By Dave Woolliscroft and Dan Ghammachi on June 22, 2020
The impact of COVID-19 has been a shock to the system and we don’t yet know how great the impact to the economy will be. What we do know is that it’s unlikely to be short-lived.
We are dealing with a new normal for the foreseeable future, and as finance leaders we must be prepared. Some B2B software companies will be impacted more than others, depending on your customers’ industries and your company’s relative health going into this situation.
In these circumstances it can be difficult to know what to do. Following are six things we are focused on with our portfolio companies, and we recommend you prioritize them as well.
Your current financial plan is out the window. You need to understand the potential impact on your business to be ready for downside eventualities. Some possibilities to consider in your scenario plans include reduced bookings, higher churn, extended implementations, delayed renewals and extended collection cycles. Assess aggressive downside scenarios for these drivers and consider what levers you have to reduce cash outflows.
It’s important that you can continue operating with your available cash. There’s no way to predict how long this will last or how much financing will be available from traditional credit markets. Depending on the outcome of your scenario planning, actions to consider could include:
Collections may have worked on autopilot before, but it’s time to actively engage with your customers.
By this point you’ve likely paused your discretionary spend, so shift your attention to essential spending.
The key point is to communicate with vendors and partners. Don’t simply go quiet and not pay. Communication will achieve better outcomes.
Government assistance programs have been changing quickly. Seek counsel from advisors such as lawyers, accountants and tax accountants. Be confident in your eligibility before applying to any program; know what you are asserting to and the rules you will have to comply with. There could be legal, financial and brand penalties for improper disclosures.
For finance leaders, dealing with the survival of your businesses can be all-consuming. Take time to consider the impact of work-from-home situations and the personal pressures the pandemic can have on your team. Small things can make a difference.
Adversity can build stronger team bonds. Don’t let this opportunity go to waste.
Certain people are ready to take advantage of bad times as well as good. With the added irregularity of remote working arrangements comes an increased opportunity for fraud and other attacks.
Change is likely to continue and uncertainty can be stressful, but taking action often provides some measure of comfort.
In summary, remember these simple principles.
About the Authors
Dan Ghammachi, Managing Director, K1 Operations
Dan Ghammachi is a Managing Director at K1 Operations. He leads reporting and accounting diligence for new investments and is an active board member for K1’s portfolio companies and advisor to K1’s management teams.
Previously, Mr. Ghammachi was CEO of Media Solutions Holdings where he focused on growth and operating efficiency. Mr. Ghammachi previously worked at Aerosoles where he focused on cash management and risk management and International Commerce Exchange Systems where he supported over two dozen business units. Mr. Ghammachi also held the position of Director of Finance at Applied Printing Technology. Mr. Ghammachi is a graduate of Rutgers University, where he received an MBA, and of Montclair State University, where he received a BS in Accounting.
Dave Woolliscroft, Practice Director, K1 Operations
Dave Woolliscroft leads reporting and finance best practices across the K1 portfolio, partnering with CFOs and finance teams to help them meet the needs of their rapidly growing business.
Previously, Dave was a Managing Director at Deloitte, where he was CFO and COO of various recurring revenue subsidiary businesses and a co-founder of their internal venture accelerator. Prior to that, Dave led finance strategy and finance transformation initiatives for Deloitte Consulting at a number of CPG, healthcare and PE backed companies. Earlier in his career, Dave was a Senior Finance Manager at Barclays Bank and Snr financial analyst at Ford Motor Company.
4 Keys to Keeping Your Team (and Customers) Safe During the COVID-19 Pandemic
How to Bounce Back Fast: 7 Ways to Manage Your Practice During a Pandemic
Webinar Recap: Recruit the Best Candidates in a Remote World