Back to basics
McKinsey has put cash front and centre of the CFO’s agenda: “the company’s primary finance focus during this period will be on implementing a ‘cash culture’.”
In fact, this virus is changing treasury in unexpected ways. The urgency of ensuring liquidity brings us back to basics and the core of treasury. Analysts say the majority of companies have three to six months of cash sustainability, so let’s hope we can exit lockdown within that time frame.
(On a personal level, being unable to return home might get less amusing if it lasts longer than that.)
In this situation, every dollar counts. Cash visibility and cash flow forecasting have become critical for survival. In that context, my two previous articles on best of breed and accessible technology remain relevant.
Treasurers stuck at home, if they any have time to spare, might want to consider BELLIN’s offer of free TMS if they are still doing treasury by Excel.
This will be a period of dramatic change. We are already learning to work remotely. We are dealing with loneliness through video conferences and Zoom parties. In fact, the compensations for remote working are so effective that apparently some introverts are feeling overwhelmed.
Technology will step up both with remote working and automation. Hopefully treasury by Excel will be an early and little-mourned casualty of the virus.
Many businesses will fail. Hopefully this will create openings for new businesses to step into, rather than simply a reduction of economic activity as a whole.
There does seem to be a risk that larger companies will be better able to milk whatever cash governments are offering, leaving smaller businesses to die. This may be a threat to systemic resilience as well as to competition. In this view, the virus might accelerate the super profits of the world’s largest companies.
Sustainability in its broadest sense may carry more weight – at least for a while. This speaks for maintaining a thriving SME sector. It will be interesting to see how quickly we revert to maximum extraction mode.
We can already see that Big Tech is thriving through this crisis. The shortage of liquidity and the difficulty of in-person communication will hamper start-ups, thus even further thinning Big Tech’s competitive space.
On the other hand, hard to predict changes brought by the virus may create opportunities for newcomers, both online and off. Maybe some business school professor will write a book called “Grey Ocean Strategy”, about filling niches left vacant by firms that proved insufficiently resilient to survive the virus.
Firms that have not felt motivated to digitise in the past are probably getting an intense lesson in priorities, now that face to face is no longer an option (and paper handling does not work well for people working from home). We can expect a major step up in digitisation worldwide. This will be good for the relevant providers, and will increase the general resilience of businesses. But the risk of cyber meltdown will become even more frightening.
We find ourselves thrust into a strange new world. It is worth taking a deep breath and remembering the basics that remain immutable: liquidity is key and requires cash consciousness, the world is digitising even faster than before, and we need to organise for sustainability – a wide term which will hopefully come to include nurturing our planet as well as our businesses.