Four actions businesses can take to start 2021
When ‘lockdown’ was declared the word of the year in the out gone year(2020), you know new year planning may look a little different – and be a bit more difficult – this time around. Although a turbulent year is nearly visible in the rear-view mirror, it can be said with some level of assurance that disruption and interruption aren’t yet a thing of the past. In the UK, for example, the changing picture of lockdown and local restrictions highlights the almost continually evolving factors and possible scenarios that businesses must account for in 2021.
One thing is for sure, without the right tools, technology and processes in place, trying to implement any kind of strategy to balance short-term agility and long-term development will be near impossible. With so many distractions, businesses need to focus on their foundations to ensure they are working from a source of truth, and using that information to sustain, adapt or expand their operations.
Here are four actions businesses can take now as we begin 2021.
1. Thoroughly evaluate your business operations
A good starting point is to evaluate your entire business operations through a comprehensive situational analysis of each department, with a focus on the elements that have withstood the shock of 2020 and those that have been most adversely affected. Assess and re-evaluate KPIs, as these will not only measure your current state, but also help to inform decisions on what to do next.
Determining which customer segments are buying and still actively engaged is crucial. Given the impact on certain sectors this year, such as hospitality, travel and leisure, businesses should focus on those that are able to spend versus those that are still stuck in survival mode due to the stop-start nature of restrictions. Assess your sales channels and, if possible, shift more resources to the best performing sectors whilst also still supporting and listening to customers and prospects that may need extra support. Make sure to communicate with your employees and present a clear vision for that year externally, to both customers and partners.
Confidence, inspiration and transparency matter. You can have all those whilst still being prepared for the near future.
2. Continue to deliver cash
At the start of COVID-19, businesses were understandably focused on cash – taking stock of the resources in reserve, outstanding receivables and pending liabilities, then making estimates of how much cash the business will need to maintain operations. The stop-start nature of the economy during lockdown(s) means the ‘cash is king’ mantra may remain true well into 2021. A fall in demand or disruption to the supply chain will have an immediate effect on cash flow.
These actions will continue to be crucial but there has also been a shift towards re-forecasting and identifying pockets of budget that can help shift priorities. For example, finance leaders can actively reallocate resources to business lines with strong existing revenue streams and optimize the company’s use of alternative, innovative sales and delivery channels, such as direct-to-consumer, which have hit a 10-year high. They can also help remodel recurring revenue for continued cash flow. Subscription or license-based offerings will be more appealing to customers and prospects than large one-off costs.
3. Turbocharge financial planning and analysis
Forecasting is hard in normal times, let alone in a pandemic when nobody can be sure when normal operations and purchasing behaviour might fully resume. Even so, as the new year approaches, business leaders must build out a handful of scenarios that are grounded in reality and assume a wide range of outcomes. Every organization must relook at its forecast for sales, expenses and cash flow and retest its assumptions. These scenarios should include modelling cash flow, burn rate and liquidity under multiple scenarios.
This planning needs to be organization wide. From finance and sales to marketing and operations, reporting and analytics are core to the planning process and can provide one integrated, company-wide plan. Once cash flow is under control and budgeting is being carried out in real time, leaders must accelerate forecasting work, using continually updated business information to strategically plan for every eventuality. Crucial here will be implementing collaborative tools to monitor and manage Key Performance Indicators (KPIs).
Real-time analytics help enable businesses to make fast decisions. It is about producing actionable insights built on historical trends, current conditions and likely scenarios so decision-makers can forecast what may happen next.
4. Collect data & collaborate
Before getting too far into the budgeting process, executive leadership must work to re-evaluate goals and expectations. It’s crucial that leaders establish goals, and then outline assumptions for achievement that they all understand and agree upon but how do you determine those expectations based on past trends?
Collecting data from across the organization can be a painful process, especially if it sits across a blended mess of systems and isolated departments.
Any time data passes from one system to another; there is room for human error. Clearly outline all sources of data needed and establish a cadence of collection. Highlight areas of concern where the most risk exists in the process and seek to close the gap. Many organizations turn to a single system that will aggregate all the data, enabling business leaders to have a comprehensive and agreed-upon view of performance for budgeting.
While no one knows exactly what 2021 has in store, there is cause for cautious optimism. What we do know for sure is that being able to evolve quickly and make fast, well-informed decisions from a solid foundation will be key
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