How CFOs Are Responding to COVID-19
The world of business has been severely hit by the outbreak of the COVID-19 pandemic. Many companies have experienced sales drop of at least 20 percent, while some have experienced 51 percent or more.
Social distancing and stay-at-home orders have triggered a falling demand in many sectors. Rising unemployment also impacted income levels, which led to changes in spending. Finance executives had to respond quickly to these rapid shifts. Otherwise, their companies could end up in trouble fast.
If you are wondering exactly how CFOs are responding to COVID-19, here’s what you need to know.
CFO’s took logical steps, among which was delaying investments and it’s a relatively simple move that dramatically enhances liquidity. Since having access to funds may become increasingly critical, especially since it isn’t known how long the effects of COVID-19 will last, it’s a step that many companies felt forced to make.
Changes In Workforce
Often, a substantial portion of a company’s budget goes to handling employee wages, benefits, and other personnel-related costs. Many businesses had to turn to employee furloughs and layoffs as a means of lowering costs, particularly in industries that weren’t deemed critical and had to shut down entirely.
The number of employees affected varied based on the shifts in demand and whether workloads could be managed from home. In as much as CFO’s were faced with a difficult decision regarding the impact on employees, the changes were inevitable as it was an efficient approach especially during economic downturns therefore, its utilization became necessary.
Preservation Of Cash Flow
Some aggressive moves were embraced in some cases by CFO’s for preserving cashflow. Executives slashed marketing budgets, canceled or paused projects, and reduced all other expenditures to the bare minimum. Discretionary spending essentially came to a complete halt.
CFOs went further by cutting employee salaries in response to the downturn. Some leaders even chose to stretch out their accounts payable as a means of maintaining cash flow.
Exploring credit lines as an option by CFO’s who had access weren’t shy to do so. Existing lines we enough to support long-term liquidity while others sought out credit options, applying for new lines in preparation for what was likely to come.
Accessing government programs was also a priority for those who were eligible. In some cases, the Paycheck Protection Program (PPP) was an option, and those who qualified quickly moved to tap that resource.
Ultimately, CFOs moved swiftly to preserve capital and find ways to improve cash flow, ensuring their company could remain solvent. Whether more drastic measures will be necessary isn’t entirely clear, largely because it isn’t known how long the COVID-19 pandemic will have such a dramatic impact on local, national, and international economies. However, many company leaders are poised to go farther, should the need arise.