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How to overcome a crisis as an FD or CFO

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How to overcome a crisis as an FD or CFO

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The survival and growth of a business depend upon its cash flow. Disasters in this area can often mean the end of an organisation.

When such a scenario arises, usually the board of directors or the company's top management turns to the chief financial officer or finance director to save the day.

But not every CFO or FD . There are certain skills that finance chiefs must have to save their company from sinking. These skills may include the ability to make tough decisions regarding layoffs, sharp negotiation skills, extract payments, extend accounts payables timelines and identify new sources for capital internally and externally.

If you are a CFO or FD of a company, you should not wait for a crisis to hit your company. Rather, you should take precautionary measures in advance to keep your company safe.

Here are some of the tips CFOs and FDs can use to keep their company out of any crisis filled situation:

Identify the signs of distress

Usually, a company in distress often faces multiple problems simultaneously. The sooner you spot them, the sooner you will be able to make a strategy to overcome them. These signs of distress may include:

Capital:

1.    Declining cash flow
2.    Increasing liabilities
3.    Unresolved debts
4.    Outstanding accounts payable
5.    Non-recovery from account receivables

Financial:

1.    Decline in stocks
2.    Decline in bond price
3.    Key financial staff resigning

Profitability:

1.    Reduced investment plans
2.    Industry not doing well overall
3.    Strict regulations

Employees:

1.    Poor retention rates
2.    Union complains

Critically analyse your own plan

You can avoid disastrous situations by reviewing your business plans from time to time. It is best if you mark some trigger points during each analysis.
For instance, if you don’t hit a certain number of sales in a certain amount of time, you can change the strategy and move to plan B, and so on. The trigger points can be anything from cash flow to basic financial metrics.

Compare your financial milestones with those of your competitors of the same size. If you are not moving at the same pace as compared to those in your industry, your company is definitely lacking somewhere in terms of performance. 

Keep an eye on cash flows

You should always keep an eye on cash paid and cash received. You should see if your company’s operations are only burning cash or generating cash too.

Always ask yourself the basic questions such as whether you have enough cash for the company’s utility bills? Or how much cash you have to invest in a new delivery truck. Often management team is over-focussed on taking steps that would increase earnings rather than focusing on how much cash in hand is available to sustain their operations.

Keeping a track of cash flow doesn’t mean only looking at the books, you should also forecast quarterly cash situation of your company to keep your company out of a cash flow crisis.

Remember, businesses may survive without making profits, but not without having the cash to sustain their operations.

Maintain good people in leadership positions

For a successful turnover, it is important that you change one or two individuals within the top tier management if necessary. Let go of those who are not aligned with the company’s strategy and replace them with those who can bring you more positive results.

If you are an FD or CFO looking for the next move in your career, register with us.

Date Posted: April 5th 2019

Posted By: Phil Scott