Crisis? As a finance manager, take these steps

Most likely, not everyone is 100% prepared for an economic crisis. Knowing what to do in these times is essential to ensure the continuity of an organisation. Financial managers are often expected to lead on this. Thorough crisis management is then required.
But how do you switch to crisis mode while keeping a cool head? During a crisis, it is time to analyse, clean up, forge new alliances and encourage change. The article below gives you several tools to keep control.
❯  How does an economic crisis arise?
❯  Analyse and adjust forecasts
❯  Delving into costs and cash
❯  Engage internal stakeholders
❯  Focus on partnerships
❯  Crisis management steps

How does an economic crisis arise?

Economic crises happen relatively often; every decade in the past 50 years has seen at least 1 or 2. A period of booming business ends with a sudden contraction.

Warning signals from a recession can sometimes be seen early. For example:

• decline in sales in certain sectors;
• less consumer confidence;
• contraction in equity markets;
• shortening of delivery times;
• rising unemployment.

When trust declines, demand declines at the same time. But what does that mean for your business?

It remains difficult to properly assess a crisis in advance, and thus determine your crisis management tactics. Nevertheless, as a financial manager, you need to make sure you are well prepared.

Financial managers are normally expected to ensure the profitability and continuity of the company.

When forecasts cannot be met, timely and appropriate action must be taken. After all, when the economy turns suddenly, circumstances can change rapidly. We tell you how best to act in such a situation.

Step 1 of crisis management: analyse and adjust forecasts

Every recession is different and some sectors will be hit harder than others.

What impact will the crisis have on sales? Which products or sectors will suffer the most? What gap will need to be closed for the annual forecast?

Finding the right data and answers will help to properly predict the impact and determine the right way of crisis management. 

Together with the Sales department, you look at metrics such as the number of quote requests, the time it takes to close a deal and the turnover per segment.

Implement digital dashboards with key information for the management team. Replace budgeting with short-term forecasting and start mapping corrective actions.

Delving into costs and cash

As always ‘cash is king’ - perhaps even more so in unpredictable situations. When the crisis hits, sales and cash reserves can quickly run out. So you want to cut spending at all costs to protect liquidity.

The team normally spends a month on cost reporting, so to get this right now in a day feels a bit awkward. Start by creating three simple buckets:

❯ Costs already incurred

Spending management tools (such as SimpledCard) can help provide insight into costs. At the touch of a button, you have a real-time overview of all expenses by project or department. Then it's time to clean up any inefficiencies. Costs such as catering and unnecessary travel can easily be cut.

❯ Planned and already committed costs

Implement lists for the different teams with monthly expenses, current subscriptions and ask them to look for online tools and software programmes that are no longer in use. Make sure there is clarity on notice periods.

❯ Costs that are planned but can still be stopped

Work with Marketing, for example, to check where the ad budget is going. Stop bad-running channels immediately and ask if there are alternatives for organic reach. If you bring this positively, it can have a beneficial impact on the relationship with other teams.

Engage internal stakeholders

An existing continuity plan may not be able to deal with a rapidly changing crisis. The focus is on responding appropriately in such a situation.
Responsibilities and actions during crisis management should be clearly described. So that responses can be structured. There will be a need for daily information on new business processes, current figures and cash flow.
Presenting clear options and scenarios to the management team is a chapter in itself. Yet nothing can be worse for the atmosphere than a top-down enforced savings plan. While you want to give direction and set clear savings targets, try to support the rest of the staff in coming up with creative solutions for their own teams.
See yourself as a facilitator, providing simple lists or additional information to help teams make their own decisions.

Focus on partnerships for solid crisis management

No business can exist without customers and suppliers. While banks and government support can provide temporary relief, a recession can provide a real opportunity in promoting new arrangements with new or existing customers and suppliers.
Contact suppliers to find out what they can do. There may be temporary scope for deferred payments and you can come to a fair arrangement. But they might also come up with valuable solutions that unlock new market potential during or after the recession. If you have a good relationship, they will probably want to come to the rescue during times of crisis. 
The same goes for customers.
It is crucial for organisations to prove their value in times of crisis. Take pole position with your customers. Think about long-term considerations and shifts in specific sectors or products. How are these needs shifting among your customers?
Help where you can and encourage internal teams to come up with new proposals and solutions. Not just for the biggest customers, look at your entire customer base. A random helping hand can inspire and can be the starting point of a future-proof relationship with a growing customer.

Take the first steps in crisis management

“Never let a good crisis go to waste”. A recession is perhaps the best possible time to initiate change, as flaws often come to light. Once the first crisis management steps have been taken and you have kept your cool, you can start building.
Think about changes that are sustainable, such as digitising workflows or innovations in business processes. Get in touch with your network, share experiences with colleagues and this way you may gain further smart business ideas.
Especially in unpredictable times, we can grow together.
Stay alert and good luck!
PS. Want to share experiences with one of our financial experts on crisis management? Then feel free to contact us!