How to plan for COVID-19

Financial planning is a must when trying to understand in which direction to steer your business. Given the current environment, having a financial model in place is key to be able to stay afloat through this time. Most business leaders need assistance with planning to make better data-based decisions for their business. A financial model helps determine where the business is heading as it aims to forecast business results.  

Uncertain times like COVID-19, make it even more crucial to have a financial model in place to plan as things change in your business. To start planning for COVID-19, you will need a baseline; which can be your 2020 plan or prior year data. Once you have a baseline you can start planning for the next 12 months. Consider business drivers within the industry and how those have changed pre and postpandemic. Look at revenue to cash drivers and liquidity. Compare latest trends and key operational drivers of the business. Weigh the negative impacts caused by COVID-19. Include factors which could affect employees, supply chain, and your customers. Have three scenarios (best, worst and most-likely case) for how the pandemic might play out within your industry. You can apply a decrease in revenue to understand how that would affect your business and liquidity.  Factor in depth of the decline and time required to ramp up.

Financial models are not factual, but they bring light to any signs that may trigger your business and they are helpful to manage and decrease risk. A financial model allows you as a business leader, to work through assumptions and disruptions which could affect your business. Having a plan in place can help relief stress and help you make data-driven decisions beyond going with the “gut feeling.”