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Interpreting new financial guidance
Finance leaders have had plenty of extra reading to digest this year. Many will have had to reschedule tasks and alter priorities in order to react to a flurry of new initiatives introduced to support businesses throughout the Covid-19 pandemic. Understanding the Coronavirus Job Retention Scheme, as well various loans and grants available has not been plain sailing – many of these offerings have been developed and added to as the year has progressed. In addition, other guidance – including requirements for Making Tax Digital and planned changes to IR35 – has been delayed until 2021. Reacting to these short-term alterations and announcements has become a regular occurrence in 2020.
Stepping up risk planning
The current Covid-19 pandemic makes it hard to predict the future. This means that finance leaders must actively assess risk, planning for a whole host of different scenarios. While it’s standard practice to have a plan for potential dangers in place, 2020 has been such a tumultuous year that an added level of contingency planning is needed. Any thoughts and evaluations captured previously have needed a re-visit. This includes re-evaluating supply chains, taking a second look at stock levels, as well as dealing with cash flow to avoid payment delays or defaults. Some Heads of Finance will also have introduced additional measures, such as credit checks on potential new customers.
Focusing on cost optimisation
The age-old question of how minimise cost while maximising business value has become a key priority. Is it necessary to decrease spending? And if this is the case, where should cuts be made and how long for? Such decisions require many hours of data analysis. On a brighter note, processes like this can also help to make companies future-proof. This is a point made by Amy Lam, Finance Director at Hong Kong Air Cargo Terminals. In an interview with Financial Management Magazine, she talks about how Covid-19 has given her organisation the chance to ‘transform ourselves by taking a thorough look at our cost structure and processes’.
Strengthening technology systems
Digitisation has been a priority for finance leaders for some time. Research by insurance company Euler Hermes suggests that the Covid-19 pandemic has affected investment in this area. Some companies may be reluctant to sign off new spending projects. On the flip side of the coin, it is now essential to have the right IT infrastructure in place. This year’s working from home guidance has accelerated decisions to move to cloud computing and paperless departments. As a result, questions around security, the privacy of data, and managing fraud risks are now very real considerations for finance leaders responsible for keeping sensitive data safe.
Forecasting future needs
Today’s financial leaders have a fine tightrope to walk. They must firstly react to short-term changes in the market and secondly, look ahead – in order to plan their recovery post-Covid-19. This means understanding new priorities from clients and customers, as well as forecasting future needs so that you can reorganise your supply chain and workforce accordingly. PwC’s Covid-19 CFO Pulse suggests that innovation to pursue new revenue streams will be critical. In fact, 63 per cent of people surveyed said that it would be important to offer ‘new or enhanced products or services’.
Strong financial management is a key component of any successful company, pandemic, or no pandemic. This year’s disruption caused by Covid-19 has, undoubtably, been a huge challenge for Heads of Finance. However, by shifting priorities – to take into account a rapidly changing business landscape – experts in this area have, once again, proven themselves to be irreplaceable.
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