CFOs break their heads over cash and forecasting

Key messages

Virtual knowledge sharing between peers

Mid and long term forecasting is difficult

Reinventing future business

The author of this articleWouter Vanlee - Business Manager
Having sufficient cash and forecasting in the longer term. These issues are occupying CFOs more than ever today due to the Corona crisis. Large projects are on hold and the financial experts are trying to learn lessons from this exceptional situation. That appeared from the Virtual Knowledge Circle that the Blue Chip Boutique Transition & Support (T&S) Antwerp/Hasselt has held for a number of clients.

Last week, T&S Antwerp/Hasselt brought together a number of CFOs to discuss their current challenges. Bringing peers together is what the unit does every year during a CFO lunch, but given the current situation, this time she organized the meeting digitally.

Different sectors, similar challenges

The CFOs who participated in the initiative come from different sectors: transport, construction, automotive, lighting industry. All are currently using economic unemployment to help deal with these exceptional circumstances. The financial expert from the transport sector said that, after a brief spike due to the hamster behaviour of consumers, he had fallen back to 30 percent of 'normal' activity, but he observed a slight recovery. The company in the automotive sector, which operates on several continents, also saw its turnover decrease to 30 percent of the 'normal' business. More than 85 percent of its employees became economically unemployed. Only in the head offices, a small group of people continue to work.

The downturn in the business also occurred in the construction company that took part in the Knowledge Circle. Many construction sites are at a standstill and subcontractors - Portuguese and Polish a.o. - have returned home. The CFO believes that the restart of the sites will take place relatively quickly, but it is unclear with how much capacity. He pointed out that subcontractors are trying to come back and are thinking about charter flights. In the longer term, there remains a great deal of uncertainty about tenders.

The company active in lighting, with some 20 branches worldwide, showed a somewhat different picture. Because it works with a network of architects, designers and contractors, the business continued to run relatively well. Keeping the pipeline of new orders filled is another issue. Just like keeping the flow of goods going, because due to border controls, transportation takes much longer. The CFO is more afraid of the consequences in the longer term.

Cash position gives varied picture

The transporter and lighting specialist told us to postpone payments in order to keep enough cash. The CFO of the transport company stopped payments to subcontractors, but in turn the company allows good customers to pay their invoices later. After all, the 'stretching' also happens with the customers. It can create a vicious circle.

The construction company feels more comfortable with its cash position because its customers are mostly public institutions and the money keeps coming in well. As a result, the CFO is more comfortable with payments to his subcontractors. The CFO from the automotive sector explained that he has never used his credit line so far. Payments are sometimes delayed by 1 to 2 weeks and his office in Mexico recently asked to 'stretch'.

Forecasting over more than 1 to 2 months is difficult

The participants of the Knowledge Circle are mainly in the dark about what the future holds. Forecasting further than 1 to 2 months is difficult. Things are critically examined, large projects are put on hold, cost structures are kept under control. And because you should never waste a good crisis, the CFOs look for ways to optimize processes sustainably, for example through digitisation. The Corona crisis sometimes makes possible what used to be impossible, such as customers who no longer want paper invoices because of fear of contamination by the virus.

Get the order book full again

The last part of the debate was about how to fill the order book again. Here, the transporter was more reassured because he works almost completely with contracts over several years and he does not have a large turnover of customers. Furthermore, he will try to convince customers who do their own transport to outsource it to his company.

The lighting specialist is looking for a broader view of projects which go beyond his existing network. However, he is faced with the challenge that his sales reps have no experience with this and he is worried about the decline he observes in some of them, who have been working from home for a month now. The construction company is going to try to recuperate the turnover that was lost due to the postponement of projects elsewhere. At the automotive company, they are setting up a global Business Development organisation to see where new initiatives are possible.

The virtual Knowledge Circle of T&S Antwerp/Hasselt has shown that CFOs enjoy consulting each other in these uncertain Corona times. The exchange of ideas can help to find solutions to challenges faced by different organisations due to the crisis.

In the coming weeks TriFinance organizes 'Virtual Expert Sessions' around topics such as Cash Forecasting, Risk Management or Power BI Reporting. Besides sharing our expert knowledge, we want to enable an exchange of thoughts, lessons and experiences between peers.

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The author of this articleWouter Vanlee - Business Manager

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