A&M releases coronavirus cash-flow management guide for CFOs

22 April 2020 Consultancy.asia 3 min. read
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Global professional services firm Alvarez & Marsal has released a response guide for chief financial officers to keep on top of cash flow during the coronavirus crisis.  

First there was speculation around the possible economic impact, then general advice for how businesses should respond in the immediate aftermath of the crisis, and now, as the air is beginning to clear, the world’s leading consultancies are helping businesses navigate through the global coronavirus pandemic with some more specific tips covering the nuts and bolts.

The latest is Alvarez & Marsal, which has released a ten-point response guide for business CFOs.

A&M releases coronavirus cash-flow management guide for CFOs

“The CFO’s primary job in this environment is to keep cash, the lifeblood of a company, available and flowing,” states the firm. Drawing on A&M’s Restructuring and Liquidity Management, Tax Advisory, and Corporate Transformation practices, as well as the experiences of many former CFOs, the guide aims to provide “guidelines and adjoining tools for CFO’s to help them ensure that liquidity and business contingency plans are robust and sustainable.”

The overriding challenge, state the authors,  is that no can be sure how long the crisis will last before business returns to normal, with current predictions ranging from three weeks to four months. That uncertainty for the finance function greatly impacts three particular areas; the Order to Cash, Procure to Pay, and Cash Management processes. Other activities are important, but in A&M’s words; “right now it is all about liquidity and keeping supply chains operating efficiently.”

According to the firm, by executing the actions laid out in the firm’s ‘Pivot to Cash’ framework, CFOs will be able to establish governance and role definitions that are critical to success, with a strong communication and change management plan also recommended, such as to ensure that every finance leader and associate is operating under the same new playbook. Keys tools for this step include a Liquidity Control Tower, a 13-Week Cash Forecast, and Short-Term Financing Strategies.

The next handful of critical actions to take are to improve ability and speed to forecast and model, both as to business and cash; eliminate non-essential spending; adjust inventory levels – with key tools here being shrinkage reports and demand planning models; limit disruption in supply chain and critical operations; and then maximise cash inflow from customers. The latter includes tools such as advanced collection strategies, dynamic discounting, and promotional portals.

From there, points seven through to ten on A&M’s finance response plan include establishing a work-at-home model for entire finance staff; enable stricter cash management sweeping; retaining talent and changing variable incentives (recently the firm urged companies to start addressing such an impact on executive compensation now); and finally, evaluating tax strategies such as payment deferral opportunities and government stimulus while managing shareholder expectations.