5 Key Lessons from UK Finance Leaders during Covid-19

The current economic and healthcare crisis is probably still in its infancy. Over the coming months, companies around the world will find out the true impact of the coronavirus on themselves and their customers.

It’s not time to panic - it’s time to make a plan.

As part of our own response at CFO Connect, we’ve held a series of digital information sessions, where finance experts can explain their approaches and take questions from their peers. This includes a Q&A with Spendesk CFO Fabien Dawidowicz during the first week of lockdown in Europe, and another one entirely for our French community.

Our latest meetup on April 1st was dedicated to community members in the UK. We asked two finance leaders from companies in different growth stages to share their first reactions to the current crisis, how their approaches have changed over the ensuing weeks, and some principles for others in the same position. You can watch the full webinar anytime right here.

About our experts

Julie Oey is the Finance Director at WeGift, a B2B platform that lets companies distribute digital incentives including gift cards. She previously spent two years as Head of FP&A at Monzo, and has a background in financial services and fintech.

Read more about Julie.

Aaron Townsend is Financial Controller at Habito, and has been for two years. Prior to this, he spent nearly 8 years at Albion Capital Group as a Finance Manager, and has co-founded a community to support budding accountants with advice and guidance.

Read more about Aaron.

Now, here are the five key lessons from our two British finance experts during a particularly trying time.

Re-forecast, re-budget, and focus on cash

In times of crisis, the first thing you worry about is money. “As an accountant, you’re immediately thinking about cash in and cash out the door,” say Aaron. “So we did a really detailed cash bridge for the next three to four months.”

Every relevant stakeholder - from the CEO to the board, to auditors, and to employees, cares about having a secure cash situation. And the finance team needs to deliver both an overview and a plan.

As Julie explains, “The first thing I did was put together a table of all the first order impacts that I could envision from coronavirus. Trying to think through the sales funnel, conversion rates, our suppliers, and especially our customers. From a cash flow perspective, would they start asking for payment holidays, and would suppliers start asking us to pay earlier or give them bigger floats? Then I went through our costs base, looking at our lease, and all of our budgeted items.”

“My goal was to forecast all of these issues out, and assign owners in the leadership team to each item. Plus rough action points. This gave us something to go to our board and investors with, to get their feedback and give them comfort that we were on top of things.”

Aaron details the impact of the current crisis on the company’s earlier models. “The housing market has definitely been hit. Our assumption is that ‘first-time buyer’ and ‘next time buyer’ markets will be reduced by 60-90% over the next three months. Our remortgage market will maybe reduce by 30-40%. We also do life insurance, which maybe won’t reduce by as much. And we do our own buy-to-let lending, which will probably hold up with some reduction.”

“We have three kinds to think about: above the line (TV spend), performance marketing (Google, Facebook, and online), and PR and communications. For us, we needed to dial back the TV spend right away. We kept the performance marketing at a certain level, but just updated the messaging to suit the moment. And for PR and comms, we’re still telling the businesses and journalists we work with that we’re here to help them. We still want to tell our story during this time.

“And then for discretionary spend, we still need to remember that we’re a tech company. So we could have stopped using developers right away. But actually this is a good time to build things like a mortgage holiday calculator. So there are still opportunities. We need to be lean and nimble at the moment, but we have to be ready for the opportunities that come up.”

Communicate clearly about new priorities

Obviously, changes to budgets and forecasts are going to affect the whole company. And as the keeper of key information, finance leaders must be able to explain the situation to team members and deliver the new game plan.

“Before we sent everybody to work from home, we had a little company ‘all hands,’” says Julie. “We explained that pretty much all discretionary budgets would have to be looked at again with fresh eyes. So we set the expectation that, even if something had been approved previously, if the money hasn’t been spent already, you shouldn’t assume you still have it available. That has freed up some cash.”

And it wasn’t just spending money that was altered. “We also looked at our people to assess whether they’re in the most impactful positions. For example, we had six people in our Brands team. They work with different brands and retailers to get them onto the platform as suppliers - Amazon, Marks & Spencer, and so on. They do a lot of brand onboarding and account management. In this situation, it didn’t make sense to have all six of them in this team. So we flipped three of them over to Sales or Customer Success.”

“We tried to think about structural and non-structural costs. This applies to people and projects too. For example, we had a few UX designers working on the core platform in areas that we need if we want to generate a sale. We also had “nice to haves” and flashy add-ons that maybe wouldn’t lose us a sale if it wasn’t available. So we divided things into these buckets. If anyone wasn’t doing structural work, we tried to redeploy them wherever possible.”

For Aaron, it was important to reduce high-value spending right away. “Immediately, some of the marketing spending that we had prepared we’ll no longer deploy. We’ve also repurposed what we’re spending on and our messaging. So it’s no longer about selling mortgages, but rather how we can support our customers.”

“For example, we’re currently building a mortgage payment holiday calculator. So that’s something our customers can use to figure out whether it’s right for them to go on a mortgage payment holiday, and what the implications are.”

Crisis periods don’t have to mean halting productivity altogether. The key is to find ways to reassign both people and money to areas where they’ll have real impact right away.

Check in with investors

“We’re currently fundraising,” says Aaron, “so one of the main issues was to figure out how that would be impacted. I had a conversation with an old VC friend of mine who told me that they were asking every single company they saw to redesign their models from scratch. So over the past two weeks we’ve been building and rebuilding models based on the information coming out.”

Businesses need to understand that the models and cash forecasts they presented two months ago are simply no longer valid. And investors want to see that the company understands and is prepared for the months and years to come. As Aaron continues, “we’ve been extremely quick off the mark to communicate with our board about our coming plans. We’ve examined scenarios and forecasts from lots of different points of view, and tweaked them as new information has come out. This makes it a lot easier to have these fundraising conversations.”

“VCs have partners of their own that they have to answer to. And a lot of those partners are getting hammered by the stock market at the moment. They’re trying to figure out where they should pull back. If you’re over-communicating and talking to the board often, it puts them in a stronger position with their own suppliers.”

Investors and board members are also just great sources of information. Even for companies that aren’t currently fundraising.

“We’ve been sharing notes and having conversations with our board chairman and our lead investor,” says Julie. “They’ve given us updates on the market as they see it, and sharing details from their own forecasts. We’ve also been talking to new VCs over the past few months. We want to stay warm with them, even if they’re not looking for investments at the moment. They’ve been able to give us advice and tell us what they’ve been seeing in the market, linking us with connections in their portfolio, and other nice things like that. So it’s important to keep the relationship going.”

Understand and employ government benefits

To help businesses in this period, governments are offering assistance. In a lot of cases, that means actual money and tax relief that can improve your balance sheet right away.

For example, the British government has its Job Retention Scheme which lets employers offer a paid leave of absence (furlough), up to a certain limit. For some businesses, this can be a lifesaver if used correctly.

“We looked into this in detail over the last few weeks,” says Aaron. “We looked at the people who would be most impacted by the decrease in volume we’re going to experience. Those are probably people directly involved with customers, because we’ll hear from fewer customers.”

“Of course they’re still our staff, and we want to make sure that they’re still part of our family and they can jump straight in when we’re back up and running. So yes, we’ve looked at it and we have used it.”

But with this period still uncertain, what’s the right way to handle these benefits from an accounting and finance point of view?

Julie says you should proceed with caution. “If they were contracted and you had documentation stating that you would receive this money, I’d feel comfortable booking it as a receivable even before the cash comes in. For anything that’s still open, I’d probably budget for it but I wouldn’t account for it yet.”

Aaron is using using these benefits in models, but being careful. “I would always be cautious, until I truly understand the process works. The way we’ve modelled it is we assume the cost anyway and then also modelled the saving, but we’ve been pretty conservative with it. There’s still more information coming out about this all the time.”

Make full use of modern technology

The biggest lifesaver for both of our experts during this time has been good software. For Aaron, just the fact that it’s online (and decentralized) is an enormous help.

“I’m in love with Xero, even though we don’t use it any more. We use Netsuite now. The reason I bring both of these up is they’re both online accounting tools. This was how I was able to onboard my new team member. The fact that these tools are online makes such a difference. People can access them from anywhere. I can share a link and we can be looking at the same thing at the same time.”

“Spendesk really helps too. It means that finance don’t have to do a lot of work if our team members want to buy something. Slack, Zoom, Netsuite/Xero, and Spendesk are making this period so much easier.”

Julie agrees with all of these examples, and adds “we’ve been using Notion as our internal wiki for some time, and this has been very helpful for answering FAQs.”

Uncertainty lies ahead for British businesses

Even our experts weren’t agreed on exactly how long this crisis would last, or how profound its impact would be. Aaron felt anywhere up to six months was reasonable, while Julie is mentally preparing for nine or more.

Finance teams need to be ready to adapt; to rewrite the gameplan as soon as new information is available. Their companies rely on them for sound financial practices, especially in times of crisis.

And it doesn’t have to be all doom and gloom. Opportunities will appear, companies will pivot, and those finance teams that are prepared to be nimble will fare best.

The coming months certainly won’t be boring, and we’re bound to see innovation around every corner.

Stay safe!