The old saying tough times call for tough measures has never been more illustrious than today under the Covid-19 pandemic. In its wake, businesses are facing unprecedented challenges that have seen some completely lose everything. In times of such economic turmoil, companies must re-strategize to optimize their chances of surviving but thriving, even as the pandemic wreaks havoc on economies the world over.
Accounting is one of the critical areas where re-strategizing could mean doing better than just surviving the pandemic. During economic turmoil, one of the make or break factors is cash flow, whose responsibility sits squarely on your accounting team. When re-looking at your Covid-19 updated budget, one of the things you are looking for is as many options as possible to keep you agile and responsive to the rapidly changing business environment. This is a definite edge in your fight to survive this economic turmoil.
Another critical thing to keep in mind in times of such economic uncertainty is information is power. There is a wealth of reliable information online that can help you ask the right questions to get started on this journey. Forbes recently published an article that has excellent advice on how to strategize your accounting department to optimize cashflows in turbulent times.
Get your accounting team to focus on analysis. Understand how each section and niche of your customer base is responding to the Covid-19 related economic challenges to establish how that impacts your cash cycle. Get your payables team to look at non-essential cost-cutting options and leveraging supplier relationships to get better credit terms.
With this information in hand, then its time for the next step, forecasting. Your accounting team should be able to provide accurate, data-driven cash flow forecasting and regular working capital position updates. Unpredicted cash flow or working capital deficit can be detrimental to the business, mainly if it results in the inability to meet critical obligations such as salaries and utilities. Ensure you have a 3-month cash flow forecast with a best-case scenario, a most likely scenario, and worst-case scenario. To understand how to plan your cashflows better, click here.
To wrap it up when looking at adjusting your accounting strategy to cater to these economic uncertainties, the three critical questions to answer are:
• Can your team deliver timely and reliable information?
• Are there items you are spending on that you don’t need to?
• Which products and markets are making you money, and where are you spending your money?