Business leaders across the globe are currently preparing for crisis management as we wait for the second wave of COVID-19 to hit the economy. They are planning for future financial performance and creating flexible strategies to not only recover from the financial repercussions of the global pandemic, but also prepare for the worst-case scenarios such as recession.

Key Financial Challenges Facing CFOs in a Post-COVID World

A few months ago, when the global pandemic hit businesses world-wide, most of us were caught unawares. Particularly, startups and SMBs weren’t prepared for a financial crisis that would come to resemble the economic crash of 2008.

A recent survey by PWC revealed that in the US, 63 percent of CFOs were planning changes to products and services while 41 percent were looking to alter pricing, among other revenue strategies as a part of their post-COVID financial management strategy. The survey also found that as businesses try to reinvent themselves, nearly one-third of CFOs (32%) were looking to implement tech-driven products and services.

Yet, as companies begin to adapt to the new normal, leaders are concerned that regardless of the time it takes for the economy to bounce back, things will never be the same as they were at the beginning of this year.

Business owners and founders now need to identify new revenue opportunities for their companies to begin recovering from the setback, keeping the second wave in mind. To this end, companies are reassessing their product and services portfolio with a renewed focus on pricing strategies and distribution channels. They will need to lead their companies to adapt business models to do more than just survive the potential second wave of COVID-19, thereby forcing them to not only remodel their offerings but also innovate to drive better revenues.

One of the major challenges brought forth by the pandemic is cash flow and liquidity management across all sectors. As India opens up post the lock-down, SMBs and startups are looking forward to restructuring business operations while managing the monthly cash flow and containing costs

Addressing Financial Challenges Post-COVID-19

COVID-19 has left the financial markets grappling with record levels of market volatility in India, especially since the depreciation of INR against the USD. The Reserve Bank of India (RBI) has tried stabilizing the financial market by introducing repo cuts and reverse repo rates, reduced Cash Reserve Requirements (‘CRR’) and planned Targeted Long-Term Repos Operations (‘TLTROs’). RBI also instituted moratorium on term loans installments, while allowing deferment of interest on working capital loans.

“The new normal will undoubtedly include revised cashflow forecasts, financial planning, re-forecasting and applications for Government-backed loan and job retention schemes that just a few months ago didn’t even exist,” writes Shak Akhtar, SVP Finance Automation/Customer Experience Officer, Redwood Software, in a company blog post.

The challenges posed by this latest black swan event are forcing companies to rethink their policies regarding cash and cost. Finance execs and CFOs must now undertake the following actions to plan a successful recovery from the crisis:

  1. Optimize liquidity: Create a robust cash flow forecast that balances cash outflows such as supplier payments and loan covenant relief, with cash inflow tactics such as credit lines and monthly collection. These need to be monitored on a daily basis and finance teams or CFOs can then, accordingly, forecast monthly projections. This also includes reallocating resources from non-working costs to products or markets that generate higher margin and add value to the business.
  2. Data-driven decision-making: For business operating on low or non-existent margins, the right reporting metrics can make all the difference. CFO partners can help in-house finance leaders and teams build models and simulations to navigate the financial crisis brought on by the global pandemic. CFOs can build decision support using assumptions based on real-time cash positions, quantity metrics, macroeconomic conditions, post-COVID supply chain models and competitive response.
  3. Re-prioritize portfolios: Since the investment plans made at the begging of the financial year are no longer viable, finance leaders must put together a task force that checks the capital allocations and strategic projects to decide new investment portfolios for the business. They must also create a new framework that brings together the company’s focus on key metrics regarding investment priorities.

Why SMBs Need a CFO Partner

If the ongoing crisis has taught businesses anything, it is the need to have financial expertise to inform the next course of action. A CFO partner will bring fact-based forecasting and help make critical decisions that include tasks such as debt settlement, raising capital, or acquiring a businesses to support current investment plans. They can also help secure liquidity for extended periods of time and reduce complexities around revising liquidity buffers, reviewing liquid assets, and evaluating government assistance while leveraging trapped cash pools.

While no one was prepared for the crisis of the current proportions, effective CFO partners understand that survival and stability go hand in hand, and can help business navigate tactical and more strategic challenges to drive long-term success.

The flexibility offered by CFO services firms can help you tap into top-of-the-shelf financial expertise at a fraction of the cost associated with hiring a full-time, in-house CFO. With engagement models tailored to meet company-specific financial challenges, CFO partners can emerge as your strongest allies in this crisis.

The post-COVID world has shown us that businesses that did not have the financial foresight or preparedness are the ones most impacted.

While it is unclear if and when the second wave of the virus will hit us or how long the pandemic will last, it is never too late to build a strong financial foundation. As the situation evolves, there is little doubt that financial stability will emerge as a key competitive differentiation for businesses looking to remain relevant in a post-COVID world. And CFO partners are a big part of this puzzle for organisations lacking significant financial expertise.

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