Protecting Company Cash Flow in a Crisis

Hands up if you’re a budget holder who’s been told to curb spending because of the Covid-19 pandemic?

Keep them up if you’re in the finance team and are expected to do more with less as a result.

Truth is, companies are in crisis mode right now. Even those who are doing well – the delivery firms, supermarkets and food subscription boxes – are not dealing with business as usual.

In fact, the business as usual horizon continues to retreat. A pwc pulse survey of US CFOs found that more than half of CFOs expect it to take their company at least three months to recover once the virus recedes. The same survey also found that 58% of respondents are considering pushing back or cancelling planned investments.

This situation is anything but normal.

How does the finance team’s role change during a crisis?

And who gets the call when a downturn happens and rapid change is needed? The CFO, that’s who. It’s all about preserving cash, streamlining costs, re-budgeting and reforecasting.

The whole environment in which we do business has changed – and we won’t mention the U-word none of us can escape right now. (Whisper it: ‘uncertainty’.) To protect company cash flow, finance leaders need to remain agile and be ready to move with a moment’s notice.

“Think of an F1 race’s pit stop,” says Soldo’s CFO Dynshaw Italia. “There’s so much you need to look at in terms of when you change tyres, how long it will take, and so on. That’s what a normal CFO would look like.

“But when you’re a growth CFO, you’ve got to change that tyre when you’re going 100 miles an hour. Things are just thrown at you; you get up in the morning and there’s a new challenge.”

During a crisis, we all become that growth CFO; everything becomes pure reaction.

3 ways CFOs can protect company cash flow in a crisis

Dynshaw was recently interviewed by Generation CFO and shared his tips for how CFOs can protect cash flow in a crisis.

Zero-based budgeting

Control the controllables. Zero-based budgeting involves looking again at all costs and contracts to see where you are. It’s not “starting from zero” as many think; it actually requires a data detailing historical costs for it to work best.

Dynshaw says it must be an inclusive process. It’s critical that budget owners get involved so you can tailor your business to the conditions and the revenue that you’re going to actually generate.

“What zero-based budgeting does is it forces you to make decisions and look at restructuring. Everybody can become a bit complacent,” says Dynshaw. A crisis like this pandemic gives you an opportunity to examine every bit of spending and question whether it is necessary and useful for the company right now.

Find new revenue and funding streams

While you’re unlikely to find new VC funding at a time like this, it’s worth looking to the plethora of government support options.

In the UK, for example, government support includes various loans, the opportunity to defer VAT and PAYE taxes, business rates relief, and the job retention scheme where they will pay 80% of wages for staff you need to put on furlough.

“We’re looking at new use cases, new geographical markets, how to deal with customers and suppliers,” says Dynshaw. “And then how to plan for the new normal because things are going to keep changing.”

Stronger monitoring and control of spend

You need to have full visibility of all outgoings so that you can control the cash flow and make sure you keep the company’s financial position in as strong a place as possible.

Using technology such as Soldo can help you to identify and control exactly what is going out. You can, for example, use a virtual card dedicated to subscriptions which will help you identify if there are duplicates or unused licenses that can be cancelled – just in case someone has bought a Zoom subscription when the company is already using Microsoft Teams company-wide.

But it’s about more than this, says Dynshaw: “It’s about having the right approval process and setting up the right systems so that before you spend, you know that it’s within budget and properly approved.”

Soldo’s software enables smarter business spending. CFOs can control spend by department, project or individual, transfer money instantly, and set spending limits – all from a central platform. Many manual processes can be automated to free-up the finance team to focus on how to get the company ready for the new normal.

As Dynshaw says, if business is at a relative standstill because of the crisis, maybe it’s a good time to think about how to innovate processes and get better protection for company cash flow by investing in technology.

Get up and running with Soldo in just one working day. No tech team required.