The Role of CFOs in the Pandemic


The COVID-19 pandemic and its related financial impression introduced a wave of unexpected challenges to firm monetary leaders, forcing many to make tough and strategic selections with a view to stay in operation as companies round them shuttered. In reviewing these companies that stay afloat, it’s clear that many elements contributed to the companies resiliency, however one fixed that was seen in practically all companies which can be surviving and even thriving throughout this pandemic was being able to adapt shortly. For a lot of CFOs and different finance and accounting professionals, that capability was made potential by superior monetary software program. Earlier than we dive into successful options, lets get a grasp of the hurdles accounting departments had been confronted with on the onset of the pandemic.

One of many biggest challenges seen was the drop in income due to the compelled closures, which negatively impacted money flows. Companies had been pushed to search for further sources of funding, wherever from financial institution debt to PPP loans. One other impediment CFOs confronted was the necessity to fully reforecast the remainder of 2020 because the scenario developed. Finance leaders had been formulating 10-20 fashions within the first two months of the pandemic an exercise that often solely occurs an on annual or quarterly foundation. Moreover, fast price reductions had been wanted to assist protect money flows, nevertheless it was tough to strategically assess which areas to cut back as leaders didnt know the way lengthy shutdowns had been going to final.

To chop or to not lower

Not all finance leaders responded the identical. Some companies selected to tackle substantial debt, whereas others adopted inflexible austerity measures mixed with substantial cost-cutting with a view to keep in enterprise. Those that selected to make reductions did so in several methods. Some suffered from a demise by a thousand (enterprise) cuts, which means that as an alternative of chopping as soon as and chopping deep, they did a collection of cuts over time. Whereas this may occasionally have appeared like a measured strategy, the draw back is that if issues dont get higher and your organization must proceed to make extra cuts, worker morale will plummet as they begin to query when their job may be subsequent to go. Others ended up ready too lengthy, subsequently shortly depleting money reserves, making it tough to remain afloat till issues rebounded. Some went too far and lower strategic investments or high-performing workers with out contemplating the long-term results. Doing so left the enterprise hobbled and unable to resist the pickup in demand when issues began to come back again round.

Probably the most profitable firms had been those who lower early, lower deeply and lower as soon as. These companies began out by evaluating low performers the underside 10% of individuals that aren’t performing to firm customary and dont have the potential to assist the enterprise post-pandemic. Different areas that had been trimmed had been non-essential or luxurious objects (like workplace perks), non-revenue producing and even administrative in nature. Nonetheless, a finance govt have to be very strategic and assume long-term when potential. For instance, say you’ve a bunch of gifted individuals in R&D. Although they may not be offering fast worth throughout a downturn, when issues normalize, this expertise may be tough to recruit again or you could end up within the place of getting to rent a completely new R&D staff. Recruiting and onboarding usually have substantial prices, which means the layoffs of the present staff and having to finally substitute them may in the end find yourself costing your group greater than preserving them on workers within the first place. When making tough cost-cutting selections, particularly involving expertise, finance executives ought to take into account the lasting impression such a lower will make. That R&D staff you thought-about chopping may assist to develop new merchandise, strategic weapons that will provide you with a aggressive benefit when enterprise comes again.

Good companies additionally made certain that they rigorously strategized communications when making cuts. With workers working remotely, administration doesnt have the flexibility to fulfill in particular person, making it tough to gauge worker sentiment. On the identical time, written communications like company-wide emails have their limitations — workers shouldn’t have the flexibility to see management and their physique language or hear the tone of their voice, which may result in misunderstandings or hypothesis about how the enterprise is definitely performing. Its important for CEOs and CFOs to have a communications technique to make sure that everybody from high to backside is on the identical web page. Companies that made this a key focus fared higher by way of worker engagement in contrast to those who didnt. These well-performing enterprise leaders conveyed confidence, not desperation, when discussing this case with workers. They had been capable of strike the proper stability of telling the reality about enterprise uncertainty whereas additionally sustaining optimism. This strategy was key as workers wanted to listen to from leaders that they’re taking proper selections early to make sure survival of the enterprise and to emerge stronger from the disaster.

Finance digital transformation: As soon as a luxurious, now a necessity

Although most of the optimistic outcomes above concerned strategic planning and communications, superior monetary administration software program has enabled enterprise leaders to understand the facility of the cloud and analytics throughout a disaster. COVID-19 has taught finance professionals that embracing the technological adjustments introduced on by what many are calling the digital transformation of the previous 20 years is a key to survival. Those that embraced this transformation have weathered this downturn higher than those that didnt.

Because the pandemic unfolded, many firms realized they wanted to take their focus off top-line income development and focus extra on maximizing profitability from their present buyer base. Corporations who had already applied fashionable monetary administration software program had been ready to make use of superior analytics to uncover developments inside their buyer base, discovering methods to extend profitability and even develop income. As an alternative of wanting outward for development, they seemed inward utilizing all of the digital instruments, software program and sources at their disposal to create new methods to supply worth, further providers, and add-on merchandise to generate development and profitability.

They couldnt have completed this with out the proper software program, which offered them the real-time analytics and insights essential to react and adapt to what was occurring of their buyer base. Administration groups who had already adopted digital transformation earlier than COVID realized that they had the instruments wanted to outlive. Some companies even accelerated investments in digital transformation in the course of the pandemic despite the headwinds, realizing making these strategic investments was key to surviving this, and the following disaster.

Recommendation for the longer term

Because the pandemic continues, so will the challenges. Enterprise leaders won’t solely must be ready to take care of an unpredictable economic system but in addition plan for the results of hurricanes, a worldwide melancholy, civil unrest and extra.

Enterprise managers ought to proceed to hunt additional alternatives for digital transformation, together with outsourcing sure non-core features. Outsourcing non-core parts of the finance operate to an organization who does it professionally can present larger high quality outcomes, like extra real-time and extra granular information to tell enterprise selections, whereas permitting the administration staff to focus their consideration on extra strategic actions. Corporations ought to hunt down outsourcing suppliers who specialize of their trade and are consultants in each finance and accounting in addition to know-how. Not solely can they function the finance operate extra effectively and extra successfully than most inside departments can, however they’ll additionally assist curate, combine and optimize all of the wanted applied sciences. It is a compelling worth proposition in in the present days ever altering and complicated world.

Marcus Wagner is the Founder and CEO of AcctTwo.

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