While the 2020 pandemic is rapidly receding in the rear-view mirror, many organizations are struggling to adapt to the “new normal.” Controllers and CFOs play a big part in shaping the future of their organizations by devising strategies that manage risk and maintain liquidity even in the face of financial uncertainty.
What kinds of strategies are top-performing companies adopting? The following are just a few suggestions for how financial professionals can guide their organizations moving forward.
Scenario Planning
True preparation demands that you consider every possible situation that may arise. Scenario planning is a strategic process by which you and your company leadership identify and visualize potential risks and challenges moving forward.
For example, how might your company react if the American economy suddenly grinds to a halt? How would you adapt to a shift that causes a major dip in your industry? What would you do if you faced a worker shortage in the coming year?
Scenario planning can be a formal process that increases the flexibility of your organization. Admittedly, the process can feel a bit artificial, but it can at least provide a starting point to help you adapt to a variety of worst-case scenarios.
Cash Flow Forecasting
Adapting to future uncertainty demands that you know how much cash is flowing in and out of your organization — as well as how much you might expect to see in the near future.
Cash flow is important, as it reveals how readily you can meet your financial obligations and overhead costs. A significant reduction in your cash flow can jeopardize your ability to maintain normal operations, or it may signal a need for external financing.
Forecasting cash flow is a method that predicts the future cash flow of your company. This estimate will allow your company to plan your future business activities more reliably and make adjustments accordingly.
Cost Optimization
The post-pandemic world has caused many businesses to reevaluate their operational costs and essential processes. For example, the supply chain disruption has prompted many companies to seek out new vendors, suppliers, and distribution networks as well as pursue automated technology to lower costs and improve speed.
Controllers and CFOs can help organizations recognize their most important costs and explain how cost optimization might improve the company’s performance. Lowering production or distribution costs, for example, can raise profit margins and provide a boost in revenue.
A cost optimization model can be used to evaluate current operations, and it can also be used to justify future investments. For instance, it may cost money to invest in business automation, but automated systems can improve operational speed while reducing costs — both of which can drive businesses forward.
Leveraging the Right Technology
Technology can boost the efficiency of your core processes, and it can also give you greater end-to-end visibility of your entire organization.
Controllers and CFOs can especially benefit from Enterprise Resource Planning (ERP) software that reports real-time data to help you understand your financial health. These tools can provide invaluable support for organizations of any size, giving you access to the data you’ll need to make strategic decisions moving forward.
But more importantly, these digital tools can gather data from multiple departments, centralizing your most important information so users can make decisions on the fly. This centralization can give your business greater agility during periods of economic volatility.
Investing in the Right Capabilities
Even if the future seems uncertain, don’t simply focus on maintaining your company as it presently stands. Now might actually be the best time to invest in new capabilities, giving your company renewed strength as corporate America embraces the new normal.
For example, you might prioritize research and development, customer service, or any other historically weak area. Your company can come back stronger and more agile than ever before, and it may even be able to venture into areas that had previously been unexplored. These improvements can ensure strong positioning for the future.
Prioritizing Education
In times of uncertainty, education can be critical. Controllers and CFOs are often required to pursue continuing education as part of their degree programs and professional credentials. But education can be helpful for any professional in understanding broad economic trends or industry best practices.
Reading trade publications or attending webinars can offer up-to-the-minute analysis of the current financial landscape and may even assist in competitive analysis so you can stay ahead of the curve.
Reliable Data Provides Flexible Solutions
Sometimes, the more reliable your data, the more flexible you’re able to be in providing solutions that drive your company forward. Controllers and CFOs play a vital role in helping senior management navigate this data, using critical metrics to make decisions that align with past performance as well as future goals.
In the end, your company’s ability to remain flexible can carry you through seasons of uncertainty as well as drive you forward in the new economic landscape.