With the COVID-19 pandemic comes unpredictable and drastic changes to our work and home lifestyles. The spread of the virus continues to create uncertainty around business activity; managing and forecasting cash flows is now a matter of survival for a great number of companies.

CFO’s have had to adapt and readjust their operational systems and work force, many of whom are functioning from their homes, while still inspiring teamwork and productivity that optimises cash flow and ensures a sufficient level of liquidity. Establishing a clear forecast of cash flows and being able to set up stress testing and simulations is now a must. 

These 10 actions, or 10 commandments, can set you in the right direction: 

Set up a dedicated Task Force

Mobilise, manage and fully leverage the potential of your core team that will optimise their impact and respond to challenges stemming from Covid-19. As a CFO, you define the modus operandi that properly articulates the goals; a clear focus, defined priorities and appropriate mandate, all while operating with tools and features in a ‘downgraded mode’.

Get a clear and fair view of your cash

Have an outlook that covers cash outflow such as working capital improvement measures and temporary cost reductions, and cash inflow such as borrowing/financing local potential measures or flash sales. Depending on the availability, granularity and quality of data you would compile this into cash dashboard with key liquidity ratios and cash balances and should be updated weekly.

Evaluateyour business decisions& cash flow patterns

Assess the impact of revenues you potentially miss or which expenditures you can drop or postpone and decide how a business and operating model redesign will affect your cash flows and liquidity needs.

Assess the impact of business decisions on liquidity management

Be aware of business initiatives taken by other departments that may impact the cash flow patterns and level of liquidity. Identify potential constraints on cash movements with countries or regions where a local business could be in danger without external funding.

Gather relevant information from your business partners and clients 

Capitalise on existing processes to gather data from different sources and locations within your organisation, and to analyse them from a crisis perspective.

Forecast your cash flows

Establish the evolution of your cash flow and liquidity needs on a short to longer term basis. It is critical to increase the cadence of measuring your cash flows to minimize the forecasting changes from unforeseen business impacts.

Stress test your forecast

Implement stress test models and re-evaluate them for factors associated with pandemic scenarios.

Relying on macroeconomic data, direct communication with stakeholders or market data to evaluate the impact of Covid-19, you can organise workshops across your organisation to highlight the factors impacting liquidity and define scenarios. You should have at least two different scenarios, based on, for example, the crisis duration or severity.

Act as the business partner towards internal stakeholders

Have well-defined cash management dashboards specific to top management, business units and divisions and sites.You can generate a cash action plan that covers the outlook of your cash situation, customized to the context of Covid-19, that is presented to internal stakeholders.

Communicate with and report to business partners and authorities

Communicating with suppliers, clients and authorities about the impact of your initiatives and action plan is important.

Keep communication in the form of simple indicators and messages such as current position, short term outlook, management scenarios and cash stress test.

Review available financing options and extraordinary assistance measures

Identify what alternative or special financing options are available to you and be aware of any local and governmental extraordinary measures.

Local governments have launched specific packages to support companies in the context of the Covid-19 pandemic and shutdown situation.

CFOs mustcontinue to ensure business continuity but also seize evolving opportunities that may arise

Implement an unprecedented, first of its kind, action plan to ensure effective cash management and forecasting but also to keep the business afloat.

The COVID-19 situation may unveil organisational weaknesses and flaws, but also show the aptitude for resilience and adaptability in adverse scenarios. By focusing on the business core areas, CFOs may not only endure the Covid-19 pandemic with success but will certainly learn from it in the long run.Top of Form

Focusing all your energy on tackling Corona-related business challenges is a tiring and arduous exercise. As a CFO, you need to focus on the main action areas to successfully support cash management and make an impact.

Diga can assist you and provide you with the advice you need in order to help you pull together your cash flow reporting. Contact us on info@diga.co.za.