Utilizing dynamic financial analysis to weather the COVID-19 financial storm

January 22, 2021

As we move through the coming months, the financial landscape for many businesses will continue to be significantly affected by COVID-19. While vaccinations of the general population have only recently begun, it will still take time before business returns to normal.

The first step is to examine your business and try to predict the continuing financial impact. Then, you can plan your prevention and response strategies, and perform the steps necessary to weather the COVID-19 crisis.

Project

Assessing liquidity needs in the face of a major crisis is critical. Sensitivity and/or ‘what if’ analysis in your financial modelling is a necessity to projecting the financial requirements over the impacted period—revising cash flows, understanding the extent and timing of financial needs and possible shortfalls, and assessing the results of critical scenario testing. Models must be dynamic to accommodate the evolution of inputs and assumptions relating to revenues, expenses, trends in markets, reserves, and debt. Immediate points of focus for consideration may include:

  • Vendors and business partners: current financial obligations as well as anticipated expenses (new or strained supply chain arrangements and financial effects on other areas downstream).
  • Employees and operations: current and anticipated payroll obligations, and other support payments, as well as operating expenses, including work-from-home tools and other requirements.
  • Customers: projected customer behaviour, needs, and new demand, and reviewing where collection of outstanding debts stands.
  • Other stakeholders: projecting impacts on existing agreements with lenders, investors, and other stakeholders.

Prepare

Understanding the internal and external financial reality is the first—and most important—step in forming adequate preparation strategies during the COVID-19 crisis. Robust communication strategies across all stakeholder groups is critical in achieving an accurate understanding of the impending financial landscape. Keeping pace with the challenges and opportunities of key stakeholder groups, maintaining their confidence, and bridging the impact on your operations will strengthen your projections and improve the effectiveness of financial analysis and planning.

Knowing your options and assessing how they fit into your business is the next step. In order to better understand existing cash flow availabilities or constraints, evaluating current agreements with lenders and other stakeholders is one of many immediate steps to take in planning for a financial reserve or emergency fund. Alternative strategies, such as monitoring ongoing changes to markets and economic policy, can also help your business quickly seize opportunities or anticipate and respond to threats.

Respond

Once you have assessed liquidity needs, defined projected financial requirements, and your business has formulated a preparation strategy, it’s time to implement your plan. Taking the steps to prevent and respond to anticipated and realized financial challenges should be a fluid process, and flexibility in times of change is necessary.

How BDO can help

We’ve helped our clients navigate the evolving financial market, including understanding economic stimulus programs and other unconventional options that may be available to support and sustain your operations. As your trusted advisor, it’s our responsibility to guide you through the essential actions, unique to your business, to continually project, measure, plan and respond to financial challenges. The time to act is now.

Alex Welch
Vice President, Strategy & Operations, Vancouver
awelch@bdo.ca

Melissa Marino
Vice President, Strategy & Operations, Toronto
mmarino@bdo.ca

This site uses cookies to provide you with a more responsive and personalised service. By using this site you agree to our use of cookies. Please read our privacy statement for more information on the cookies we use and how to delete or block them.