It’s safe to say that 2020 has thrown many off track. For months, we have all been striving to “get back to normal.” In business, CFOs and other leaders have worked to lead their organizations through the immediate crisis of COVID-19 to try to return to that “normal,” but they’re all quickly discovering something.
The pre-COVID “normal” no longer exists: The coronavirus has changed so much of the economy and business landscape that it will be nearly impossible to return to business as it was.
Changing market conditions should instead drive companies to adjust traditional planning and budgeting activities to plan for the next normal. Financial leadership ought to consider building permanent speed and flexibility into forecasting, planning, and resource allocation processes by incorporating new tools and decision-making protocols into finance and accounting’s daily work.
It’s time to shift the focus from uncertainty and reactive cash conservation moves to building resilience and preparing for resurgence. These five tips for accounting management can get you started.
- Use Multiple Business Scenarios
While many companies already perform some level of scenario planning, the post-COVID world will be easier to navigate if scenario planning is embedded into the existing accounting management and core planning processes. Start with three or four scenarios that can guide the team with more agility and flexibility in the planning process and company response as the effects of the pandemic continue to unfold. Consider a scenario that includes a rapid rate of recovery for greater market share, and another with a slower rate that prevents the company from growing faster than the economy does. From there, create operating plans with clear KPIs that can help guide the team if you reach specific crossroads between scenarios that indicate a need to switch tactics.
- Conserve Gross Margins
Your impulse reaction may be to want to slash prices in order to achieve the desired sales volume. However, this will not protect gross margins in the long run, which are critical for the long-term success of the organization. Tighten pricing controls instead, giving up volume for margin where it makes sense. Business volume will eventually pick back up; if margins are cut too soon, they may not return to pre-COVID levels.
- Reinvest Savings in High-Impact Business Areas
It’s tempting to put all the company’s savings toward the bottom line; a smarter move is to invest in the future of the business by looking for strategic investments that can help accelerate a rebound when the economy is ready. This is the time to look at technology upgrades—for example, digitization for accounting management and beyond—as well as investments in marketing efforts and staff training.
- Cement Good Disruption Practices as Best Practices
Many finance teams switched from a monthly or quarterly cash forecast process into a weekly process to maintain oversight and agility in a rapidly changing environment. Several are finding this weekly process so helpful they’re making it a standard practice instead of a crisis response. Catalog all the new processes put in place to manage during COVID-19 and consider optimizing and operationalizing them into ongoing best practices. Look at weekly collections, accounts receivable aging, and cash forecast reviews that will reveal trends earlier, so teams can react before there is a cash issue. Institutionalizing best practices adopted during the crisis can help finance leadership ensure company success in the next normal.
- Push Digital Transformation Forward
Many companies fast-tracked digital transformation plans when quarantines and shelter-in-place orders forced workers into remote setups. If you haven’t done so already, now is the time to make progress on your own digital transformation plans, such as adding a cloud-based ERP and other accounting management tools. Refining various elements of the finance function’s navigation system—tools, KPIS, and protocols—can support changes in forecasting, planning, and budgeting.
Prepare for the Next Normal with Software from ASI
Even once they establish a recovery strategy, finance leadership needs to ensure it either remains constant or changes as needed to fit emerging new directions. Continue to check in early and often with management on strategic direction and outcomes from other initiatives. With the right information from accounting systems, CFOs will be able to continually evaluate liquidity and risks in order to support new initiatives or prop up existing ones, providing better insight into how much longer until the company emerges on the other side.
For more than 30 years, ASI has been helping businesses find the right tools for accounting, automation, and beyond. Whether you’re just starting down the digitalization road or looking for tools that can add clarity and finesse to your processes to better prepare you for what’s on the other side of COVID, our software experts can help answer questions and identify critical requirements. Get a free consultation now.