts at PositiveVision help you get the right tools to take your organization successfully into the next normal. Talk to one of our software experts now.