COVID-19’s Lesson: Elevate Your Organization’s Liquidity IQ

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No one would deny that 2020 was an exceptionally challenging year. Because of COVID-19, most organizations had to scale back operations and shift to a remote work environments—either in the short term or indefinitely. The same was true for their suppliers and business customers, and many consumer customers’ lives and finances were upended, too. With the new Delta variant on the rise, we’re running into the same string of changes and problems. This dynamic wreaked havoc on the normal cash flow cycle and not just temporarily. For many businesses, it’s still a problem today, and growing. During a recent Tesorio webinar, we asked three experienced finance professionals—a CFO, an accounting manager, and a controller—to share their thoughts on this COVID-induced dilemma, what it’s taught them, and what you can do in the next few months.

Pandemic's Cash Crunch

Cash has always been king, but “this past year and the pandemic were a stark reminder of just how true that is,” explains Dan Fletcher, CFO of MarkLogic. “When things go sideways, everyone immediately focuses on cash.” The pandemic pushed things as far sideways as they’ve ever been, putting an unprecedented amount of focus on cash and consequently on the CFO. After all, it’s the CFO’s job to position the business for success and provide a return for investors, and cash is critical to both, Fletcher says.

Finance's Pivot

As former accounting manager at Planful, Brian Go says he also witnessed this huge focus on cash and liquidity in 2020. Before COVID, he notes that finance organizations primarily focused on the business income statement, profit generation, and the standard accounting and finance reporting metrics.“Once COVID hit, there was a greater shift away from that and a more immediate focus on cash,” Go reports. Company management needed to know its cash position in order to make crucial decisions in light of the pandemic. As a result, he says the finance team’s most important job became “making sure that cash didn’t leave the company too fast and that cash came in as fast as ever before.”

Tactical Changes

With cash and liquidity pushed to the forefront of every business decision during COVID, the finance team had to adjust its day-to-day activity, especially its collections and reporting practices, according to Molly Yu, the controller at Planful." The hardest thing to predict during a pandemic is when you’re going to get paid,” she says.Yu explains that businesses had very little cash cushion because of COVID-19. The team at Planful dealt with this by producing more frequent direct method cash forecasts because they needed to more closely monitor every step of the end-to-end business cash cycle: from customer set-up time to the turnaround time from order-to-invoice and invoice-to-collection.

Let's Elevate Your Team's Liquidity IQ

When COVID-19 subsides, all three experts predict that cash will remain the focus. Based on the learnings of 2020, Yu thinks the AR team will play a vital role in helping the CFO elevate the liquidity IQ of the entire company: “We’ll use our knowledge to help companies scale and be successful with the help of automated processes and technology,” she concludes. Let Tesorio help modernize your AR team for a post-COVID world. Learn more of Dan Fletcher, Brian Go and Molly Yu’s thoughts on cash flow and liquidity by listening to Tesorio’s recent webinar How Great CFOs Empower Leading AR Teams and how leading AR teams make CFOs look great.