Three Insights to Help CFOs Guide Business Recovery

Tim Wakeford, VP for Financials Product Strategy at Workday, offers his insight to CFOs looking to lead their business back to strength.

After a year where organisations were forced to continuously change plans and rethink their approach to business recovery, the future is finally looking less turbulent, with a potential COVID-19 vaccine on the way. One fundamental transformation 2020 brought to businesses, however, will continue informing the next year. Leaders will be looking to the CFO for insights on the business and guidance to decide their next move.

If the early stages of the pandemic have taught us anything, it is that companies need good quality data to make faster decisions. The question is, what data-driven insights do CFOs have to provide companies to deliver the best response to persistent change?

It could be argued that all data is valuable. Nonetheless, CFOs must focus on three particular data-led insights to steer businesses to recovery. They need to provide visibility into working capital, empower other leaders with data, and manage investor expectations with scenario planning. In doing so, they will be in a strong position for success in 2021 and be able to guide the business through any challenges the future may bring.

Gain greater visibility into working capital

The first priority all CFOs have in common is being able to share real-time visibility over their business’ financial inflows and outflows in order to manage cash pressures. This is because many businesses have seen revenues plunge during the pandemic, which had a negative impact on cash flow. In fact, 94% of the Fortune 1000 are seeing coronavirus supply chain disruptions and facing the reality that they will need to become more agile in managing inventory. The disruption of the second wave is heightening financial pressures and will likely mean that CFOs have to reassess their budgets again and again. Without a real time view of working capital, moments of disruption can lead executives to make decisions in a panic. This could result in significant inventory spend with non-preferential suppliers, which in turn reduces the potential for savings from contractual discounts, and is common during turbulent times. Having a 360-degree view of the organisation’s working capital, however, can provide a better handle on spend management, optimising costs and overall efficiency. This will help leaders avoid risks that can set them back, and help them to accelerate recovery.

The first priority all CFOs have in common is being able to share real-time visibility over their business’ financial inflows and outflows in order to manage cash pressures.

Empower the organisation to make data-driven decisions

Getting the right data-led insights into the business to guide decisions can be challenging during a constant state of change. However data-driven insights are absolutely key in empowering decision-making — even during the best of times. Providing the right data, to the right people at the right time, can only be done by breaking down the data silos still present in many companies. A global Workday study revealed that out-of-date information and siloed teams are the biggest barriers to agile decision making. On the other hand, 80% of technology leaders from more agile companies stated that employees have access to timely and relevant data without gatekeepers blocking access to such information.

The challenge is that, as many businesses have grown and evolved they have accumulated different technologies — systems that are often placed together and lack smooth integration or a single pane view of what is happening in the organisation. CFOs whose businesses have reporting scattered across different data sources will find that it is much slower and harder to monitor performance, identify variances, and surface risk. This is why CFOs and finance teams have to consider investing in overhauling their technology stacks. Our customer Equiniti, for example, found that having all HR and financial data in the same cloud helped identify challenges and respective solutions with much more agility and confidence during the pandemic. This way, they were able to fix gaps quicker, without slowing their recovery plans.

Manage investor expectations with scenario planning

The uncertainty and volatility created by the pandemic has led to markets swinging back and forth. In turn, this creates pressure from investor communities and has served to highlight one of the biggest challenges organisations face — determining the long-term future of a business. In the current state of constant change, CFOs and their teams cannot underestimate the importance of taking a strategic approach to investor relations. Besides sharing earnings reports, it’s the CFO and its team’s role to offer constant reassurance to stakeholders by communicating how management teams are dealing with the crisis.

Therefore, when talking to investors, leaders have three choices: withdraw, revise, or reaffirm guidance. A recent Deloitte report revealed that more than half of CFOs from public companies have chosen to withdraw from providing guidance. Although understandable, this could signal that leaders are unsure of their company’s prospects and have a downward impact on stocks.

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When faced with this lack of clarity, finance leaders must stay ahead of the curve and give invaluable insights to investors by undertaking scenario planning. Many of our customers are basing their entire recovery plans on multiple pictures of their budget using what-if scenarios, and it’s proven equally important for investor insights. CFOs can build scenarios to better understand what the future may look like in areas of particular interest to investors, such as covenants. Deploying these types of forward-looking processes will help businesses prove their stability, ensuring sustained recovery and emphasising their long-term objectives with clear metrics.

The strategic role of the CFO for business recovery

The pandemic has shifted the role of the financial office for good. Everyone – from HR and commercial teams to investors – are now looking to the CFO for guidance and to spearhead the business through upcoming disruption. Armed with the right insights, plans and tools, the CFO will be able to lead their organisation to a swift recovery and prepare the business to thrive, whatever the future holds.