Finance Operations During the Covid-19 Crisis: Five Agile Growth Strategy Lessons from Accenture CFO Survey
How important is it for an organization to develop a more agile and adaptable finance function that can respond to information and changes in real-time? The Coronavirus pandemic has certainly changed just about everything for businesses in almost every industry, and CFO’s and finance management teams have been heads down in the weeds since this started. From everything such as ensuring physical safety of their employees, setting up remote working processes, to securing PPP payroll funding, but one main priorities has been managing liquidity and cashflow in a risky and volatile economic environment.
We are now more than 3 months into this Covid-19 crisis, with companies having analyzed their operating expenses, secured financing credit lines, and taken a hard look at all planned future capital expenditures. And while some companies tapped Government relief programs other did 180 degree pivots into new lines of business. Recently two Accenture executives David Davidson and Aneel Delawalla of their enterprise value group coauthored an article in CFO mag about 5 agile finance lessons they have learned from talking to number of different CFOs. In their article they explain they have heard similar statements such as “If and when we get out of this, we are going to do things differently. That’s easier said than done.” Now if your startup has not yet hired a full-time chief financial officer yet, check out this article about the pros and cons of renting a cfo instead.
Now Accenture a major management consulting firm has been known for pushing organizations into automation and digital transformation processes. So when the they say that even before the crisis hit, there was a growing trend that many traditional finance processes of a CFO’s role which includes
Of which some of the tedious tasks could be automated with software tools. According to research currently only about 34% of finance activities are automated today. A recent Accenture global CFO research survey uncovered opportunities to automate as much as 80% of these financial activities. Other important CFO tasks include forecasting, financial modeling, investor reporting, investment evaluation, risk management, digital transformation and data stewardship.
Finance teams are reporting an increase in the demand for insights into a multitude of data sources:
The author Mr Davidson said that before this crisis hit the big question was growth and where to find it. By analyzing important data such as return on investment, business-line revenue, profit margins and other vital key performance metrics combined with the experience of how to properly deploy capital, CFO’s find themselves in an advantageous position to help their companies chart a plan for growth. Unfortunately the article points out that many CFOs have not made the transition to focus on the future. Stating that most financial management teams spend to much time trying to uncover insights from past performance instead of looking ahead.
The pandemic is changing all that
According to Mr Davidson’s article now management teams, boards and CFOs, are coming around to see the value of having an adaptable, agile finance function that operates in near-real time. As teams are working to recover from the damage of Covid-19 crisis and government shutdowns, Accenture’s research found that there were 5 common key themes or trends that many CFO’s have learned.
1. Automate tasks and processes that which can be automated
Recessions, crises and uncertain time periods can uncover gaps and highlight organizational cracks. With financial management teams being exhausted and pulled in many directions, financial functions found that it could be helpful to use certain software tools to help automate some activities which includes routine transaction processing, compliance, controls, and reporting. There are plenty of enterprise ERP solutions to choose from and implementing the right ones can help to free up resources for focusing higher value added human cognitive thinking tasks such as planning, analytics, and decision support to the business. “Low value-added activities which can be done by technology have to be done by technology,” says Larry Reinhold, President and CEO of Systemax. “There is relentless pressure to reduce cost and do things in the most productive manner.”
2. Digital organizations are resilient organizations
Companies that adapted and moved quickly to establish remote virtual operations to run finance functions when the pandemic hit back in March — relying in most cases upon a strong digital and technological framework — have had less rough time in maintaining business continuity and maybe setup into a stronger position to bounce back in a post-crisis environment.
3. Relationships are everything
Partnerships and having strong relationships matter even more during volatile times, from your banking and financial lenders to your large customers and vendor/ suppliers, companies hav e figured out pretty fast who can you rely on when the sh@t hits the proverbial fan.
CFOs will likely be putting more effort into reinforcing key relationships and into making their own organizations into dependable customers, suppliers, and borrowers. Another aspect of relationship management is building and maintaining employee trust and confidence. Mr. Davidson said in his article that one CFO stated “nothing gets done without a strong team.”
4. It might be time to re-think leverage
(image credit: FT James Ferguson)
Economic growth coupled with low interest rates made leverage attractive for many companies. But the crisis has underscored the fact that leverage is a form of risk. Many CFOs we have talked to want to de-risk by borrowing less, or to restructure their entire borrowing framework once things return to a semblance of normality. To do this, they are looking at ways to generate more cash from operations — for example, by working more closely with customers to accelerate the payment cycle by actively monitoring payment terms. Another tool is known as working capital optimization which I have written about before.
5. “Black swans” may not be so unusual after all
After years of extreme volatility following the financial crisis of 2008, some CFOs may have thought that things had returned to “normal” (with 121 consecutive months of economic expansion as of July 2019) It seems, instead, that this time the “new normal” should be thought of as the “never normal” — a state of affairs in which agility, alertness, and the ability to shift directions on short notice will be essential, first for survival, and then for growth. Companies will need scenario modeling techniques, rapid simulation, data-driven forecasts, and other tools to assess variables and establish a planned strategy to go forward.
Adjustments to this new environment will play out in different ways for different companies and different industries. Some companies, for example, may want to reconstruct their supply chains to reduce their reliance upon a small number of vendors. Others may want to focus more on distribution and marketing and less on manufacturing, turning some operations over to trusted third party partners. While other may try to decentralize activities so that disruption in one geographic region has less global impact, or, create greater variability within the cost structure.
What is pretty clear takeaways from this article is that the role company’s CFO and their finance functions will be an important anchor to operating effectively, in the post covid-19 recovery period. CFOs have been on the financial frontlines in the crisis, and their importance will increase, not diminish. By automating transactional activities and harnessing data, analytics, artificial intelligence and other technologies to develop better and deeper insights, a CFO can manage short-term liquidity issues while helping to guide the company toward a future marked by profitable growth. And if your company is a small business or new startup that does not have a full-time chief financial officer, our accounting firm Huckabee CPA offers outsourced CFO consulting services. If have any questions feel free to reach out to us for a free consultation.