How CFOs and FDs can plan for a rainy day but still seize ad hoc opportunities

It may already feel like we’re in the grips of the fabled ‘rainy day’ with the variety of economic challenges some businesses are currently beset by, but what the last year has demonstrated to all businesses is the need to be ready for unexpected crises.   How can CFOs and FD’s support the business to ensure that the business is crisis ready but agile enough to grow?

Deployment of cash or borrowings

Many businesses during have benefitted from government schemes in the form of loans during the pandemic while others have had to rely on their own reserves. Either way, any cash that is present in the business that is superfluous to day to day operations must be either paid back if applicable or, where practical, earmarked for a distinct purpose. The choice appears to be twofold.

  1. Keep the funds “high and dry” as a reserve to survive any future emergency
  2. Identify strategic initiatives to invest surplus funds into

Needless to say any debt (government or otherwise) needs to be paid back and forecasts must model how the payback will be managed under all circumstances.

The identification of the best option

The Founders and CEOs of mid-market businesses may intuitively know what to do with their funds, after all it is their nose for business that got them to where they are in the first place.

That said, strong entrepreneurial gut feel allied with data-led decisions result in the strongest growth and most value.

In order to facilitate effective decision-making the CFO or Finance Director should support any contemplation of strategic initiatives by clear modelling to ensure all the following aspects of the idea are thoroughly understood:

  • Costs
  • Variables
  • Risks
  • Sensitivities
  • Mitigations
  • Opportunities

Minimising the chance of nasty surprises and avoiding foreseeable challenges are paramount.

Questions to be answered

“What ideas do we currently have?”

“How much genuinely deployable cash do we have?”

“What are the right choices for the funds we have and have we properly modelled the options?”

 ‘The 5D FD’ White Paper 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 Measure to ensure the right skills are present in the CFO email and request a call back.

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