Finance Monthly - CFO Awards 2022

Bank i ng & Fi nanc i a l Ser v i ces 54 Finance Monthly. 1. Be directionally right — not precisely wrong Obsessing over minor savings in every area of your operation could mean that you ignore the bigger picture. You should take the same approach as a physicist — think about orders of magnitude and start with a high-level view rather than going granular straight away. With this outlook, you can perform sanity checks on a regular basis and not get sucked into the trap of fine-tuning every number to the second decimal. Putting everything under a microscope is a waste of time if the big numbers still don’t add up. Remember what your ultimate goal is and make sure you take big strides towards it — not baby steps. 2. Cash (management) is king Developing knowledge around the principles of cash management within any organisation is a good idea whether times are hard or not. While business leaders are often skilled in understanding and manipulating profit and loss, they often don’t know the ins and outs of cash management and cash flow. Making cuts across the board is never the right approach. Fat is always distributed unequally in businesses, so a surgical approach is required. Cut spending in some areas, while investing in others that will help you to grow more muscle. In an ideal world, you’ll cut out all of the things that don’t work, and further invest in all of the things that do. 3. Keep it simple Sophisticated business models with high levels of functionality and reams of features often aren’t suited to tough economic circumstances. Think about what it is that your customers really need at this time and focus on that part of your offering, and leave the bells and whistles for another day. In my experience, building a simplified business model can be more difficult than building one with high levels of complexity; but remember to focus on the larger orders of magnitude as you will have very little margin of error when the recession starts to bite. 4. Keep providing the good coffee You won’t make major savings by switching to a cheaper brand of coffee, but you will undermine staff morale. Not just because staff will waste time complaining to each other about the standard of the new brand, but they’ll also go out in search of decent coffee — time that a happy employee would otherwise be spending productively. “Making cuts across the board is never the right approach.”

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