Joe Rudkin Treasury, Market Insight
Since March, the United Kingdom alongside the rest of the world has been dealing with the impact of the COVID-19 outbreak. All businesses, industries and functions, including those in treasury, have been dealing with challenges not experienced for over a decade.
With expert insight from treasury professionals we are running a series of interviews in which we’ll discuss the challenges being faced, the short and long term implications, the lessons learnt and advice for future similar situations.
A huge thank you to the following for your contribution:
- Paul Leacy, Interim Group Treasurer at Badoo
- Martin Walker, Treasury Consultant with experience in leading treasury functions across a range of sectors
- Catherine Porter, Chair of the Membership Advisory Panel at the ACT
- Nick Axton, Group Treasurer at Travelport
Interview four of the series saw our panel discuss what support business should receive from Governments. We asked them:
How do you think the government schemes and companies’ understanding of them will impact accurate cash forecasting and modelling? Are companies equipped to implement more complex and longer term cash forecasts effectively?
- Many corporates will prioritise investment in cashflow forecasting processes and models in the future
- Treasurers should understand the various relevant schemes available and build this into the company’s models
- The cash flow modelling assumptions have to be understood, agreed and implemented
Paul Leacy: For many industries the government support is providing a vital source of funding and in the short term should significantly help businesses model cashflow. However, as things stand many of the schemes are of relatively short duration, so it is vital for the government to either extend the schemes or provide some guidance that the schemes will be extended as long as the social distancing measures disrupt certain businesses. It's impossible to say how well equipped at present companies are to implement more complex longer term cashflow forecasts but one would expect that as a result of COVID-19 many corporates will prioritise investment in cashflow forecasting processes and models in the future.
Catherine Porter: The cash flow modelling assumptions have to be understood and agreed internally and then put into the model. Added input from local finance teams across multiple countries is needed which means extra workload all round.
Nick Axton: One of the initial challenges was understanding what schemes were available and whether we could apply. The more information that was released the easier it became to understand the different schemes available. The next challenge was incorporating the impacts of these schemes into the cash flow model, with timing of payments uncertain. Adding layers of complexity will be a challenge to those will very manual / high level processes. Effectiveness of longer term forecasts in this environment, with so much uncertainly is almost impossible to achieve.
Martin Walker: Various government schemes were announced back in March. The most significant schemes for most businesses being the Coronavirus Job Retention scheme and the Coronavirus Business Interruption Loan Scheme. There have been regular changes and updates to the schemes as the scale of the situation becomes more apparent or problems in implementation are identified. Treasurers should understand the various schemes which are relevant to their business and build this into the company’s models together with other actions the business is implementing. I don’t think this in itself increases the complexity or ability to produce accurate forecasts. However I do see a number of challenges arising including: changing business practices, understanding how long will the support be available and what is considered a steady state and when do we aim to get there.
For advice or more information about the latest developments within the treasury world, visit the ACT website www.treasurers.org. They have a vast array of technical supports. Alternatively, feel free to contact us at Brewer Morris as we may be able to put you in touch with the relevant people.