“Cash is king” as the saying goes, but in times of unprecedented crisis, cash has become even more critical, according to Soldo CFO, Dynshaw Italia.
Italia made the comments while speaking on a panel at the Virtual CFO Agenda on Tuesday, June 23. He was joined on the panel by Edward Parks, CFO of LHI Group and Adrian Lee, group financial controller of Passion Pictures.
“We always used to say, ‘cash is king’. But I think cash is no longer king and has become god,” Italia said.
“It’s about cash conservatism now, in this short-term period or this period of crisis. We need to become more efficient, we need to reduce costs, and make use of the government schemes that are available to us.
Italia warned however, that it is important to remain balanced in cost-cutting measures.
“You can reduce costs and you can go really drastic, but you have to get the balance right. It’s about survival, it’s not about killing your business. The idea is to survive through this crisis and make sure that you’re strong enough that when you’re coming out of the crisis, you’re able to then put those priorities of investing back into the long-term.”
Parks agreed with Italia’s sentiments and added that it was important for firms to manage their cashflow carefully now, so that come the fourth quarter, the “green shoots” of growth will be visible and CFOs can start using the cheap debt funding as an opportunity to expand.
Lee said that at Passion Pictures, many investments were planned and had to be pushed back, but similar to Italia, said they were only deferrals not cancellations.
“We’re in survival mode, we’re not getting rid of the company altogether. So, it’s just a matter of how do we deal with this short time period. We are looking into every government opportunity in trying to manage our liabilities including VAT deferrals etc,” he said.
As cash management becomes ever more important, so too will real-time visibility, agreed the panel. Italia added that this was an important part of the finance function in both times of crisis and normality.
“It enables decision making to be much quicker. You can’t afford to wait one or two months to know how you performed and where your expenses are, those days are over, you just can’t do it anymore,” Italia said.
Perhaps most importantly, real-time visibility allowed businesses to learn quickly, to “fail fast”.
“The real time tracking allows you to fail fast. Let me explain that, it means that when you’re growing as a business, you’re always wanting and needing to experiment and always needing to try out new things.
“Some of its going to work some of it’s not going to work, things that don’t work you want to switch off as soon as possible. If you don’t have that real-time tracking you will continue to bleed cash, trying to see whether the thing is working and if you wait too long, you’ve lost too much money. So, the ability to fail fast is really critical, especially in a growing business,” Italia added.
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