Jun 09, 2021
COVID-19 has fundamentally changed the way in which businesses operate. From remote working to labor shortages, businesses have been forced to think innovatively to survive in a post-pandemic world. Revenue and cash flow have no doubt been a point of unease. During a recent WVC survey, more than 50% of respondents noted their number one concern being cash flow and access to capital. In a time of crisis, the focus is less on revenue and profits and more on liquidity and cash flow. In a distressed organization where resources are likely constrained, time is better spent on developing an accurate cash flow.
William Vaughan Company has developed a 13-week cash flow forecast tool for businesses to assess short-term cash demands. This model offers the most granular view into the money moving in and out of a business which means any short-term planning shortfalls can be addressed immediately. Click here to download.
Here are some best practices for cash flow forecasting business owners should consider if and when they find themselves in a crisis:
- Take control – Prioritize your expenses from critical to nonessential. With precise insight into your cash peaks and valleys, it’s easier to prepare contingency plans ahead of projected pinch points.
- Let the data drive decisions – Short-term cash flow forecasting should be driven by your data. Critical decisions can be made effectively with the numbers at hand. Most importantly, the 13-week cash flow is an objective, repeatable model that can eliminate false optimism among leadership.
- Communicate – Use this as an opportunity to create an open dialogue between management and other key team members. In addition, it can also help expedite key decisions for your lenders.
- Think outside the box – Think about other financing opportunities. This will also identify fixed versus variable expenses in which you can build scenarios from the model and “stress test” it against various conditions.
As businesses begin the long road to recovery, thinking strategically and taking action to minimize negative impacts will decide who remains competitive. Cash flow forecasting is just one of the many tools business owners can use to ensure their sustainability. With a thoughtful approach, you will gain the visibility needed to potentially right the ship.
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Don’t go at it alone! If you’re not sure how to assess your current environment and need guidance on utilizing cash flow forecasting, contact a William Vaughan Company advisor today!
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Apr 08, 2021
In our last manufacturing-focused blog, we explored the topic of the fourth industrial revolution known as Industry 4.0. This highly developed revolution focuses on the use of technology, automation, and digitization for operational efficiency. Many are now curious to know how this new phase of manufacturing was impacted by the disruption of the pandemic. With a vast shift from in-person work to a more remote setup, Industry 4.0 experienced a surge in the scaling of related technologies.
According to a survey by McKinsey, of their 400 respondents, 94% of respondents told noted that Industry 4.0 had helped them to keep their operations running during the crisis, and 56% percent said these technologies had been critical to their crisis responses. For those organizations who had already taken the leap to incorporate Industry 4.0 into their daily operations, the pandemic was a win situation. These early adopters were simply able to rely on their automation to overcome the loss of physical presence in their factories and at the same time utilize their real-time data analytics to assess their operations and make prompt adjustments.
For others, the pandemic was a wake-up call. Manufacturers who have yet to make the transition to Industry 4.0 were met with the stark reality of being unable to pivot during the disruption which left them negatively impacted. According to the McKinsey survey, 56% of respondents that hadn’t implemented Industry 4.0 technologies prior to COVID-19 found themselves constrained in their ability to respond to COVID-19 in the absence of digital technologies to support them.
While the pandemic made organizations realize the importance of Industry 4.0. It has also hindered progress. For some, the pandemic wreaked havoc on cash flow and talent creating a sort of catch-22. The need for automation and digitization is apparent, but without the capital to support the transition, manufacturers are stuck in a rock and a hard place.
So what is next? Manufacturers must first recognize the value-add of Industry 4.0 and commit to scaling their operations to include features of this forward-thinking revolution. Once committed, the next step is to develop a detailed plan. Given limited resources, having a strategic approach will ultimately maximize the benefits of smart technology without having to reprogram due to short-fixes. The biggest hurdle is making the decision to scale and take the first step. Whether it’s setting up your current system to pull data in an efficient manner for future data analytic software or focusing on best practices for remote working, committing to Industry 4.0 is the first step. Don’t make the mistake of discounting Industry 4.0, it could be deadly in a time of disruption. Organizations that learned from the pandemic, have embraced this new revolution, and can be nimble during uncertainty are those who will survive and thrive.
Feb 19, 2021
Many small business owners do not believe their businesses can or will fall victim to occupational fraud. Due to this belief and budget restrictions, many small businesses do not make this a priority, which leaves them vulnerable.
According to the Association of Certified Fraud Examiners’ 2020 Report, financial statement fraud is the costliest type of occupational fraud affecting organizations. Financial statement fraud is not only costly from a fiscal standpoint, but it also impacts trust within the organization, the community, and with investors.
The rapid advance of COVID-19 has placed a significant strain on organizations and individuals alike. Donald R. Cressey’s fraud triangle theory includes the three major factors that are commonly present when financial statement fraud occurs: Pressure, Opportunity, and Rationalization.
Here is how COVID-19 has impacted these factors:
Pressure – Organizations are facing challenges never experienced before. COVID-19 has left many facing revenue loss, supply chain disruptions, and employee wellness concerns. All these factors, and more, are causing undue pressure to meet financial expectations.
Opportunity – While organizations are receiving state and federal funding to cope with the financial impact of COVID-19 disruption, there are dramatic shifts in operations with remote working and a reduction of in-office staff. This means internal controls are reduced and accessibility increased. These become prime opportunities for fraud.
Rationalization – Mounting stress impacts individual decision-making skills, leading people to rationalize actions they would otherwise regard unacceptable or illegal. Employees may rationalize they are “owed” financial support because of the work they do.
Some potential areas to consider when thinking about your organization include:
- Revenue recognition – The timing and amount of revenues recognized.
- Allowances and reserves – Changes in methodology and unusual adjustments.
- Valuations – Significant estimates used in projections, declining cash flows, and idle assets.
- Treatment of expenses – Expenses are recorded in the proper period.
- Disclosures – The adequacy and sufficiency of disclosures.
- Margins – Reasonableness of margins given the current year operations.
- Internal control – Opportunity for control override.
These are just a few of the common ways for financial statement fraud to occur. While we all work diligently to recover from the COVID-19 disruption, we need to be aware of the heightened risks and adjust our processes and tasks to monitor for this risk.
If your company needs assistance, William Vaughan is here to assist you.
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Juli Seiwert, CPA
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