By Reon Janse van Rensburg
When drawing up budgets in 2019, you as a manager probably took all given scenarios into account in your financial planning. However, to give some comfort in terms of the past year and its unforeseen circumstances: no one could have foreseen a pandemic that, without warning, would turn the world upside down.
The financial planning process for 2021 offers you the opportunity to use the hard lessons that the Covid-19 pandemic has taught us to put in place a strategy that will prevent you from again finding yourself in the same unprepared position.
As part of the duties of every CFO and manager who must take their respective businesses into the future in a responsible manner, it is important to consider the resources at the company’s disposal and adapt the strategy accordingly. Given the financial instability experienced by many businesses in 2020, necessary changes in budget processes are indispensable. Traditional inputs and standard approaches are no longer suitable for these processes.
There are sectors that performed better than others during the national restriction, but the pandemic affected each sector and industry in different ways.
To ensure that the setbacks of the 2020 pandemic are not repeated, businesses need to be able to make faster decisions that will enable them to redeploy their talent to the right place, to set up and implement a new business model, to increase productivity, to come up with new products or services and to refurbish or reconsider operational requirements.
At the heart of each of the above examples is speed − getting things done quickly and in the best way possible.
The radical redesign of budgets and performance management processes to be more strategic in nature compels financial and departmental managers to optimal strategic planning and discussions leading to deeper insights that unlock value and give managers more mobility in terms of resource allocation.
The perfect budget for 2021 may not exist because there are still uncertainties about the pandemic and how it could affect the future. It is therefore crucial to develop a strategy that makes provision for unforeseen events (such as those experienced by businesses in 2020).
According to McKinsey & Company, an international consulting firm, financial managers can take the following steps that will put their respective businesses in better positions in future:
- Stress-test scenarios and assumptions to counter uncertainty.
- Spend less to build flexibility and more options into budgets.
- Allocate financial resources to areas with the highest priority in the business.
- Accelerate decision-making processes.