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Make Informed Decisions with Effective Finance Modelling

01/05/2020


With today’s current business climate and the daily changes caused by COVID-19, the ability to anticipate and adapt to change is more important than ever. COVID-19 will change how all businesses approach remote work and business continuity; The infrastructure of yesterday is not scalable for the needs of the today’s remote workforce of.

Real estate and construction companies are facing urgency to transform how they work and engage with tenants, vendors and staff. This includes the need for effective financial management practices in a now-completely digital world.

This pandemic is forcing you to make key business decisions in short time periods amid a backdrop of market volatility. How can you evaluate your position and take informed steps forward? Below are some considerations to ask as a management team. 

  • What is our current cash position?
  • What are our direct and indirect construction project costs? What is our fixed and variable overhead costs?  
  • What construction project costs can you reduce or postpone? What fixed cost can you reduce or defer?   
  • Are financial circumstances pushing you to consider layoffs? What government programs, like the Canada Emergency Wage Subsidy, are available to your organization?
  • Reduce costs if you have less than six months of runway focusing on sustainability in lieu of growth. An example is incorporating adequate scenario planning (worst, baseline, upside) to get an accurate handle on future outcomes.
  • Review customer engagement tactics – ensure transparency and understand everyone is impacted by this. Your customers will need to know the expected timing changes of the construction project and other changes to the initial contract.
  • Based on current obligations and spend and slower than normal revenues, how long can your business stay afloat?

These questions help you determine what the next steps are. However, getting the answers may be time-consuming and difficult as your information may be spread across multiple systems or out of date.

With robust financial planning and analysis tools, you can quickly understand where your business stands and use the information to evaluate the consequences of your strategy and the decisions you’re making.

Your business is dynamic, so your financial planning and analysis processes and technologies that support it provides needs to be dynamic too. Financial planning and analysis tools can support growth and improve profitability during boom times, but the models are equally importantly to creating sustainability during down times.

Here’s some examples of what financial planning and analysis tools can do:

  • Advance the use of financial and operational models for effective scenario planning and cash flow management – A robust revenue model to help trace costs and profitability. An example, of this type of activity can be in the form of new development projects and mortgage and leasing investments.
  • Identify the backbone of your Financial Management operating system - the foundation for building an agile business ready for disruption. An example being the current and forecasted state of your financial statements – balance sheet, income statements and cashflows.
  • Build adaptability and transferability to finance as a partner to the business – similar to the financial crisis of 2008, many departments look to finance for direction.
  • Make organizational agility and more-insightful financial analysis a possibility across all departments – there are more cost- and time-effective ways to manage your business outside of spreadsheets. From budgeting and forecasting to workforce and capex management within connected models.
  • Connect technology to your business strategy for real-time information and reporting needs –one source of truth lets you know where your finances stand, wherever you are.

As you continue to manage the change in front of you, access to timely and accurate information is important. The coming weeks mean you have to make tough decisions on staff considerations to maintaining transparent relationships with your customers and financial institutions. Implementing a digital finance strategy can help you get the answers you need, allowing you to navigate the uncertainty with confidence.

Looking at your spreadsheets and forecasts can help you get an understanding of your current reality. But if you want to understand your options and see how decisions will impact your organization down the line, digital finance strategies can help.

Learn more at MNP's COVID-19 Business Advice Centre

Strategies and tools to help your company navigate the coronavirus crisis, stay resilient and take the next steps towards recovery.