The CFO'S Perspective

Is It Time to Downsize Your Business?

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.

Topics: Economic Trends Mergers and Acquisitions Planning Staffing Leadership Forecasting Expenses Profit Margin Assessment Strategy COVID-19

Weathering a Prolonged Recession – Expert Tips from Senior Leadership

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:

Topics: Economic Trends Planning Cash Flow Leadership Risk Management Change Management Transition Strategy COVID-19

How to Strategically Invest in your Business During a Downturn

A recession or downturn in the market is one of the most demanding scenarios for senior leadership to weather because there are so many possible responses to consider. Each decision leadership makes during this critical time can have a significant effect on the company’s ability to come out on the other side at all, let alone seize available opportunities to grow in the process. So, how can you strategically invest in your business during a downturn to increase the likelihood that it will be able to emerge stronger?

It is critical to act swiftly instead of ignoring the warning signs that a downturn is coming, worsening, or may last longer than anticipated. However, that does not mean giving into kneejerk reactions. A Harvard Business Review article summarizes it best by saying,

“Inaction is the riskiest response to the uncertainties of an economic crisis. But rash or scattershot action can be nearly as damaging. Rising anxiety (how much worse are things likely to get? how long is this going to last?) and the growing pressure to do something often produces a variety of uncoordinated moves that target the wrong problem or overshoot the right one.”

Have honest conversations with your leadership team to solicit feedback on how to proceed while leaning on the data. Focus on efforts on strategically managing expenses, acquiring assets to achieve your goals, prioritizing customer relationships, and developing new markets while focusing on your core competencies.

Topics: Economic Trends Leadership Growth Risk Management Strategy COVID-19

Strategic Planning from a CFO’s Perspective

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.

Topics: Planning CFO Responsibilities Strategy

The Convergence of Accounting and HR

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.

Topics: Recruiting Finance Accounting Trends Hiring Planning HR Leadership Budgeting Forecasting Strategy

When to Use a ‘Decision Tree’ for Business Planning

Originally published: 2/15/2021
Updated: 3/4/2024

For those not familiar with the term, a decision tree is a flow chart that works through all possible response options in a scenario to analyze resulting outcomes. Basically, it is a visual version of an “if this then that” statement across all possible alternatives.

The “branches” off each decision alternative that result use data analysis to forecast the most likely outcome of each decision. When one decision leads to another decision that must be made, that branch splits to continue extrapolating the effects of each subsequent decision. The result is a tree-like diagram (hence the name) that is easy to understand and interpret.

Decision trees can be more conceptual in nature or have numbers to back up decision scenarios, as is the case of pricing changes affecting revenue figures. For decision trees with complicated calculations, a software program can assign values and probabilities to streamline decision-making. A decision tree is a critical part of strategic planning because it allows decision makers to analyze the effects of a significant change throughout different areas of the business.

Topics: Data Analysis Planning Analysis Leadership Growth Forecasting Risk Management Change Management Strategy

What are the Benefits of Business Process Outsourcing?

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.

Topics: Recruiting Trends Planning Cash Flow Leadership Growth Budgeting Strategy

Mastering the Budget Reforecasting Process

Budgeting and strategic forecasting creates a business roadmap to maintain stability and achieve growth. However, for forecasting to be accurate it needs to be modified when significant changes occur either internally or externally. This is especially important to consider this year, as supply chain disruptions and changing business regulations have drastically changed corporate outlooks across the country.

If you understand now that there is a high likelihood of needing to undergo reforecasting next year, you will be better equipped to do so when the time comes. Kory Wagner explains, “Expecting your assumptions to last through an entire year is at best naïve and at worst detrimental to your business. Incorporating reforecasting into your regular budget process, as needed, will keep you on track and help you roll with the punches.”

Some companies are reforecasting-averse, so they shorten their budgeting cycles from annual or semi-annual to quarterly or monthly to reduce their chances of needing to do so. But if 2020 has taught us anything it is that every company should be prepared to reforecast as needed because it could become a necessity at any time.

So, this year as you finalize budgets and forecasts, take the approach of “planning to re-plan.”

Topics: Data Analysis Financial Projections Budgeting Forecasting Strategy