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THE POWER OF “WHAT IF”

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By Robert Douglas, Europe Planning Director at Workday Adaptive Planning

 

Organisations across the world are currently dealing with the economic instability brought on by the fight against COVID-19. On top of being forced to adapt to these unpredictable circumstances seemingly overnight, the impact of the pandemic continues, challenging companies to course-correct in nearly real time, with no end in sight.

The key to persevering in this fast-changing world is the ability to identify disruption and proactively respond to it, which is why trying to work with a business plan developed months ago limits an organisation’s ability to be successful on both counts. The reality is that agility starts with planning. And, in these times, scenario planning gives organisations the ability to weigh trade-offs and explore the impact of different decisions.

 

Thinking ahead

The pandemic perfectly illustrates that no one can ever claim to know exactly what lies ahead. But preparing for the unexpected is key in order to respond with agility. Successful finance leaders and financial planning and analysis (FP&A) professionals can identify a list of potential scenarios the organisation might face and then map out potential outcomes. This allows them to also propose actions that can be taken to mitigate the most critical risks associated with all identified eventualities.

Running accurate scenario planning on short notice, especially in the face of uncertainty, can be challenging. While the process itself boils down to a handful steps, carrying them out efficiently requires having access to solid data and the technology necessary to run multiple, sophisticated models.

 

Assessing the impact to the top line

Preparing for any significant event or change requires planning. Many companies coming into 2020 were already assessing if the long-running economic expansion would begin to show signs of slowing. The pandemic, while sudden, accelerated the need for scenario planning at a pace that most companies had never experienced. At the onset of the pandemic, it was reported some finance teams were handling 30 times more forecasts and build-out scenarios than in a typical week*.

Because there is no historical data for a pandemic, many companies started by assessing the impacts to the top line of their business. Modelling things like new sales, business renewal activity, and any upsell opportunities for customers to create that topline start. From there, teams might consider a range of scenarios, for example looking at 50 percent, 65 percent and even 80 percent of pre-pandemic plans. This allows a view into what could happen to the balance sheet and income statement to better help businesses understand variances on the metrics that matter most to them.

Considering the current economic and health crisis, the focus is really on the “levers” that can be pulled to make trade-offs. For most companies, the biggest expense is people, which is why workforce planning has emerged as a top priority for 2020. Looking at whether to continue with hiring or freeze hiring in certain areas or regions allows teams to evaluate various outcomes. And since no company wants to cut jobs, it’s important to have a full understanding of the various levers available in order to make the right decisions that align with the longer-term business strategy. All options need to be put on the table and assessed against a range of scenarios.

 

Align and execute

While scenario planning and ‘what if’-analysis is owned by finance, it cannot be done in a finance vacuum. Leaders from across the organisation need to be involved with validating all assumptions made and make sure the right levers are identified from the start. This keeps everyone aligned, and with modern planning solutions, this can be done seamlessly using real-time dashboards with up-to-date data that executives can access around the clock.

Apart from agreeing on the current state of the organisation, finance teams and leadership need to also agree on what the best outcome for the business looks like. This will require understanding the priorities across the workforce, customer satisfaction standards, sales, product development, and more. By agreeing on the organisational priorities up front, as business strategies are revised, the scenarios the finance team needs to focus on can be identified and managed.

The speed at which the economic outlook changes also means scenario planning, like every other sort of planning, needs to be continuous. Priorities will inevitably change in the face of new developments impacting the business, and as soon as this happens it needs to be communicated to finance so that new scenarios can be created and evaluated to inform decision-making.

Once the finance team has established the scenarios with which it is working, defined the top priorities for the business, and identified the levers it is willing to pull, it becomes worthwhile to dive deeper into the data and generate sophisticated and actionable in-depth plans and reports. For some companies, this will mean digging into supply chain issues, for others it may be assessing risk by segment or proactively offering support to clients and customers.

 

Technology as the enabler

Being able to answer crucial ‘what if’ questions for the business—and do so at the pace our current climate dictates–relies on modern technologies. Without a powerful IT infrastructure that can support real-time access to performance data from across the organisation combined with modern planning tools, teams will be challenged to create the plans and reports needed to guide critical decision-making.

Innovations in FP&A technologies have already reshaped many finance teams and ushered in unprecedented business agility in recent years. By moving away from on-prem data silos to the cloud, where data can inform highly complex models on demand from anywhere around the world, businesses have ensured they have the capacity to effectively plan for a near-infinite number of scenarios.

No one knows what lies ahead, but through the power of “what if” finance teams can help organisations adapt and adjust as business conditions change and continue to do so. And while the pandemic has certainly escalated this need, the effective use of scenario planning has proven that finance teams can embrace flexibility and use it as a strategic advantage.

 

*https://blog.adaptiveplanning.com/perspective/in-uncertain-times-agility-is-the-safest-harbor-of-all/

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Business

TOP TIPS FOR BOOSTING YOUR CASH FLOW AND BUSINESS IN 2021

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By

Ian Gass, CEO at Agitate

 

Many small businesses are still dealing with the disruption caused by the pandemic. Improving financial performance is most likely to be at the top of agenda, and a good place to start is reviewing cash flow. No matter what the product or services a company provides or the size of the business, cash flow still remains king.

Research has shown that 38% of small business owners who have suffered cash flow problems have been left unable to pay debts. With 1 in 7 small business owners having been left unable to pay employees because of cash flow issues, this equates to a huge 2.2 million people in the UK not being paid on time.

 

The importance of positive cash flow

Profit has traditionally been seen as the most important measure of an organisation’s financial performance. However, the focus is increasingly shifting from the income statement to the balance of cash inflows and outflows. Prioritising profit levels reflect long term fiscal health, but it does not necessarily mean that a business can pay its bills on time and survive in the short term.

Ian Gass

Sudden drops in demand prove how keeping an efficient cash flow balance is essential, and can expose shortcomings of currently used solutions. When reviewing your cash flow, you need to look at ways to get more money coming in and better manage the money that is going out. Here are a few ways to improve cash flow management and see positive changes in a short period of time.

 

  1. Efficient forecast

It is important to be able to compare actual income and expenses with those that are in the pipeline, as it helps to determine which area of business is under performing or generating unnecessary costs. Start by looking at your projected income and expenses for the next three months, don’t wait until you receive a bill to realise there are not enough funds to cover it. An easy way to overcome this issue is a free cash flow template available online.

 

  1. Terms and Conditions review

Making sure that T&Cs are clear and comprehensive not only provides your business with a protective layer, but also makes customers understand when and how the payment is expected, and the process and penalties for late payments. That’s why regular checks and reviews of existing agreements prevents businesses from potential loses. It is also good to use reward tactics to encourage customers for prompt or early payment such as discounts or free shipping.

 

  1. Payment terms

Payment terms that are understandable and realistic is clear T&Cs in place. As it creates a contract with suppliers and obliges the organisation to pay on time, it is important to match these terms wider operation processes. For instance, if you have 14 days to pay your suppliers, but your customers get 30 days to pay you, a problem of late payments will be inevitable. To avoid damaging relationships with suppliers, you should consider an extension of the terms or reducing the credit period for your clients. It is worth taking deposits, asking for payment in advance or on receipt.

 

  1. Invoice management

Another method that can quicky improve cash flow is sending invoices promptly and ensuring they are accurate. Any mistakes will simply require queries to be resolved and it will take longer to receive payment. In addition, it is important to remain persistent at following up late payments and moving the money to the bank as soon as possible. Some clients will always need chasing and, without a follow up, they will hold on to the cash as long as possible.

 

  1. Payment options

Making it easy for clients to pay gives businesses the best chances of being paid quicker. While accepting card payments might be common place, there is a high risk of fraud. For example, in 2019 £620.6m was lost in card fraud in the UK. Also, it can be expensive to process and often leaves an organisation to wait days to receive the funds. Using a free bank-to-bank payment app means businesses can send payment requests from mobile phone straight to customers via email or messaging app (such as WhatsApp).

In that case, the consumer will receive a message with all the information they need to make the payment instantly. They click the secure ‘Paylink’, which directs them to their online banking app and all the relevant information is displayed such as your name, the amount to be paid and a reference. The transaction needs then authorising with their bank and the money moves instantly from their account to yours.

 

  1. Cost reduction

If there is too much money going out that a company can’t afford, business owners need to think of ways to reduce those expenses. There are a few questions to help understand where money can easily be dislocated:

Is there software or equipment that you are paying for that you don’t use? Can overhead costs such as utilities and administrative expenses be reduced? Are card transaction fees putting an unnecessary pressure on cash balance? If so, it can be eliminated with a bank-to-bank payment app.

Although profit might be seen as the ultimate goal for companies of all shapes and sizes, sustaining positive cash flow provides vital foundations on which a company can grow. By using the right tools, business owners can not only get paid faster and more securely, but also improve customer experience, reducing the transaction to a quick QR scan. Making a few smart changes to the existing balance sheet can have a big impact and future-proof an organisation in no time.

 

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Business

BRIDGING THE DIGITAL EMPLOYEE EXPERIENCE GAP

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By

Matthew Sturman, senior technical consultant, AppLearn

 

While the financial sector was arguably some way along the digital transformation curve before the pandemic, embracing innovative solutions to enhance customer experience and security, the last 12 months have required a step change like no other for employees.

Overnight, teams were operating remotely, using an array of new business applications from communications tools to support systems. Business critical processes which may have been stagnant for some time due to a risk adverse culture, quickly evolved with a need for greater agility.

In a post-pandemic world, it’s crucial that financial leaders don’t become complacent about the employee experience; KMPG put employees at the top of their list for financial institutions six considerations in dealing with the impact of COVID-19. Organisations have rapidly undergone transformation to facilitate home working while maintaining operations, however the proliferation of technology has also highlighted a critical digital employee experience gap. Addressing this will be key to embedding digital strategies which enable and support employees in the long-term.

 

Matthew Sturman

The overwhelmed employee

Even before the pandemic, research from Okta detailed how the number of worker applications deployed by organisations had increased by 68% over the past four years.

You only need to look at how employees access IT support to realise just how complex this picture has got for employees. Every technology application – from risk and complicance to payroll software– has a different route to access support, with employees having to navigate chatbots, online knowledge bases, resource hubs or the helpdesk. The result? Context-switching. Time spent flitting between different applications or windows to complete tasks, taking employees out of the flow of work. Studies have shown that switching contexts has a dramatic impact on time lost mentally re-focussing between tasks, in addition to time wasted navigating to try and find support.

In fact, research from McKinsey has found that workers spend up to 20% of their working week searching for information or support on tasks. This issue has only been compounded further with employees working from home, and not knowing where to go for timely support.

 

Prioritising the user

Over time, these small interruptions can add up to a significant impact on an organisation’s performance – and lead to user frustration, as well as decreased motivation amongst employees.

Historically, financial services businesses have taken a customer-first approach to investing in user experience – prioritising external customer service and communication over the internal employee experience. However, most employees are also users of this technology, and expect the same smooth transitions and consumer grade experience when using their work devices or software. When their digital experience is seamless, employees can focus on their role without interruption.

In a recent report, KPMG said organisations should create an ecosystem of tools and technologies that work together to enable experiences that help people work better. Any shifts in technologies should consider the combined impact of features and integration. It’s this sentiment financial leaders must embrace to truly empower digital workers.

 

Bridging the employee experience gap

According to a recent report from analyst firm Constellation Research which looked at the impact on the pandemic on the digital workplace, organisations have a historic opportunity to transform the employee experience.

It encourages organisations to adopt an ‘employee experience platform’ (EXP) model that connects disparate digital tools into a more cohesive digital workplace. This model is made up of disruptive technologies that bring together siloed applications and software.

Technologies such as digital adoption platforms (DAPs), machine learning, ‘people analytics’ tools and on-demand talent sourcing have been highlighted by Constellation as key components to the EXP. DAPs, for example, help solve the issue of disparate IT estates by overlaying software applications and providing a consistent support experience across multiple applications. This can take the form of step-by-step guides to navigate the user through new digital tasks and workflows, through to ensuring knowledge articles and chatbots are seamlessly available when required and provided in context of the individual requiring it and the task they are performing. Crucially, this keeps employees in the flow of work and avoids wasted time switching between applications and searching for support.

 

Looking ahead

It’s been an immense year of change for financial leaders, organisations, and importantly employees. As we move out of the pandemic, getting this next phase right will be absolutely key. For many businesses, this will be about moving from survival to thriving in a digital world.

The steps are simple. Identify the experience gaps, explore disruptive tools and technologies that bridge them, but most importantly, create an employee experience that enables and empowers them to do their job better.

 

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