According to the Asian Development Bank (ADB), COVID-19’s global cost might hit $8.8trillion, which is 6.4% to 9.7% of the world’s GDP. Businesses that closed and the massive layoffs that occurred contributed to this huge loss. However, individuals weren’t the only ones thoroughly devastated by the pandemic, a lot of businesses ranging from small to large enterprises also took a heavy toll.
Now that the world is slowly turning back to normal (albeit with some changes), businesses have begun to rebuild from what was left of their ventures. While many had suffered huge losses, some managed to stay afloat, adapting to the new normal to survive.
The pandemic had turned financial matters more sensitive for businesses. Thus, many turn to Chief Financial Officers to manage their finances. With someone overseeing their bookkeeping, business owners can focus on the other aspects of business management. But how exactly can a CFO help your business manage the after-effect of the pandemic?
Plan and Assess
For the crisis at hand, the main purpose of outsourcing cfo services is to build a line of defense. The primary responsibility of a CFO is to seek and predict the cash collections based on the company’s latest sales. The second step is to collect payments from non-paying customers.
If the working capital lacks in some areas, the CFOs must think about other options to amass capital, such as using available lines of credit. Additionally, the CFO should utilize different sets of tools to focus on the pending payments and create reporting metrics for monitoring real-time liquidity.
Moreover, CFOs need to think of multiple scenarios about the impact of the virus. It’s up to the CFO and the team’s strategic planning to predict how COVID-19’s impact will further manifest, which countries might be more strained than the others, and what industries may suffer the most.
The CFO needs to establish a task force that can convey useful information to navigate the business decisions and track the factors that indirectly/directly impact the finances of a company. Furthermore, during a crisis like we’re experiencing today, it’s imperative to communicate proactively and clearly with the investors.
Thus, CFOs need to set up a communication plan to ramp up the transparency and frequency of communication. Uncertainty is the last thing the board of directors wants. Therefore, it is imperative to give them information on what measures should be taken to navigate the crisis and how these steps may affect the company’s performance.
Formulate The New Normal
Once the cash preservation concerns are dealt with, CFOs need to direct their attention to the developments of near-term performances. Both business and finance operations must step up and adapt to the changes due to the crisis. The CFO is responsible for overseeing the shift in production to new services and products that help people in need.
For starters, the CFO should have a statistic when considering shifting to delivery channels and alternative sales when necessary. It could potentially improve the quarterly returns of the company and bolster the customers’ loyalty. Moreover, CFOs need to recheck the company’s investments.
During the pandemic, the CFO should run thorough diagnostics on the accounts payable and receivable, refinancing outstanding credit, and reducing inventory. CFOs need to guide and encourage the IT, capital allocations, and research and development teams to optimize the organization’s investment portfolio.
Moreover, the CFO needs to aim their attention to financial analysis and planning. The start of an economic crisis is the best time to revisit the budgeting and forecasting of a company. The financial planning and analytics team must track the KPIs and oversee them so they can hand out data to the board of directors in real-time.
Making It to the New Normal
For a company to succeed in what comes after the economic crisis, CFOs must amplify their gameplans when allocating the resources of the company. The financial planning and analytics team spearheaded by the CFO needs to recheck the company’s investment portfolio and focus on the achievement of each business unit to its maximum potential.
Additionally, the CFO must know how divestitures can boost the company returns in the next quarter of the year. Historically, resilient businesses amidst past economic crises lose about 1.5x more total income compared to weakened businesses.
Businesses can make various opportunities for acquisitions and mergers by perceiving profitable strategies amidst the crisis. In that regard, it is an excellent idea to adopt digitization to avoid hampering business operations.
The pandemic has made the practice of working from home productive and popular for many companies. Businesses should keep this practice in place and think about the effect of a digital workforce on business finance after the pandemic is over.
Plan for Recovery
Even though it is unforeseeable when the economy will start recovering from the pandemic, it’s not too early to think about your company’s plans. Since physical distancing could be part of the new normal, CFOs must explore multiple recovery models to discover which segments or markets are likely to bounce back.
Say, for instance, economic recessions and downturns sometimes result in downsizing, furloughs, and layoffs. However, businesses will probably continue to deal with the long-drawn-out talent shortages they’ve endured in the past, particularly during and after the recovery.
Downturns introduce an opportunity to hire vital talent from other universities and organizations that could contribute to downsizing the level of debts. Moreover, the COVID-19 crisis can offer many opportunities to make sure their digital transformation projects are complete.
Ensuring research and development strategies should be in place to deal with any possible threats on the horizon. Additionally, CFOs need to focus on cutting the company’s entire cost, supporting its long-term growth.
Once the crisis is over, it’s a great idea to hire a group of talented professionals whose role is to support and oversee strategic planning. This group of executives will help position your business in an ensured victory after the crisis.
Takeaway
Despite the uncertainty created by the pandemic, CFOs need to establish strategies to successfully navigate the crisis, utilizing scenarios of different duration and depth. Planning should include multiple scenes from the best case to the worst, considering the key stakeholders, customers, suppliers, operations, talent, and the likelihood that the pandemic could continue for a long time.
Author’s bio:
Lauren Cordell is a full-time writer with vast expertise on topics related to business and finance. Her blog revolves around helping new business owners find their way to success. She dedicates herself to spreading the right knowledge when it comes to business management and financial literacy.
