How CFOs & Finance Teams Can Lead During Times of Crisis
Companies worldwide are experiencing something they almost certainly never expected. In just a few months (or weeks in some cases), physical premised have closed their doors, events and travel have been postponed or canceled, and businesses have either had to go fully remote or go into hibernation.
On top of that, we have uncertainty. No business leader can confidently say how long the new normal will last.
But this is no time for doom and gloom. The CFO’s job is to mitigate risk while encouraging growth, and this only becomes more important in unpredictable times.
To give us some necessary guidance and clarity, Spendesk CFO Fabien Dawidowicz held a live AMA (“ask me anything”) for the CFO Connect community on Friday, March 20. You can watch the full session any time at that link, and we’ll also share some highlights below.
Fabien brings over 17 years of finance leadership experience to the role of Spendesk’s CFO. A graduate of ISG Business School in Paris, his previous roles include financial audit PWC, CFO at dagobert and most recently CFO and Group Executive Vice President at John Paul.
These are the most important takeaways for CFOs trying to navigate this tricky period.
Ensure communication channels are open
In any difficult situation, Fabien explains that the first step is to make sure that everyone can communicate. For the most part at Spendesk, this isn’t an issue. “We’re lucky. We all use laptops already. But we needed to make some hardware investments. Some people need a second screen at home - especially engineers and designers. Some needed a keyboard or a mouse. So we made sure that they had these delivered during the week before Paris (and other centers) were completely locked down.”
As CFO, Fabien also oversees Spendesk’s HR department. So he’s ultimately responsible (with his team) for keeping the team happy and high-functioning during a crisis. Which means not only making communication easy, but also continuing the culture and camaraderie the company normally enjoys.
“We also set up a special Zoom room that lets people join any time. It’s a rolling meeting where people can come and go, have a conversation over tea or coffee, and then carry on with their day. People need to be able to maintain the rhythm they had previously - to be able to bump into their colleagues without planning a formal meeting.”
Build an executive action plan
It’s not all business as usual in a crisis. Companies need to prepare themselves as early as possible for what’s to come, even if that may no be clear right away.
“I would tell other companies during any crisis that first, you need to get your leaders together and share ideas about how to adapt and keep up the pace. Our Chief of Staff Guillaume was able to gather all the team leads in anticipation of going remote, to revamp our strategy. We looked at the nitty gritty - would we be able to reach our targets under these new conditions? Would our cash burn rate change, or could we keep this at a reasonable level?”
So what did this exercise reveal? “The biggest, overarching issue at the moment is trying to understand the consequences for our revenue. How do we close deals during this lockdown period? What is our cost of acquisition for new clients?”
And company-wide, the most important steps are to make the product even more effective for clients during this period. “We’re currently working hard to figure out what features or tools would be most useful for clients right now. We know we have some that are ideal in this situation.”
“It’s not so much about building new features - it’s probably already too late for that. But how can we unlock certain features and make more customers aware of them? These are the discussions we’re having.”
Because these discussions involve updated pricing and packaging - and because Spendesk is a tool for finance teams - the CFO is a key leader in them.
Delve into cash and costs
“Cash is key - everybody knows it,” says Fabien. In terms of strictly financial steps to take in a crisis, the most pressing is to figure out your cash flow situation.
“We need to keep a clear balance between revenue and expenses. So this is what we’re working on right now - understanding the consequences for our sales and CS teams, and our upcoming marketing campaigns. And then finding smart ways to lengthen our runway as much as possible. Obviously, now is absolutely not the time to think about raising money, because everybody’s fighting for their own business. So that runway is more important than ever.”
“Depending on your level of cash flow, re-forecasts in this period might need to happen at different rhythms. In some cases, it could be day-to-day. For instance, if one or two clients can’t pay and that would severely impact your cash. At the very least, this would be a time to talk to your own suppliers to see if you can change your frequency of expense payments.”
“If your cash reserves aren’t too bad - if you have the famous 18-month runway - twice a month is probably a good rhythm for forecasts.”
But how can CFOs forecast the company’s financial situation when the situation itself is so unclear? “We’ve built different models for these scenarios in terms of time, and also in terms of financial impact. So we have models assuming 30% reduction in expected revenue, 50% reduction, and even 70% reduction. And then we can identify the necessary costs to cut in each case.”
“It’s more about cost of acquisition (CAC) than LTV (lifetime value) at the moment. And the best response right now is to target inefficiencies. CAC is the measure of efficiency for your sales and marketing as it relates to new revenue. It’s really important to measure this - especially now - because that’s where you’ll see major impact from the crisis. CAC will show you how profound this is for specific teams, markets, and industries, and will help you to make smarter marketing and/or sales decisions.”
But the most important takeaway is that you need to have this data available in order to make the right decisions. “My challenge is in finding the right data and key details that will help me understand our situation better.“
Open a dialogue with key suppliers
During the AMA, a question came up around suppliers: is it a good idea to start delaying payments, and to find loopholes in your contracts?
“I don’t think delaying supplier payments is a good solution. If you have a good relationship with suppliers, there is probably already some wiggle-room in the timeframe for payments - 30 days is usually not a major issue. But delaying payments hurts everyone. We’re all in the same chain here. If we delay payments to our suppliers, and our clients delay payments to us, it’s going to hurt all of us eventually.
So what proactive steps can CFOs take if they feel that cashflow is going to be a problem? “What I recommend is to talk to your most important suppliers and find out what they can do in the circumstances. I did this with our landlord, just to see what their expectations were. This lets us explain our own situation to them, and come to an arrangement if we need to.”
And this is also the perfect time to look at any special rules and regulations put in place by your relevant governments. “In our case, the French government has also set up some solutions for French companies - most notably those in need. So we can deal directly with our bankers, social authorities, and landlords. So I called all of these vital suppliers right away to make sure we all understand the rules in the same way, and to keep an open and happy relationship during this period.”
Just as you don’t want to lose clients during this period, your suppliers don’t either. But rather than pressuring them and making the situation worse, it’s better to talk openly and look for solutions that benefit everyone.
Build even stronger relationship with clients
All things considered, tech companies like Spendesk are built to handle this sort of crisis. Businesses need tools to digitize and decentralize their processes more than ever, and SaaS companies are here to help.
But that doesn’t mean it’s smooth sailing, says Fabien. “The complexity for us and other tech companies comes from our clients’ business models. They’re not all tech companies like us. They might be in hospitality or hosting events, and these industries are suffering right now.”
“It’s our role to help them during this time. I’ve already heard from a client whose accountant uses a desktop computer, for example. And all of their tools are only installed on that machine. Which means that they can’t work from home. So we’re doing what we can for these clients, and it’s also opening their eyes to the possibilities that come with more modern tech.”
And of course as clients struggle, that significantly increases the risk of churn. “We spoke with one client a few days ago in the event world. They wanted to churn. So we spent time with them looking at the challenges they’ll be facing in the near future and why keeping a clear overview of their spending will be so important. Especially over the next few weeks.
It’s vital for smart companies to prove their value to clients during times of crisis. But it’s a balance. Every customer’s inbox is overflowing right now, and it’s easy to go from helping to hurting.
Companies need strong financial guidance
In trying times, managers and employees alike can feel a little lost at sea. Which makes the finance team - the people with the numbers - so much more valuable.
The business looks to you for evidence of what’s working and what needs to change. It needs strong leadership to identify the best next steps, and reassurance that you’re built on strong foundations.
Good luck. The CFO Connect community is here to support and offer ideas to help you through this.