The CFO'S Perspective

Downsizing is never a light topic to broach, but for businesses that are financially compromised or experiencing a reduction in demand, it is important to fully understand before any strategic planning can begin.

Downsizing is often tied to a reduction in headcount. Headcount is more than just a number, which is why downsizing should be approached with the utmost care and consideration. Knowing why a company should downsize, what kind of risk is associated with doing so, and how to avoid common mistakes is key to increasing the likelihood that your reduction efforts will be successful.

Use this guide to get a better understanding of the implications of downsizing and help inform your strategic planning as it relates to both maintaining your business and preparing it for sale.

As more people begin to get vaccinated, we are eager to return to what life was like in the "before times" to plan vacations, in-person meetings, even concerts and ballgames. When it comes to the workplace, there is no turning back the clock to how we used to do things. Wise leaders will capitalize on the innovations developed during the transition to continue remote operations by retaining the process improvements to be sustainable, regardless of what comes next.

Attitudes around FP&A (financial planning and analysis) are kind of a mixed bag – everyone agrees it is important, but many people do not know what it really entails. As a result, businesspeople form their own opinions about who should handle it and what owning it should look like.

Some business leaders downplay the complexity of FP&A and mistakenly task their accounting and finance teams with this crucial function. This can be a mismatch because many accountants are not equipped to handle this level of financial responsibility and organizational oversight. Alternatively, some business leaders put FP&A on a pedestal and assume its critical role in the success of an organization necessitates a dedicated role.

Regardless of what precipitates a recession, economic ebbs and flows are to be expected over time. Recessions can be caused by a period of contraction that inevitably comes after economic expansion or a sudden and unexpected economic shock.

While the coronavirus recession is fresh on our minds, it is not the first nor will it be the last recession that today’s businesses face. Knowing how to weather a recession is an essential management skill regardless of how long it lasts. However, facing a prolonged recession poses unique challenges that can test even the most adept leaders.

Our team of experienced CFOs shares their top tips on getting through a recession and coming out stronger on the other side:

A CFO’s role is one of many hats. They are expected to be a steward by protecting company assets, have operational savvy, act as a strategist, and be a catalyst for positive change. There are many projects you would expect a CFO to facilitate:

• Facilitating M&A transactions
• Raising capital
• Overseeing Controller and internal auditing functions
• Helping accounting firms prepare for an audit
• Mentoring internal leadership
• Managing the organization’s overall risk and liquidity
• Driving growth initiatives 

These are all areas where a CFO adds value to a business. But one of the biggest priorities of this role should be strategic planning. CEOs and boards increasingly want a CFO that not only gets the numbers right, but that also partners with them in strategic planning.

Companies that understand how finance and HR overlap and foster a relationship between the two are better poised for long-term growth than their less informed counterparts. The reason behind this is simple – knowing when and how to leverage your CFO to assist with hiring and employee retention can improve profit margins, encouraging sustainable long-term growth. Additionally, encouraging collaboration between these two vital areas of the business improves workplace culture across the entire organization.

Business process outsourcing (BPO) allows CEOs to focus on the job of running the entire business instead of getting bogged down with the management of individual departments and teams.

Effective outsourcing allows both large and small companies alike to lean on senior skillsets outside of the company to provide accurate information, offer impartial feedback, and inform strategic decision making.

In fact, according to a recent Intuit study, 65% of business owners surveyed said they would be “better positioned for long-term growth if they could take a step back and look at the bigger picture.” These business owners also reported that they were involved in areas of the company such as sales, marketing, customer service, human resources, and accounting, instead of outsourcing them. It is no coincidence that these activities were taking away from their ability to focus on their core business functions. When they were asked what they should be spending their time on instead, their top answers included developing business strategy, making an impact on customers directly, and innovating product/service offerings.

Business process outsourcing allows business owners and CEOs to utilize highly experienced professionals without needing to hire internally, both managing costs and improving business agility. Furthermore, outsourcing allows business leaders to reduce stress, lessening the likelihood of executive burnout.

Who thought 2020 would be like this? We have made it through the lockdown, subsequent economic shock, and the scramble to put it back on track. Stimulus programs (like PPP) are done rolling out and payment deferral programs from lenders are ending soon. More tailored lockdowns are underway but with no certainty this time of any government support for impacted businesses.

You have stabilized the ship. What do you do next?

The COVID-19 impact is not going to be over soon. “Normal life” is likely at least a year away. Even if a vaccine arrives in 2021, it will likely take many months to become ubiquitous and effective.