I’m writing this blog post on the day the EquityFD team and over 200 CFOs and other senior finance execs were supposed to be meeting in Central London for the fifth annual Contemporary FD event. (Don’t worry: we will reschedule as soon as possible.)
Now, a month after Boris Johnson issued the order to lockdown the UK – and six weeks since Chancellor Rishi Sunak announced a blockbuster first-aid package for the UK’s businesses (and how's that working out for you?) – how are the people who should have been enjoying the event faring? We’ve been calling finance leaders to find out.
No rest in the lockdown
The first thing to note is how busy they are right now – we’ve not had much opportunity to chat at length to more than a few of them. (If you’d like to share your own responses to the pandemic lockdown, drop us a line – as you’ll see below, we’re not interested in names and dates, just priorities and emotions.)
One CFO told us the daily challenge of staying on top of cashflow – with customers pulling back and suppliers desperate for payment – had pushed their work-week to the limit. More than 80 hours in a week has not been unusual. (The flip-side: this CFO has also had dinner with their kids every evening since lockdown began, something that hadn’t happened in years…)
Drawing on experience
A couple of the finance leaders we reached were also very grounded. “Five weeks in, and it’s a mixed bag – some areas are clearly much worse off, but others actually better,” said one (now a CEO). “The cash position is OK. And we’ve been through recessions before. We’re treating it like that – a very sudden and possibly very deep recession, but it’s not completely alien.”
Lots of CFOs are taking the same steps. For example, it’s pretty standard to have frozen marketing spend as soon as it was clear what was happening. “But we’re then releasing budget on a month-by-month basis when it looks sensible,” said one CFO.
Protecting your people
Most businesses have put some employees on furlough – it’s crazy not to, where activity levels have dropped and employees aren’t going to be too adversely affected by the £2,500 a month cap. (Some businesses are topping up higher-paid employees to the 80% level – additional cash runway shouldn’t come at the expense of the talent base.) “And we’ve had to insist others take a week’s holiday by the end of May,” another said.
Uncertainty is clearly the big challenge. The government has to make that tough trade-off between the health of the economy and people’s lives. “No-one envies them that,” said one of the erstwhile speakers at Contemporary FD. “But as a business, we have to make similar decisions. Our staff mostly commute in on crowded trains to busy offices – it’s a recipe for a spike in infections.”
Look forward – for traps and springboards
So apart from the obvious – monitoring and conserving cash in particular – what else do CFOs need to be doing? One CEO told us the critical job is coming up with a worst case scenario for this year. “We need to be able to discuss that with the board so they’re clear how bad things might get,” they said. “That will also shape some of our conversations with shareholders. Then it’s talking to the bank about covenants. Ours are based on EBITDA, and clearly there’s a risk that the numbers will be exceptional this year. If the CFO can get them to waive or amend those metrics, we’ll be in a much more secure position.”
Then conversations internally need to be constructive. What can we learn from this experience to run the business better? What bits of the past should we leave behind when we come out of it? That might be business models – especially those legacy operations whose days were probably already numbered – and practices, too.
Even the basics may never be the same again
The necessities of lockdown have opened up new ways of thinking. “We do, undoubtedly, work better when we're together,” said one FD. “But we’ve proved now that we can also work apart. We already had most people working one day a week from home. Now, I can see that one day going to two or even three in the future – providing we can meet the big challenge of ensuring our people maintain their sense of belonging to the organisation.”
And another CFO has already learned to use new working habits to stay more involved – jumping into video meetings is much easier and less obtrusive, allowing the top team to feel connected. It’s that kind of creative thinking that will keep finance on its toes, businesses in good shape and help to rebuild the economy.
We’ll be talking to more private equity, financial management and business leaders over the weeks and months about what’s changed, how they’re coping and what they can see for the future. Get in touch to share your own thoughts at [email protected] or via EquityFD – as always, in complete confidence.
And don’t miss our new series, Women Finance Leaders, starting with Dianne Buchanan, a PE-backed CFO who's reflections on mentoring and learning from creative management partners is a must-read. Our second CFO profile will be up soon, including thoughts on running the finance function in the pandemic.