Work with several banks at the same time
In the early 2000s, it was normal for a company to have several accounts in a dozen banks. At that time, interbank information exchange was not as established as it is now. And if an entrepreneur encountered problems in one bank, he could always solve them in another.
Then we discovered the “delights” of cash pooling - pooling funds from different accounts to generate additional income from financial activities.
The importance of the human factor has also increased: some managers have shown greater flexibility and ingenuity in solving their clients' problems than others.
In 2024, import and export companies will have to continue to work with multiple banks and financial services at the same time. That being said, I recommend that CFOs conduct intelligence and build relationships for the future so that if there are payment problems, they have a business network to resolve them.
Delve into the profitable part of the business
In a crisis, top management expects the CFO to take charge of cost control and cost reduction. But income growth is much more important.
Analysis of revenue and profitability in terms of: products, customers, sales channels is considered the domain of the commercial department. However, not in all companies this department keeps records in sufficient detail to make the right decisions based on it.
Here are examples of common flaws.
Different legal entities of the same client are entered into the database as different clients. Because of this, it is difficult to assess the dynamics and final results of working with them.
There are disagreements regarding which costs to include in the cost price and how to distribute indirect costs. Because of this, pricing is lame.
Direct business costs are not tied to transactions, customers, or distribution channels. The company cannot assess the profitability of working with a client. This leads to errors in the distribution of scarce goods, marketing budgets, discounts and other “benefits”.
Customer data is not segmented by industry or type of activity. In 2023, players in some industries will experience significant difficulties due to sanctions and consumer uncertainty, while players in others will remain solvent. A company that does not categorize its customers into groups based on their future prospects will fail to prioritize resource allocation and will miss the opportunity to direct its sales forces to the most productive locations.
CFOs will have to pay much more attention to categorizing customers, accurately accounting for costs across different customers and sales channels, assessing the impact of marketing efforts, and other aspects of analyzing company revenue.
Teach the management team to calculate the level of return on investment (ROI)
If the company’s revenues fell significantly, then in 2023 it had to “cut” costs. However, most companies suffer not so much from the actual decline in income as from uncertainty. In such a situation, it would be a shame to accidentally “cut off” what could become a new profit generator. For example, stop hiring sales managers and lose the opportunity to build quality relationships with promising clients.
It's helpful for CFOs to look at costs as investments that are expected to produce a return. Of course, we are not talking about a detailed calculation of how much profit spending on office supplies or seasonal tire replacement will bring. But there are three cost items where the manager always has doubts: is it necessary? These are the creation of new jobs, marketing, automation and digitalization.
Of course, there is no guarantee that the company will receive a return on every ruble invested. However, calculating ROI raises important questions and increases the chances of success. At the same time, cost initiators often do not know how to calculate ROI and have difficulty communicating in the language of numbers. The financial director is the one who can create calculation methods and instill in the company a culture of discussion and decision-making with numbers in hand.
Therefore, in 2024, the CFO will have to do even more explaining, teaching and helping with calculations. This is good not only for the company, but also for the “financier” himself: he will understand the activities of his company even better, increase his value and be able to count on new career prospects.
Promptly “layout” and adjust budgets
Uncertainty is higher than ever. The budget for 2024, which we are adopting now, is more a description of “how we want” than of what will actually happen. This is a master plan that outlines our main goals, and in broad strokes - the distribution of resources.
The period of 2020–2021, when businesses were either opened or closed for quarantine, taught us to plan in “short dashes.” With annual goals in mind, we detailed the budget for the next two to three months and were always ready for adjustments.
If you haven’t done this yet, then in 2023, create tools for “flexible” budgeting: establish connections between income and main cost items so that when sales parameters change, the main part of the budget is recalculated automatically. Let the budget be enlarged, but it will allow you to make calculations and make decisions quite quickly.
The process of creating such a “budget model” itself is useful, since you can once again understand the costs and, possibly, find unnecessary ones.
Rework the credit policy for clients based on their prospects
In 2023, most markets switched to prepaid shipments. This was due both to shortages of certain goods and materials, and to a general decrease in confidence in “what will happen tomorrow.”
Not all companies will face a decline in sales in 2024. Among your clients there are those who, for various reasons, will be fine. These clients will try to take advantage of their position - to improve purchasing conditions as much as possible, since a queue of suppliers will line up for them.
CFOs should encourage sales and marketing managers to evaluate the prospects of different types of customers. And then, after weighing all the actual data and forecasts, develop rules: to whom the company will provide deferments and on what conditions. Make the most of market opportunities without exposing your business to unnecessary risk.
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