Cash Flow Management and Planning Have Changed for Good

This is the first in a three-part series highlighting key insights provided at a panel discussion from the CFO Leadership Council’s Atlanta chapter. The conversation focused on cash cash flow management, planning and forecasting during a cash-crunched environment, and featured insights from two CFOs and a VP of Finance. 

In this installment, these leaders look back at how they dealt with the initial shock of lockdowns and closures, how that impacted FP&A teams and their approach to cash flow management, and what they did to adapt and keep their business going throughout the year.

A Fast Focus on Cash

The pandemic brought disruption and change to every organization, quickly. In March, 2020, most CFOs focused on cost cutting to conserve cash. But, as the pandemic took hold, they soon realized incoming cash was to become their biggest concern. 

One panelist shared how their company, a shared-services business incubator, initially focused on worker safety, moving to the cloud, and easing the stress of school closures. With many of their clients paying by paper checks, however, the impact on cash flow was immediate and substantial. “Collections came to a screeching halt, and the U.S. Mail did as well. So, we had to go to plan B and incent clients to move to ACH,” the leader recalled. 

Another panelist was in a similar situation, although theirs was a cloud technology company with a flexible culture, so the transition to remote work happened “in about a week.” But, for them, paper checks and sporadic mail delivery were the least of their worries. “A lot of states imposed non-collection rules, but we had to still provide services. Our vendors are large telecommunications companies, so while I had to give breaks to our customers, they were not giving breaks to me, despite my efforts.”

At that same time, a third leader shared how he was working with an esports client that relied on revenue from in-person events. Social distancing rules forced them to move online, completely upending their business model. It also reduced revenues, since “online streaming fees aren’t the same as for an in-person event.”

The fast-changing environment in a cash crunched market and the immense uncertainty quickly forced these and most companies to abandon the typical 13-week cash flow models for faster, continuous planning models. 

From Quarterly to Daily

The 13-week rolling cash flow plan was trendy well before the pandemic. That duration seems like a luxury today, as many businesses moved to monthly, weekly, or daily cash flow forecasts as chaos and uncertainty roiled everything from suppliers to customers to the proverbial “check’s in the mail” promise. But as the end of 2020 approached nearly all companies had moved to fast financial planning and forecasting cycles, with an October survey from Deloitte finding that 45% of companies forecasted daily, weekly, or biweekly. 

The panel echoed this trend, with companies looking at collections daily and disbursements to vendors weekly. To conserve cash, some slowed payments where possible and pulled customers onto modes of electronic payment to accelerate incoming cash flow. One panelist shared that their company relied on PPP loans and credit cards to bridge the gaps and defer some payments. She also accelerated billing to weekly, with a weekly close to maintain more consistent cash flow. 

The CFO’s Takeaway: Planning is Dead. Long Live Planning.

Nearly everyone was shocked by the pandemic, and the ensuing months threw FP&A into a daily and weekly whirlwind of planning and forecasting, and repeating the process. In general that pattern is still going on, largely from home offices, and leading to FP&A burnout, exhaustion, and lower productivity. 

These patterns aren’t sustainable, but daily and weekly cash flow updates are what the c-suite has come to expect over the past year. There’s no going back. But those behind the spreadsheets can’t be expected to continue working nights and weekends—and restart their daily commute—without hitting a breaking point. With huge growth expected in 2021, FP&A needs more time to analyze and capture strategic opportunities, collaborating with the business instead of struggling with unsustainable cash flow planning and forecasting cycles. It can’t be done manually, but it can be automated and accelerated with Planful’s cash flow forecasting software.

In part two, these CFOs look at where they are today, how 2020 changed their tactics and cash flow planning processes, and what they’re looking forward to in 2021. 

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