Return to site

When they return to work, the CFO must do both!

The outbreak of COVID-19 is raging and has set off a serious battle around the world. Gradually recovered from the forefront of the "war epidemic" throughout the country began to resume work and production, enterprises in response to the epidemic at the same time, but also to face the economic downturn brought about by the survival pressure.

Affected by the outbreak, Xibei restaurant in more than 60 cities across the country more than 400 stores of the catering business has been suspended, the chairman Jia Guolong directly called, "account for a month of salary of 156 million, on the cash only enough to pay the staff three months 'salary! On the first day back to work, Trendy media slashed staff also to reduce cash flow expenses. The company has nearly $1 billion in cash on its books, but will only live for six or seven months if revenues go to zero. A week ago, Leijun said on his official account that companies must strictly control costs and manage expenses if they want to survive the crisis. For SMEs, to overcome the epidemic, it is imperative to do a good job in cash flow management and cost control, and it is the responsibility and obligation that the CFO must shoulder. As a financial company serving nearly 100 SMEs, Fintegrity understands the importance and urgency of its responsibilities at this moment while providing CFO financial management services. Cash flow and expense control is also part of Fintegrity's financial management. Today, we mainly combine our own experience and the needs of the enterprise to talk about CFO from these two aspects. First, cash flow management.  

broken image

CFO does well in cash flow management, mainly from two aspects.

The first is forecasting. This requires the CFO of the company to fully grasp the operation of the enterprise and be able to accurately prepare the budget according to the actual situation of the enterprise. Budget to ensure the smooth flow of cash. For the internal fund management, comprehensive budget management is one of the effective tools for CFO to conduct fund management. CFO can be through the refinement of capital budget management, and implement the rolling forecast, monthly payment plan, including all kinds of business income, cost of sales, management, procurement expenditure, fixed asset purchase payments according to the detailed budgeting, not only pay attention to the money spending, and the key to carry out the business income of capital inflows, strengthen current money collecting, revitalize the internal funds. In practice, Fintegrity found that the CFO of many large companies put cash flow budgeting as the focus of overall budget management, with raw material procurement budgeting, manufacturing overhead budgeting, and sales overhead budgeting as the focus of cash flow budgeting. Not only that, in order to further refine the budget items, the CFO will regularly hold capital scheduling and balancing meetings to help business operators timely understand the operation of operating funds and ensure smooth cash flow.

The second is control. Cash flow control is the technology of cash income management, cash transfer between internal departments, and cash disbursement of enterprises. It needs practical implementation plan and strong department to control. This requires the CFO to plan from the beginning of the project, and then control from the total amount, sub-items, and must be controlled in real time. According to Fintegrity, cash flow management consists of three parts: inventory, receivables and payables.

  1.Destock. Affected by the outbreak, many businesses closed down, resulting in a growing inventory backlog. Overstocking imposes costs on businesses.

2.Manage receivables well. The most direct effect of the high level of "accounts receivable" is to significantly reduce the enterprise's capital use efficiency, resulting in a decline in benefits, affecting the operating cycle, making the enterprise face huge financial pressure, at the same time, it also increases the probability of errors in the accounts receivable management process, enterprises are vulnerable to additional losses. In terms of accounts receivable management, we can collect funds in advance from customers through customer portrait analysis, collect accounts receivable in advance and other measures, and collect funds through accounts receivable financing, so as to speed up the capital turnover rate.

3.Deferred payment of accounts payable. In the case of capital shortage, enterprises can consider deferment to pay some accounts payable, including business accounts payable, bank interest, rent, social security fees, etc., the country's latest relief policy can pay more attention to. Talk about cost control. How can cfos help companies control costs at the source and be "thrifty"?

broken image

We divide the costs of enterprises into two categories:

Fixed expenses: those that must be paid every month, such as salary, rent, property fee, utilities, depreciation of office equipment, etc

Variable expenses: travel expenses, transportation expenses, conference expenses, entertainment expenses, welfare expenses, marketing expenses, etc. Fixed expenses are often obvious, such as rent, water and electricity, property fees, etc., which are almost stable expenditure items of enterprises. The management of this part requires budget management. Then, how to effectively control the variable cost, the originally uncontrollable cost, clearly visible display and effective and timely control, in the management of both accounting and money will be in charge of, become every enterprise must think about the problem.

Each item of variable cost, if taken out alone, the proportion may not be high, but together, it will often be a very large category of enterprise expenditure, and the management difficulty is also very large. Take travel expenses as an example. Enterprises have fixed cost standards, and direct reduction of the standards will easily cause dissatisfaction among employees. Travel management through reimbursement after the event will often result in "special" circumstances that exceed the cost standards, and some transportation expenses may not be matched.

There are two Spaces to be saved. The first is how to control all expenses in advance, not afterwards, and the second is how to let employees save money for the enterprise. For example, in the traditional reimbursement model, the business personnel need to provide invoices and a "sufficient reason" to go through the reimbursement process. For the financial personnel, they can only "step on the brake" through human judgment. If the finance is more strict, there will be a conflict with the business department, if almost all of them pass, it will increase the cost to the enterprise invisibly. The advantage of this classification is that the amount of money companies must spend is relatively manageable. In the event of a crisis, stop all variable costs, then analyze the fixed costs, plan to cut item by item, the whole cost is controlled step by step.

In a crisis, every business faces different problems. For example, in this outbreak, the most prominent issue in the catering industry is cash flow, while the most important issue for the mobile phone industry is inventory security and supply chain. However, all changes are the same, and Fintegrity always believes that as long as there is determination and courage, the difficulties will pass, and for enterprises, to overcome the difficulties, there must be a good CFO to fight together.

broken image
broken image