Planning for the Future Post Lockdown

May 15, 2020

Over recent weeks we have seen how everything we plan for can literally be turned upside down.  There has been an incredible change from what started out looking like a prosperous year for business to turning into what could be the worst recession for decades.

These events are a reality check for all businesses, both those that have suffered, together with those that have been able to prosper.

When the market conditions are relatively stable it is hard enough for businesses to create budgets, cashflows and plan for the year ahead.  However, when suddenly faced with the rapid changes seen, it is important that they can adapt and quickly evaluate the impact on their business.

The impact will be far reaching, from future revenue streams, costs, employees and the overall business putting pressure on the finance functions to create and adapt plans to ensure continued success in the future.

Many businesses will have neither the existing nor additional resources to enable the business to adapt and monitor the impact as they move forward past lockdown.  However, there are many consultants and advisors that can assist with this on a part time basis which could make all the difference for the future.

What are some of the key actions that a business needs to look at to minimise the risk whilst improving the outlook?

Create a Business Continuity Plan

As businesses we are all good at thinking how well the business will perform moving forward, everything is looking good, revenue and cashflow will improve and profits will fall to the bottom line.  Now, look back and consider that again? Did you have any continuity plans drawn up? Have you suddenly had to adapt to the new trading environment?

Businesses all need to plan for scenarios where the outlook is not so prosperous and creating a business continuity plan will help with this.  What should be included in the continuity plan? Important areas to think about are as follows but not limited to:

  • Evaluating Cashflow – Short, medium and long term

  • Assessing capital investment needs

  • Reviewing financing opportunities

There are some general steps to start creating a plan:

  • Identify the scope of the plan

  • Identify key business areas

  • Identify critical functions

  • Identify dependencies between various business areas and functions

  • Determine acceptable downtime for each critical function

  • Create a plan to maintain operations

A full continuity plan should also include financial forecasts and “What-if” scenarios across the business.

Look at different scenarios to assess the impact

A general continuity plan should address different “What-if” scenarios covering:

  • Various timeframes and how that affects how you react?

  • What additional costs will be incurred?

  • Can these costs be mitigated?

  • How will the employees be impacted?

  • How will revenue, profitability and cashflow be affected?

With effective modelling the above can be included in these continuity plans which should be adaptable so the business can make quick changes to the plans and see the impact.

With the current Covid-19 outbreak, flexing the inputs to the plan can give the business a real insight to what the future may look like and how they can adapt to continue to operate. 

Initially, back in March, when furlough was introduced until the end of June, there were indications that as we approach summer, business would start to get back to normal.  However, this has been extended and again businesses need to re-assess the overall impact showing the importance of creating flexible continuity plans.

Engage with the wider business and collaborate

With businesses being impacted by Covid-19, far greater than by anything we have seen before, it is critical that businesses engage with employees to plan for the future.  This is best done with a collaborative approach, utilising their knowledge to create a plan that encompasses the businesses key values.

Effective collaboration requires three key parts:

  • People – Identify key roles and create cross team working to help develop the collaborative nature of your business

  • Process – It is best practice to document your processes, simplify them as much as possible and use consistent processes across your various teams

  • Technology – Integrated systems across your business enables a single view of your data.  These systems should bring your people together and develop an environment that makes planning and forecasting quicker and easier

Bringing all these together will create a centralised repository of data and expertise within your business that can be utilised, not only with the continuity planning but through the normal business operations.

Prepare dynamic forecasts

Traditionally businesses produce budgets annually which are compared against actual performance throughout the year before the process starts again.  Have you thought about changing this and producing more dynamic forecasts?

As we have experienced this year, budgets can become irrelevant and meaningless overnight.  By creating your budgets with dynamic inputs, this enables the business to quickly adapt to the new challenges facing them.  Using these key inputs creates flexibility to not only adapt the annual budget but also for specific time periods, making them more realistic and useable.

Have you thought about using rolling forecasts? Think about how this can be achieved using the knowledge gained in the past month to update the forecast for the future, continually enabling the business to evaluate where it is and adapt to situations faster.  Always having a forecast covering at least the next 12 months which is updated regularly can save weeks of budgeting each year.

Rolling forecasts enable the business to review and analyse the “What-if” scenarios within the continuity plans, preparing the business for the future.

Assess risks and opportunities for the future

Within a business it is key to regularly review risks and opportunities. By including these factors into the continuity plans (which include the rolling forecasts), the business will have a much better insight to the future and how they need to adapt.

Accounting for these risks and opportunities can add an extra layer to forecasting to quantify the impact on the P&L, balance sheet and cashflow.  This provides an early warning system for future actions which may result from the opportunities as well as the risks i.e. have you won a new contract and need additional employees to deliver the contract on time?

Look at your business and consider each area, looking at all risks and opportunities, appreciating that whilst they may not all be financial in nature, they will ultimately all have a financial impact.

If you would like to book some time to discuss how we may be able to assist your business, then please contact us.