Managing cash during a crisis: real-world CFO experiences

Most businesses around the world are currently in “survival mode”: they’re just trying to get through to the end of the pandemic crisis, protecting as much of their cash and business as possible.

Yet, even when times are good, cash flow can kill a business – it’s one of the top reasons why businesses fail, with 82% of failed small businesses blaming cash flow problems for their demise.

Only those who are savvy with financials, who got ahead of the crisis and put in place measures to survive and protect cash flow, will emerge on the other side.

What can the CFO do to protect company cash flow?

“It’s challenging, yet we have to adapt,” says Soldo CFO Dynshaw Italia. “I always believe in circumstances like this, you adapt or die.

“It’s about extending cash as much as possible through controlling costs, finding other sources of financing, finding new use cases. Making sure you look after employees, and work with customers and suppliers. We’re doing everything we can to get through the crisis, but most importantly to be ready for when it’s over.”

The two best steps to better cash flow, regardless of the economic situation, are simple:

• To prepare, have a plan and have access to accurate and up-to-date financial data
• To take steps to actively prevent cash flow shortages, such as cash flow forecasting, monitoring key performance indicators, and taking control of your business operations.

But if this crisis found you unprepared – heck, even if it found you fully prepared – there are some steps CFOs can take now to protect company cash flow.

Soldo’s Dynshaw Italia joined Adrian Lee, group financial controller at Passion Pictures, and Edward Parkes, CFO at LHi Group, for a panel session with the CFO Virtual Agenda team. These are just some of their experiences; listen to them all in the webinar.

1) Review your cash flow priorities

…and review them frequently. For example, LHi Group is now reviewing cash weekly, with a 13-week advance view. They’ve also put in place a spend limit for most budget holders. Passion Pictures is looking at its pitch processes and advertising strategies.

“They always used to say cash is king,” says Dynshaw, “but I think it’s no longer king; I think it’s become god. It’s about cash conservatism now. We need to become more efficient. We need to reduce costs. We need to make use of the schemes available to us, and push back long-term investment.”

2) Get the balance right

But make sure you don’t go too far in the wrong direction: “It’s about survival, it’s not about killing your business,” says Dynshaw.

The idea is to survive through this crisis and make sure you’re strong enough so you can get back to long-term investment priorities when you emerge at the other side.

3) Use the support available

Most governments have put in place support packages for businesses; apply for the help, even if you think you might be ok. You can always use the loans to support growth on the other side of the crisis.

We’re looking into every government opportunity in trying to manage our liabilities including differing back payments etc. We’re focusing as much as possible can, considering the unprecedented situation, to focus on what we really need to do in the next few months

Adrian Lee, Group Financial Controller at Passion Pictures

4) Forecast more frequently

The uncertainty means many businesses are forecasting on shorter cycles. Some – like Soldo – have moved to zero based budgeting and are reviewing legacy payments while seeking new use cases and markets.

To forecast well, you’ll need access to accurate and real-time data. You want to get as granular as possible with spend data, and have access to historical data to see any trends emerging. Technology, such as Soldo, can be essential to this process. Soldo provides the ability to zoom into real-time spend and track at an individual, departmental or cost centre level.

5) Control variable spend

“You need to be asking ‘Is that variable spend going to have revenue at the end of it?’ “

Edward Parkes, CFO, LHI Group

Around 79% of webinar attendees felt uncomfortable with their level of control over variable spend – and, certainly, most CFOs would like as much detail as possible on where cash is going. Around a quarter said they were completely in the dark about their spending.

To better manage cash in a crisis, you need to build in flexibility and contingencies – and the best way to do this is to deploy technology for real-time tracking of variable spend. This enables you to act quickly when there is a risk of overspending.

Soldo empowers financial teams with real-time data on spending, as well as the ability to set spend limits and spend controls at any level. Set aside a specific card only for software subscriptions, or a cost centre or department. Limit an individual to only spend on certain categories.

Gain full visibility into the cash position and act quickly to mitigate risks during a crisis, and beyond, by leveraging Soldo’s financial tracking while empowering employees and freeing everyone of the hassle of collecting receipts for month-end reporting.

Want to learn more about cash management during a crisis? Watch our free on-demand webinar as a panel of finance leaders, including Soldo CFO Dynshaw Italia, are interviewed for CFO Virtual Agenda.