CFOs tighten belts for difficult year aheadby
The finance function’s status quo shifted overnight as the country went into lockdown and CFOs faced a raft of new challenges and a difficult economic climate. For many, these challenges are still continuing well into 2021.
The finance department has been confronted with many difficult challenges, which forced companies to tighten their belts and review the options to keep afloat.
A year of challenges
In addition to Covid headaches, finance leaders also had to wrap their heads around the new Brexit legislations and regulations. As Advanced pointed out recently, many CFOs weren’t properly prepared for the new requirements when importing and exporting goods to and from the UK and the EU.
The Covid restrictions may have eased since the peak of the pandemic, but CFOs are still manoeuvring the finances from survival into growth mode. So, what tools and strategies should businesses focus on in their post-pandemic recovery?
We’ve pulled together advice from across AccountingWEB to summarise the steps CFOs can take to prepare for the arduous challenges ahead.
Moving out of survival mode
Agility and speed were key in coping with the onslaught of Covid and Brexit. The common incremental approach to change management couldn’t withstand the fast-moving demands of the virus or the last minute Brexit rollout.
All the usual financial survival tricks went into overdrive. Companies cut costs, focusing on discretionary costs and overheads, and many CFOs carried the agile ethos: manage cash first and worry about profit later.
This agile mindset bled into every aspect of the team’s survival mode. While it was essential in fastening the finance function’s belt, the upside to this approach was the inevitable speed up of businesses’ digital transformation. It was also vital for businesses to have accurate and real-time information to apply for government loans and steer the strategic direction of the company.
It’s thought that the pandemic fast-forwarded five years of the digital transformation into the space of a year.
In fact, a recent Advanced Trends Survey Report 2020/21 found that more than three quarters of business leaders said one of the legacies of Covid-19 will be to shift their organisation to a digital-first mindset.
The pandemic pushed CFOs to dust off their contingency plans. Perhaps it even uncovered holes in their systems. Maybe it tested their disaster capabilities.
If anything the past 18 months exposed the readiness of companies and highlighted the importance of scenario planning and having a solid contingency plan.
The almost improbable scenario of a global pandemic became a reality and the ever-changing Brexit plans disrupted supply chains and kept finance teams on their toes. Both of these scenarios demonstrate the need for CFOs to review their contingency plans and ensure it reflects the new Brexit trading conditions, advises AccountsIQ.
While it was tempting to delay payments in difficult times, CFOs had to weigh up the knock on challenge this would cause on straining their relations with suppliers. That’s the last thing businesses need. Late payments would also raise even more alarms about the health of the business.
As difficult as it sounds when in survival mode, sticking to the principles of good credit control would benefit the business when it eventually shifts into growth mode.
These principles are simple: Your company is in business to earn cash from customers; a sale is not complete until it is paid for.
New tech issues
Understandably then, new tech remains a big issue for CFOs for the year ahead. The rapid take-up of tech was the central story across the globe. Our US sister site AccountingWEB.com reported on a recent Invoiced and CFO Dive survey which found that accounting and finance professionals said their companies have already automated accounts payable (49%), accounts receivable (47%) and financial reporting (45%).
The challenge facing CFOs is to continue the trajectory of this digitalisation and not let it falter when the day-to-day status quo returns and a possible revert back to the old incremental change management approach.
‘“Adapt or sink’ is the mentality of many CFOs and Finance Directors looking to position their finance team and business to thrive post-pandemic. Cloud technology is here to stay, and will help shape finance leaders and their teams as the strategic, agile heartbeat of every business,” summarised Advanced as one of its key 2021 takeouts for CFOs.
Another incentive companies have discovered as part of their digital transformation and shift to remote working is a widening talent pool. No longer restricted to geography, the pandemic has opened finance leaders’ eyes to talent hundreds of miles away from the office. Again, this would require CFOs and the finance function to step away from the old way of doing things, but this new layer of flexibility would be another step in overhauling the status quo.
Whilst finance teams scrambled to get debtors paid and transition to new tech, they also missed the stimulus of the office environment and had to grapple with new hybrid working communication tools like Microsoft Teams or Zoom.
Combined with the business disruption pressures, Advanced highlighted the need for CFOs to focus on employee mental health and wellbeing while working from home.
“It was clear that this human crisis required a human touch from CFOs and finance directors who needed to grow their personal skills over the past year,” the software company noted in a recent industry insight post.
The pandemic has changed the face of the finance team. While opportunities have risen from the distress and pressure, it also means that finance teams will have to remain agile in order to embrace the fruits of change.
Digital transformation has shaken up the finance function and provides the ingredients to shift businesses from survival to growth mode. It just needs finance leaders to continue the agile mindset that got them through the crisis.
Brexit? Covid? Adapting to remote working tools? What was the biggest challenge your finance team faced over the past year and how did you adapt?