An FD’s guide to surviving uncertain times

From budget reviews to cashflow control, extraneous events like Brexit and potential political instability, finance directors can protect their businesses from external factors by putting an effective risk management plan into place, says Phil Scott, managing director at FD Recruit

We are living in uncertain times. Whether you are pro- or anti-Brexit, we are all hindered by the lack of clarity on what separation from the EU will look like, and when it will happen. And nobody is quite sure what is happening on the other side of the Atlantic.

So how can finance directors (FDs) thrive, and even grow, in 2017? Here, we outline four priorities to making the year ahead work for your organisation.

Budget smarter

Uncertain times lead to more caution when spending. Budgets may be cut. But having less money available does not always mean cutting supplies, investment or staff numbers.

Now is a time to focus on improving efficiency instead. There are a number of ways of getting better value from your expenditure.

Shop around, and do not be afraid to negotiate. Inertia can lead to overspending, so question all purchases, whether new or recurring, to see if you could get a better deal from current suppliers, or maybe a competitor.

Join forces with other local companies or the wider supply chain to benefit from economies of scale when ordering. Alternatively, make the most of organisations such as chambers of commerce, or other groups that offer special rates and member discounts.

It is good practice to trim the fat by eliminating unnecessary purchases, but before cutting investment in areas that could hurt the company’s potential, see if there are smarter ways of buying the same for less.

Improve cashflow

The profitability of any business only helps when it is backed up by sound cashflow that allows you to operate. In an uncertain economy, it is vital to give your operation the chance to survive lean times; the best way is to ensure money sits in the company’s own account and not with debtors.

Get tough with long-term outstanding debts. If your company policy has sound terms and conditions in place, be brave and start enforcing them on habitual late payers. Some businesses will pay as late as allowed, and it does not take much pressure or persuasion to coax them into paying.

Sometimes it might take the threat (or even the reality) of legal action, and while it can seem daunting to risk upsetting customers, it is better to focus on those that honour payment terms anyway.

If you are more laissez faire with small print, introduce new paperwork for the sales team. Draw up reasonable payment terms and make them clear, make it easy and even desirable for customers to pay on time (early payment discounts, for example), or take advantage of services such as invoice discounting to gain earlier access to cash.

Utilise analytics

Decision making carries an inherent element of risk at the best of times and economic uncertainty for the foreseeable future only makes it tougher.

An integral part of the business landscape is the use and application of data-driven analytics. With recent advances in software and the fact that many organisations carry out a lot of sales and commerce online, FDs have access to more information than ever.

It does not require expensive, specialist software, though those are certainly useful. Even the most recent updates to Excel have built-in functions that help build projections in more detail, using more sources.

Data collection does not need to be intrusive to customers. There are many ways of collecting information - and pooling it into one central resource - which help measure demand, trends, inefficiencies and opportunities.

With the rapidly growing rate of adoption, in 2017 it is a case of jump into data analytics soon or fall behind competitors that already have.

Risk planning

Be prepared. The last 12 months were full of unexpected moments, especially politically, and the year ahead will almost certainly contain more of the same.

Amidst all the unpredictability, it is best to get your business ready and be able to react quickly to change.

Start with drawing up ‘what if?’ scenarios for various possible situations. Think about possible Brexit outcomes, for example, and how to react.

Then assess your organisation’s vulnerabilities and strengths, and what action to take if a headline breaks - whether it poses a danger or an opportunity.

Put together a plan for an unexpected event. Having cover-all policies in place will mean, if necessary, you can begin making moves that’ll give you extra time to react and give you an advantage over the competition.

Once you’re running a lean, cash flow positive business, you’ll be in the best position to move quickly when situations arise.

In playing out scenarios on paper, identify barriers to change, whether that is a lack of resources, broken or bloated lines of internal communication, unclear leadership lines, or inefficient critical paths. Right these mistakes now and even if no situation occurs which requires immediate action, the organisation will still be in better shape overall.

About the author

Phil Scott, managing director at FD Recruit

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