This is undoubtedly a testing time for leaders near and far. From protecting their employees to being relevant to their customers, they have their hands full. But, among the pressing challenges, getting their finance in order and safeguarding the future of their organization have got to be at the top of their agenda for any business impacted by the current health and economic crisis.
Actions taken now by the leaders — most certainly including the chief financial officer — can have an immediate impact on the survival of the company, how quickly it rebounds from the global downturn, and its financial health and sustainability going forward.
As leaders attempt to safeguard total enterprise liquidity in this time of crisis, they should ensure they have two key capabilities supporting the core of finance and liquid asset management activities.
First, create and maintain a “liquidity control tower” as an effective approach to managing assets, risk, and operations. This is an agile group of cross-functional, interdisciplinary teams aligned with the chief financial officer to collect, interpret and act upon data in collaboration with other core corporate functions and lines of business. It provides an enterprise’s leadership with a single view of all aspects of liquidity, linking information related to receivables, payables, inventory, risk, taxes and cash flow, through a 360-degree governance framework.
In addition, companies should leverage data and analytics to manage liquidity for faster decision-making, actions and impact assessment, enabled in days instead of weeks or months, through dynamic scenario-based forecasting models. Having agile models allow leaders access to forecasts and outcomes that are reflective of the changing scenario inputs.
Tapping into real-time analytics and behavioral modeling can predict how a business decision would impact liquidity. Cash management analytics solutions that incorporate business and regulatory insights can help drive maximum value from the capital structure and free up stranded cash. Predictive analytics can help reduce working capital, for instance, by proactively identifying and reducing slow-moving inventory or detecting and fixing invoices with the probability of raising disputes.
The control tower also helps organizations adjust demand and supply forecasts on what-if scenarios and make smarter capital allocation decisions based on their own risk and resilience postures. Availability of integrated data can help leaders to continually evaluate investments, revisit the returns of committed projects and reassess resource allocation.
As we look at the immediate term, leaders should strive to secure and strengthen existing financing sources and look to create breathing room by cutting non-essential spending. At the same time, they should leverage the liquidity control tower to improve cash flow.
As companies recover from the economic shock, leaders can and must re-think how things could and should be done and invest in their future. For example, companies can reduce the fixed cost that they carry by “variabilizing” the cost structure, which would help them respond quickly to changing business conditions. A great place to implement this approach is technology. Moving to the cloud and software-as-a-service gives businesses flexibility fixed technology costs such as data center operational costs and software licenses don’t.
What’s more, technology investments can kill two birds with one stone by setting organizations up for operational success, like enabling more agile and efficient product development. Continued focus on cost management will provide the funding to reinvest in new opportunities and future growth.
Looking beyond the pandemic, building an organizational habit of data-driven decision-making, accountability and strong controls on the company’s spend will not only yield efficiencies for years to come but provide crucial capital to reinvest in strategic initiatives to unlock new growth opportunities.
Lisa Marais is a Dallas-based managing director at Accenture and the Strategy & Consulting—Products lead for its 13-state South Market Unit. She helps clients in industries including retail, consumer goods, travel and manufacturing continue to transform to meet their evolving customer needs.