Why doing nothing about your cash flow during COVID 19 is hardly an option
The bottom line is that every organisation is impacted by COVID-19. Some of you may know how your business is being affected. For others, the impact may not have been felt yet or are there is uncertainty about how the business is being affected. However, the fact is that the current crisis demands a response from everyone. Continuing business as usual is not an option as we prepare to emerge stronger in a post-COVID-19 world.
Two response to consider
The first is to put your hands up and admit ‘I don’t know how my business will be affected!’ From our observation, most organisations will be in this camp because there is no relevant benchmark, no reference data for anyone to compare this ‘black swan’ event to. You are not alone. In this case, we recommend at a minimum that your organisation simplify and enhance your budgeting and forecasting processes.
Don’t waste time on creating a detailed budget, don’t attempt a comprehensive forecast, because you know it won’t be realistic. Instead, adopt a ‘less is more’ approach. Simplify budgeting and forecasting processes by reducing complexity. This can enable you to free up resources and buy you time and money to turn around budgets and forecasts faster.
Consider this approach. When preparing revenue budgets, switch from customer to customer groups, or even verticals. Be prepared to identify and tag one-offs in your reporting that can be attributed to COVID-19, for example the closing of a product line or entity. This will allow you to segregate these impacts from market trends in your year-on-year actual reporting, from future financial years. Utilise existing patterns in your Performance Management Repository where you can for example compare previous year’s actuals.
However, if you can quantify the impacts of COVID-19 on your business, the second option would be a better alternative for you. In this case, do your numbers then adjust your performance management processes by planning or forecasting either increased costs or reductions in income, or perhaps even additional revenues.
Keeping a close eye on your cash flow is critical for any business. Now, more than ever, ‘doing nothing’ is hardly an option.
