From keeping cash flow healthy to streamlining costs and figuring out how to plan for a continually evolving situation, COVID-19 and its economic fallout have forced finance teams to do more with less while re-evaluating their processes.
We recently sat down with Hitachi Europe’s head of financial planning and analysis, Abby Obomighie, to discuss the crisis’ financial impact on businesses. Here’s what she had to say about how finance teams can help businesses adapt in uncertain times, the importance of accurate data, and the role of tech moving forward.
I think there have been two main changes.
Firstly, planning has become more important. When COVID-19 hit, most businesses’ budgets immediately went out the window. We had to have frank discussions about what should be prioritised and what kind of spending was feasible.
Secondly, the way we do our analysis has changed. Obviously, maintaining positive cash flow became more important. But we also needed to be a responsible organisation, and find ways to do business in this new reality we were facing.
You can’t make good decisions and change direction effectively if you don’t have accurate data to base your budgets and forecasts on. So we’ve been looking more closely at how we produce our numbers and at the data behind those numbers.
I think it’s good to focus on simple things. What are your drivers? How is the current situation affecting them? And what can you do to offset?
Let’s say you trade in two different places. One is in lockdown and one isn’t. Where lockdown is in place, it’s going to be more difficult to trade, especially if you sell products. So you could look at getting more product to places where lockdown has been lifted to make up for the areas where you’ve taken a hit because of the restrictions.
This might be less detailed than your normal approach. But you can at least have a conversation and take action instead of just going “Here are your numbers, make of them what you will.”
We were lucky, because we already had systems in place that could tell us our monthly spend and produce bespoke reports. We had visibility, and this helped immensely in terms of governance and guidance — we could query certain types of spending and also see where the savings were coming from.
What this has taught me is that it’s important to have stable processes in place, because then you can enhance those that are most useful to you when things aren’t going well. You don’t want to be adding to uncertainty by resorting to new and untested methods during a period of crisis.
I think it’s always advisable to make use of technology. But at the same time, technology is pointless if you don’t know how to use it to your advantage.
Look at it this way. Everyone talks about big data and how it’s the new gold. And it’s true — data is an asset. But if you don’t read the data properly, it can lead you in the wrong direction.
Understanding how to get the best out of technology is just as important as having access to it in the first place. And you need to commit to continuously improving. I consider myself an advanced Excel user, for example. But I’m always discovering new features and functions.
The biggie is that fewer people are flying at the moment. So, in most industries, businesses have healthy surpluses on their travel budgets.
The flipside is that travel is often linked to sales. So, while it’s a saving, it could be having a negative impact somewhere else, because sometimes you have to get off Zoom and do things face to face to get results.
I’ve also seen some spikes.
Beyond the obvious, like video conferencing and other software subscriptions, we’ve seen logistics costs rise. That’s challenging. Do you let it eat into your profit margin? Or do you pass it on to the customer, who is also having a hard time and could potentially think twice about buying?
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Truthfully, I don’t think any industry will be going back to business as usual any time soon. The good news, for finance, is that we have a new precedent to follow. We can say “OK, this has happened and we survived. Is there a winning formula in there which we can apply to future situations?”
I think, regardless of the economic climate, it’s finance’s responsibility to challenge budgets and budget-holders. Covid-19 is something we couldn’t have possibly thought of. So now we have another angle from which to consider our budgets and take a more honest look at whether we’re making the best use of our resources.
I think it’s very clear that data is no longer just a nice-to-have, because businesses need to make well-informed decisions on the fly.
Having access to accurate data means you can go beyond number-crunching, ask the interesting questions — Do we really want to go in a certain direction? Is it worth it? Are there other avenues we could explore? — and have honest conversations around them.
I believe digital transformation is a journey, not a destination. So, sometimes you might get off at a junction and come back on the main road later on.
That said, COVID-19 has definitely had an effect on the way businesses see technology. Those who were already thinking about tech have probably been pushed to do more. And many who were unsure have probably started to see the benefit.
But at the end of the day, with the way the world is going, you’re either going to go there willingly, or you’ll inevitably get dragged there.