On December 31, 2019, the first COVID-19 case was officially confirmed. Just a few short months later, the COVID-19 pandemic had spread around the world, upending normal business operations, and triggering a massive liquidity crisis.
The preliminary response from businesses was one of survival, focused on freeing up cash to cover operating expenses. Many organizations took drastic measures such as reducing their capital expenditures or even temporarily closing their businesses. The pandemic has demonstrated the importance of being proactive and data-driven when it comes to cash management. By performing scenario planning, you can ensure your organization is prepared for any disaster scenarios that arise, and has a strengthened cash management strategy that can take on the toughest unexpected challenges.
The Effects the COVID-19 Pandemic Had on Cash Management
The pandemic highlighted the many challenges businesses had with ensuring their working capital, capital and operating expenditures, and their balance sheet were in healthy states. External disruptions made it difficult to manage working capital and operating expenditures during the pandemic as many customers had trouble paying their bills, demand plunged, and supply chains dried up. Many organizations were forced to slash their capital expenditures by 25 to 30% just to keep their doors open. This resulted in significant sunk costs with ongoing projects due to many expansions and internal investments having to be scrapped.
The pandemic has demonstrated that businesses cannot operate under the assumption that their market will always be healthy. Rather, they must look ahead and identify potential challenges to their business models through scenario planning.
How to Access Your Organization’s Ability to Overcome Cash Challenges
If you are new to scenario planning, the sheer range of potential outcomes you could forecast can be extremely overwhelming. It’s best to start small. Focus on a small number of scenarios and build from there.
For each scenario, answer some basic questions:
- What is the issue that you are trying to assess?
- What are the risks of the scenario?
- How far out are you trying to predict?
- What are some external and internal factors that can impact your scenario?
- Do you have the right resources to develop and maintain scenario plans?
These questions will enable you to develop a scenario-building framework that will help you make more informed, data-driven decisions.
Gaining a Competitive Advantage with Scenario Planning
Scenario planning can give your business a significant competitive advantage. As McKinsey recently noted, “Companies that managed cash prudently before the pandemic have remained resilient, while less-prepared companies faced existential threats in the face of a liquidity crunch….”
Moreover, scenario planning allows leaders to react quickly and make informed decisions in times of crisis. Rather than scrambling and being casted into survival mode, your business can seamlessly switch gears and adapt to the temporary or new normal.
Drawbacks of Traditional Scenario Planning Tools
Scenario planning can be a potentially enormous undertaking when performed manually. The process may take many months to complete as many businesses have to scramble to not only manually consolidate and normalize their transaction data, but then they have to transform that data into meaningful insights by building complicated forecasts.. It’s difficult to justify the massive allocation of resources since markets can change very rapidly, impacting the planning process
With automation technologies, however, organizations are empowered to generate flexible forecasts that can adapt rapidly as conditions and assumptions evolve. Trovata, our cash management platform, amplifies your ability to seamlessly generate automated forecasts built upon your real-time cash flow and position that analyze changing scenarios, business decisions, and potential investments. Trovata’s Advance Scenario Planning capabilities truly empowers you to overcome any potential disruptions your business may face and equip you with a significant competitive advantage since you’ll be able to react quicker to challenges than their competitors.
Empowering Comprehensive Scenario Planning with Automated Cash Management
Trovata enables you to automate your scenario planning, empowering your organization to become more proactive and drive quicker, data-driven decisions through:
- Real-time cash & transaction data
- AutoTag™ that automatically segment groups of transactions
- Automated forecasts with enhanced user-defined growth rates and variables
Gain Real-Time Cash Visibility with Open Banking APIs
Scenario planning is only as good as the data on which it relies. Traditional paper-based scenario planning is not only time-consuming but incomplete and/or outdated data often produces flawed forecasts. Trovata’s Direct-To-Bank APIs establish a real-time, big financial data pipeline, equipping you with forecasts built on up-to-hour transaction and cash balance details.
Analyze, Monitor and Plan at Every Level of your Business
Powered by Artificial Intelligence and Machine Learning, Trovata automatically segments transactions from key vendors and institutions utilizing AutoTag™ technology, enabling you to drill down and forecast for these subsidiaries individually. From these tags, you can generate dynamic scenario models that provide invaluable insights into your cash flow.
Generate Automated Forecasts with Enhanced User-Defined Growth Rates and Variables
You know your business better than anyone. Trovata empowers you with enhanced user defined growth rates and variables, so you have the flexibility to model and forecast around changing scenarios, business decisions, and potential investments. This way, you are prepared for any disaster scenarios and growth opportunities that arrive at your organization’s door.
Automate Your Scenario Planning with Trovata
As we’ve seen, the COVID-19 pandemic has fundamentally changed the way organizations need to manage cash. Proactive planning is critical to ensure any future geopolitical threats or recessions do not cripple your business revenue stream. By automating your scenario planning with Trovata, our automated cash management platform, you can equip your organization with contingency plans that strengthen your cash management strategy.With our ever changing economy and world, it is more imperative than ever to have accurate, automated cash reporting and forecasting capabilities that provide you real-time, invaluable cash insights. Download our Cash Imperative Guide to discover how you can gain real-time cash visibility and automate your scenario planning with Trovata.