We are surrounded by all sorts of forecasts (or speculations) on how long the financial consequences of Covid will last. 1Deloitte’s economic forecast, amongst others, predicts a bounce in Q3 of 2021.
One best practice that should apply in any world containing Covid or otherwise is the responsibility of the Board to find lasting savings. Not reckless unthinking cost cutting but sensible, practical savings and efficiencies that make one wonder why the work to identify them hadn’t been done a long time previously.
Practical steps to take to both identify and implement realistic and long term savings
The keys to saving, and maintaining the savings in the long run, include:
- Ensuring the right analysis is undertaken to identify what costs currently exist
- This may necessitate Excel modelling or deeper interrogation of accounting software
- Assign responsibility and accountability to the right budget holders
- Identify the personnel who are genuinely in control of the decision making that govern costs
- Collaborate on the right methods on how to save rather than simply focussing on a number
- Collaboratively create the right incentives for budget holders
- Demonstrate how the savings support strategy, allowing resources to be redeployed into alternative investments that strengthen the company
- Introduce savings initiatives as a regular review and exercise as opposed to a one-off
Introducing a culture of strategy-linked redeployment of resources for overall gain is paramount.
To promote lasting savings CFOs and FDs of mid-market businesses must be able to both articulate the shape of costs and have the gravitas and communication skills to collaborate with unit leaders and the board
The Founders and CEOs of mid-market businesses may not realise how many embedded savings are unrealised in their organisations. Where valuations are a multiple of EBITDA long term savings are well worth uncovering.
In order to facilitate effective long term savings the CFO or Finance Director should have a strong understanding of the detail of costings and how they drive business performance. This combined with the ability to collaborate and reason with those controllers of cost is potent.
Questions to be answered
“What costs do we currently have?”
“Who is actually controlling our spend in each area?”
“How can we engage with our teams to generate the right incentives?”
‘The 5D FD’ White Paper attached underpins the importance of ensuring the FD or CFO has the right range of skills to undertake these crucial tasks. To learn more about ‘The 5D FD’ and how Acuity Associates uses The Acuity Method™ to ensure the right skills are present in the CFO email firstname.lastname@example.org and request a call back.
1Deloitte COVID-19 Economics Monitor https://www2.deloitte.com/uk/en/pages/finance/articles/covid-19-economics-monitor.html