How to Build Financial Resilience in Your Business-Image from Pexels
Financial Resilience-Overview
The Covid-19 Pandemic has dramatically highlighted the importance of financial resilience. Strong Financial Resilience requires businesses to adapt their existing financial frameworks to deal with a much more volatile environment in which profitability, cashflow and access to funds are experiencing simultaneous pressure.
There are 3 key elements in creating financial resilience in your business:
1. Cash Management and Stress Testing
The current environment requires companies to have sharp capabilities for both understanding their current cash position and how much cash they may require in the future.
Even for cash-rich companies, the potential benefits of accurate cashflow forecasting are numerous
Some businesses that were healthy pre-Covit19 are now under acute financial pressure.
All Businesses that could potentially be at risk need to take action to rapidly reduce costs and preserve cash without unacceptably high risk.
They also have to adapt cash flow models for uncertainty and disruption, revising them weekly, against prior forecast and outturn to underpin resilience strategies and determine response priorities.
You should consider embedding rolling 13 week and annual cash flow forecasts into your budgetary and financial management cycles.
To implement the above quickly, medium and large size businesses are forming Agile Multi-Disciplinary teams, including talented people from functions such as IT, Admin, HR, Legal, Media and Communications, Finance and Operations.
The Agile team should be laser-focused on rapidly creating and implementing cashflow models to deal with the uncertainty and disruption being experienced as result of Covet-19.
Small businesses with limited manpower resources should consider bringing in a financial expert to set up the Agile Process and train internal people to manage it ongoing.
Financial stress testing is about identifying the areas of vulnerability in your business so plans can be tested to address them in a timely and proactive manner should the need arise.
Doing this will enable you to determine the length of time your business can trade under different scenarios and give you time to engage with key stakeholders (shareholders, regulators, staff and funders) to negotiate outcomes.
2. Liquidity & Financing
Ongoing uncertainty over demand and supply chains is creating liquidity pressure across the business.
Your Agile Team will need to evaluate funding strategy options, including existing lenders and other sources of capital in order to meeting your funding needs in the time available.
Engage regularly with other key stakeholders on interim funding and payment alleviation options supported by government.
3. Financial Crisis Response & Contingency Planning
Businesses in immediate cash crisis must take steps to preserve cash balances by restricting payments to only the most business‑critical vendors as they mobilise contingency plans
If insolvency looks unavoidable, carry out contingency planning to decide the insolvency strategy most likely to protect value for creditors.
Directors should consider their duties in a financially distressed situation, the duties owed by directors’ shifts from shareholders to creditors. Personal liability and disqualification risks should be considered.
Your Next Step
If you believe that the Covid 19 Financial Resilience Program might be right for you, to provide you with all the knowledge, and skills you will need to Build financial resilience, cashflow, liquidity & working capital forecasting in your website.
Or alternatively, if you have the means, to take advantage of the situation in your industry to develop & implement a strategy to consolidate your position.
You can book a Free 20-minute strategy call with me personally in my calendar, so we can discuss whether working with me to implement this program would be the right option for you at this time.
Click Here to Book Your Free 20 Minute Strategy Call
You will receive an email confirmation and a reminder from my booking system prior to the meeting.
Alternatively, you can send me a message through my website contact page
Or send me a text message with a brief explanation of what you need help with, and I will call you back for an initial chat within 24 hours. My mobile number is 0418 277 137
