During COVID-19 organisations are identifying expertise gaps in critical areas. As we work through this crisis period we have created a series to focus on these critical areas, with insights from one of our readily available expert Interim Executives.View the full series here.
"What these crises taught me is to be prepared. The people who stay prepared will be the most useful when or if something happens” – Vicki Potts
Vicki has over twenty-five years CFO / Operations experience, driving significant return on investment to entrepreneurial companies, in telecommunications, travel, digital, media/communications, health and education sectors, across Australia, UK, US and NZ. Vicki has a lot of hands-on experience in crises.
The company was cashflow negative when the GFC hit and were given a month by investors to get “cashflow positive or close”. Vicki along with her CEO headed to a cafe for the weekend and mapped out how much recurring cashflow they needed to get to a safe level and the potential options to do that.
Vicki had already run a series of upside and downside scenarios quarterly, so they had a strong starting point to re-assess. They chose to only let go of 6 staff as they were already lean, and still growing fast. The company was US based but the majority of the staff were based in Australia. When the AUD crashed to 62c Vicki proposed to the board that they hedge their AUD payroll for the next 12 months based on an assessment of whether there was more likelihood of going further below 62c or increasing again in the year. This gave them a cashflow gain of $1m. Their supplier terms were to pay for the previous month in the first week of the new month. Vicki advised the suppliers that they were moving to payments by geography (Europe/North America/Asia/All other) so their staff were able to spread the payments over 4 weeks. That way they gained a one-off cashflow benefit of three weeks of North America, two weeks of Europe, and one week of Asia cashflow, which was a one-off gain of over $2m.
They reached positive cashflow in a week, added a good buffer with the change to payment terms and continued to grow successfully. With hindsight Vicki feels they could have pushed the suppliers further, they had gained roughly half a month of one off cashflow and it could have been closer to a month, but fortunately this turned out to be enough.
What Vicki Learnt
Communication was key – it needed to be clear and constant. As they were cashflow negative at the time, their investor’s demands for them to “get positive or close” was their first goal. Vicki communicated to the investors what they would be doing on that first weekend. Then on Monday she presented their proposals with the CEO to the management team and then to the investors for their thoughts. From then they continued the conversation weekly with investors and brought the rest of the staff into the updates. The product team contacted the suppliers one by one to touch base and their call centre was there to support customers.
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