Originally published in CFO Magazine.
For the long-term health of your business, it’s time to move beyond cash conservation tactics.
As COVID-19 took hold of the global economy, most CFOs went straight to crisis management mode. The focus was vigilant monitoring of cash balances and running multiple scenario plans to ensure adequate liquidity in the short term. Now, a few months into the pandemic and resulting economic uncertainty, it’s time to start shifting our focus past fear and reactive cash conservation tactics to resilience and eventually, to resurgence.
Here are 7 steps to help you make the transition.
- Maintain your gross margins.
- Although it can be tempting to cut price to achieve volume, protecting your gross margins will be critical for the long-term margin prospects of your enterprise.
- Maintain tight pricing controls and sacrifice volume for margin where it makes sense. Business volume will return; margins may not if you cut them early.
- Use analytics to better understand margin/volume/product drivers. Are you seeing a dip in margin dollars and business? How can you tell the culprits? Using analytics to understand drivers in margin due to region mix, product mix, price, and a subset of each of those allows you to drill into the areas of most focus. You can’t fix the problem if you can’t identify it.
- Embrace zero-based budget opportunities.
- When was the last time you actually did a zero-based budget in practice? As travel expenses have now gone to zero, we have a unique opportunity to redefine how we approach corporate travel.
- Increase approval levels on corporate travel so C-level executives are determining what is considered ‘essential travel.’ Put monthly check-ins in place with each department head to monitor, discuss, and determine what the future of business travel will look like for each function.
- Find ways to re-invest savings into high impact areas of the business.
- While it can be tempting to take all savings to the bottom line, try to find strategic investments that will help accelerate your rebound. Take the current business landscape as an opportunity to modernize your technology stack, invest in strategic marketing campaigns and/or train up your sales team. The benefits to the long-term will far outweigh today’s bottom line.
- Engage all members of the organization.
- To find ideas to save money, improve processes and otherwise maximize the rebound during a physically fractured time, enlist the support of those closest to your business: your employees.
- Create an internal ‘Call to Action’ taskforce with cross-company representatives to identify creative new ways to maximize efficiencies across the organization.
- Take practices from disruption and morph them into best practices.
- Chances are, the weekly cash forecast process you put into place has turned out to be pretty useful, hasn’t it? Take the best of the new processes you have inserted, optimize them, and then operationalize them.
- Continue your weekly collections, AR aging and cash forecast review so you can spot trends earlier and react ahead of future cash issues.
- Asses your office footprint; don’t run straight to a pure mobile workforce if you can help it.
- As the initial move to a full work from home staff has started to wear, you might see productivity start to dip. Generally, we will be a more remote workforce than ever before, but there are steps you can take to encourage collaboration and innovation while we all remain remote workers.
- Work with your IT team to ensure the right technology tools are in place and that you aren’t spending more on software licensing than you actually use. All the ‘try our free software’ offers that flooded our inboxes when remote work first launched could come back to haunt you once the ‘free’ expires.
- Advance your digital transformation plans.
- While it may seem counter-intuitive, the time to make progress on your digital transformation plans is now. [Also read: COVID-19 is Accelerating the Need for Digital Transformation]
- For the sake of getting work done, and done well, cloud technology can deliver many more opportunities than traditional, on-premise systems that now few people can access. Communication is easy and instantaneous. Work is more secure and, if you’re paying attention to the data your cloud systems can provide, your decisions are quicker and fact-based.
We continue to operate in uncertain times – no one knows how long the global health crisis will continue or to what extent it will impact our economy. But the time for emergency, knee-jerk reaction has passed. Strategic moves such as those described above will help provide the lift your business needs both today and in the future.
For more strategies specific to the pricing function, read the post Pricing in Turbulent Times.