Focus on Finance: Blog Series – Executive Insights for Q1 2021 Part 2
Focus on Finance: Every quarter, we’ll present insights from top executives from different backgrounds and functions. To help you prepare for Q1 2021, here are finance insights from John Tunison, an experienced CFO and member of the Cerius network.
Focus on Finance: What do you envision as the biggest challenges companies will face in Q1 2021?
As I write this, the US has passed 10 million COVID-19 cases, Joe Biden appears to have won the election, Donald Trump is pressing numerous legal challenges to election results, the Dow Jones is looking for a new high above 30,000, oil is headed down through $35 per barrel (again), unemployment claims are trending down to 7 million but flattening, single family housing sales are +32% higher than one year ago, and multi-family rent delinquencies are ticking upwards. This year is now the worst for hurricanes and wildfires in recorded history. More employees are working remotely than ever before. Productivity is up for some, down for others. Insurance markets are in disarray.
Is this good news or bad news? Exactly. Both, neither, it depends, and I don’t know are all valid answers.
The biggest challenges that companies will face in Q1 2021 will center around uncertainty on many fronts. Regardless of your industry, structure or geography, you can be sure that COVID-19, politics, employment and the economy are, and will be through Q1, in states of change, and will continue to evolve on daily, weekly and monthly timescales—not on more familiar annual or five-year timescales.
Established strategies are likely in need of change. Evolving strategies are likely proving hard to crystallize. Lack of strategy has likely exposed critical problems. Some companies have failed. Others have thrived. Liquidity exists but finding and tapping it can be challenging. Tactics that have worked in the past may not work today, and new solutions are needed—and quickly. Companies and their employees are dealing with more change, collectively, than ever before.
Focus on Finance: What’s your recommend strategy for addressing these challenges?
Model and secure your cash flow/liquidity relentlessly. You can do that by modelling scenarios, identifying triggers, and taking actions to secure liquidity as a buffer against uncertainty by maximizing use of Cares Act/PPP and Main Street Loan Programs, and refinancing existing debt and/or securing new credit if you can.
Take care of your employees by checking in with them frequently and monitoring your company culture. Consider modifying benefits and policies to address temporary and permanent changes, stressors and talent/human issues. Over-communicate, and don’t assume everyone is fine.
Take care of your strategy by updating it (or creating one). Ensure your strategic objectives still make sense, are flexible/future-proof, and can be executed by and with the resources you have available. If they require very specific external factors that are uncertain, consider delaying them. If no longer relevant, even if significant resources have been expended, stop them. And, although it’s easy to decide to “hunker down,” don’t suspend strategic execution because your suppliers, customers and competitors, at least the good ones, will not.
Pull your most important internal and external stakeholders close (such as your Board, bank(s), suppliers, customers and extended leadership team) and communicate frankly and transparently with them about the challenges your company is facing, and the actions you are taking to address them. Be open to new ideas or sources of assistance that arise, and don’t try to “go it alone” or “hide bad news.”
Don’t miss opportunities to lock in positive changes when things start to return to “normal” (which they will!). If you streamlined back office procedures, make the new procedures permanent. If you found new ways to collaborate, continue to use them even if you’re no longer working remotely. Lastly, if you found things to stop doing and haven’t “missed them,” don’t start doing them again.
Focus on Finance: What are the critical skill sets companies will need to survive and thrive in Q1 2021?
Most of these skills have always been needed, but now are needed more broadly, in greater abundance, and are likely to come from unexpected sources. You will need strong communicators who can communicate quickly, consistently, candidly and convincingly when things change. Your people must take extreme ownership and be accountable, stepping up and owning decisions and results, good or bad, at pace.
Because of change, you’ll need both people with high tolerance for it and who can drive it, within time and resource constraints while the external landscape continues to evolve. To succeed financially and commercially, you’ll need people with the ability to think creatively about banking, financing and commercial structures, contracts, relationships and problems. You will likely need good negotiators. Finally, you need “high EQ” people leaders who can lead others through uncertain times, preserve and foster culture, and promote stability.
A few questions you might ask yourself to ensure you find and empower talented people with these skills could be:
Did someone “step up” unexpectedly during times of crisis?
Have you encouraged them and figured out how to leverage the person’s “hidden talents?”
Did your criteria for judging talent and performance change?
Have you changed your hiring/onboarding practices to fit the current landscape or how you communicate with your teams and how you receive feedback?
Have you decided how you will measure success?
John is the CFO of Trussway LLC. He has been CFO of several public-, PE- and VC-backed companies and is a former US Navy Nuclear Submarine Officer. He holds degrees from the US Naval Academy (B.S.) and University of Rhode Island (MBA), speaks German and Spanish, and has lived and worked in three countries and a dozen US states. Originally from Olympia, WA, John now lives in Houston, TX, with his wife and three daughters.