When crises hit, organisations always lean heavily on their internal finance specialists to reduce costs, streamline operations and plot a roadmap to recovery, in that order. While lessons should have been learnt after the global economic crash a dozen years ago, and more robust business continuity plans established, it was impossible to predict the speed, scale and severity of the coronavirus pandemic.
Once again, business leaders are looking, desperately, to their finance teams for rapid solutions to colossal challenges. It’s a mighty responsibility, given the amount of uncertainty and an impending global recession.
“During the current crisis, C-suite executives rely on financiers to identify the most cost-effective sources of financing, not only for the survival of the firm in the short run, but also for the growth that follows economic stagnation,” says Dr Nikolaos Antypas, finance lecturer at Henley Business School.
“For most companies, the top-down directive is: survive first, grow later. Since the pandemic started, the role of internal finance has shifted towards turning down or postponing indefinitely any project or cost item with non-existential importance.”
However, unlike in 2008, access to digital technologies, cloud storage and data analysis are enabling faster results, greater agility and collaboration, and better forecasting. If COVID-19 has accelerated digital transformation, the financial function is in the driving seat of that change.
Tech-savvy organisations have major advantage
Laggard organisations that decline to embrace technology will fail. And even industries that have rallied well since lockdown, such as ecommerce and healthcare, should be anticipating more obstacles on the road to recovery.
“The threat of decreasing revenue looms ominously,” warns Antypas, nodding to the tapering of the furlough scheme, which could trigger a sharp rise in unemployment. “No company should be complacent with their current success; their customer base is about to lose its revenue stream and that loss can have devastating ripple effects. Even the most profitable company can suffer if cash flows are not managed efficiently.”
Red Flag Alert, a credit risk management company, has amassed financial data of UK businesses for the last 16 years. The analysis is bleak. “UK industry is facing a mountain of unsustainable debt; it could be as much as £107 billion,” says Mark Halstead, a partner at the Oldham-based firm.
“Technology and data will be critical to companies bouncing back from the pandemic. It will also enable businesses to protect themselves and strive for growth in an economy saddled with record levels of debt.”
Technology and data will enable businesses to protect themselves and strive for growth in an economy saddled with record levels of debt
Organisations that invested in digital technologies and evolved the financial function before the pandemic have an early-adopter advantage. Kaziu Gill, who co-founded London-headquartered LimeGreen Accountancy in 2009, has long promoted accountancy software and other digital tools to his clients, who are mostly small and medium-sized businesses in the creative industries.
“COVID-19 has forced many businesses to change and become leaner and more mobile, but we have managed to continue without any disruption,” he says. “In some cases, we have been more productive.
“We are seeing more businesses exploring how they can grow digitally and the suite of tools that we use complements any organisation’s approach to budget and forecasting.”
Finance functions arm themselves with digital tools
LimeGreen enjoys a partnership with cloud-based accounting software platform Xero. “We offer plug-ins to Xero, like Spotlight, which is a great forecasting tool, and Receipt Bank,” says Gill. “And there are other project management tools that help link the financial function with human resources, such as CakeHR. We have always strived to utilise tech and now financial functions simply have to make that transition to digital. Pieces of paper are no good when you can’t send or receive physical mail during lockdown and with remote working.”
He argues that the recent open banking directive – a government-enforced programme designed to open up banking data, launched in 2018 – strengthens the case for finance departments to embrace digital tools. “It’s the perfect time because every bank in the UK is obligated to open up their application programming interfaces so third-party software companies can use them.”
Xero, for instance, recently launched a short-term cash-flow tool that projects bank balances 30 days into the future, showing the impact of existing bills and invoices, if paid on time. “This capability helps the financial function to scenario plan accurately and make changes to business plans instantly,” explains Donna Torres, Xero’s general manager of global direct sales and operations.
“It’s more important than ever for organisations to have an up-to-date view of their cash flow so they can plan, forecast and make the right decisions about their future. Cloud accounting technology provides a real-time snapshot.”
Empowering finance teams to change business plans
Financial functions that push to arm their organisations with other digital tools, including artificial intelligence-powered document scanning and e-signature, are discovering they can achieve company-wide efficiencies almost overnight.
Mike Plimsoll, industry head of financial services at Adobe, offers a banking example. “Facing increased demand with reduced branch capacity to maintain social distancing, TSB acted quickly to transform a significant amount of offline forms into digital-only interactions, creating an end-to-end journey for its personal and business banking customers,” he says.
“After implementing Adobe Sign, TSB managed over 80,000 customer interactions in the first eight weeks, saving the need for up to 15,000 potential branch visits.”
Plimsoll posits that by switching their processes and establishing digital technologies, finance teams have been able to “keep the business moving and react quickly to the shifting landscape and help steer a course through the uncertainty”.
Adopting a shorter planning window is paramount for business continuity and recovery, says Thomas Sutter of Oracle NetSuite’s Global Solutions Centre of Excellence. “Most businesses operate on a 12-month budget cycle and manage strategictra plans with longer timeframes, but at this time the focus must shift to immediate priorities,” he says.
“Now more than ever, establishing a clear framework of visibility and control will streamline and protect cash flow in the short term, keep customers happy, and reveal new and innovative options business leaders have available to drive the business forward in the future. Finance leaders and their teams will be at the heart of these strategic moves.”
Finance departments may have had more responsibility thrust upon them when COVID-19 hit, but it seems their role will only grow in importance in the coming months and years. Technology is both empowering and enabling their new lofty status.
This article was originally published in Raconteur’s Business Continuity and Growth report in August 2020