After we looked at the effects of the Corona pandemic on the upcoming preparation and audit of the annual financial statements as of 31.12.2019 in one of our last blog posts, we will now examine selected business and financial aspects that the CFO encounters in day-to-day operations.
Priority No. 1: Improve your own liquidity in times of the Corona crisis!
Ensuring solvency is certainly one of the “standard tasks” of a CFO. In the current situation, this task is becoming much more important – collapsing supply chains, associated restrictions in the company’s own service provision, refusal of acceptance by customers or payment difficulties with customers are now the daily challenges of the CFO.
The federal and state governments, as well as the social security funds, have taken a variety of measures that will “give companies some breathing space” in the tense situation. Every CFO should consider the use of these measures.
Apply for a deferral of taxes and social security contributions!
Currently , the federal, state and local governments allow the interest-free deferral of corporation, trade and sales tax. In some cases, individual federal states go even further and also grant the reduction or refund of special VAT advance payments. In addition, no tax claims are usually enforced at present.
The umbrella associations of health insurance funds are granting interest-free deferral of social security contributions for the months of March and April. The employers’ liability insurance associations are also planning deferrals for upcoming payments.
Take advantage of the KfW special programme 2020 and short-time work allowance!
The KfW Corporate Loan and the KfW Quick Loan are intended to provide liquidity to companies in a timely manner. In some cases, these loans come with a 100% exemption from liability. The short-time work allowance, which has now been granted under simplified conditions, also brings relief.
Keep a closer eye on outstanding receivables – secure receivables!
Due to the nationwide spread of the coronavirus – regional, supra-regional, national and international – there is a need to keep an eye on receivables management on a daily basis. Of course, it is also an imperative of cooperative partnership that customers are granted longer payment terms, but this must not lead to payment difficulties of their own. And if payments are deferred, a corresponding written agreement with an acknowledgment of debt is always recommended. This saves many a dispute later on about the legality of the claims or their amount.
Use “classical instruments” – put everything to the test!
Of course , the CFO must also use the classic instruments of reducing expenses – all costs must be put to the test, investment plans must be reviewed, and extensions of payment terms with suppliers must be agreed with them.
Corona crisis management: Deliver business figures in a timely manner!
Especially in times of crisis, all areas of the company need fast and meaningful figures. Meaningful also means that the CFO is faced with the following tasks:
- Constant review of the recoverability of existing receivables,
- if necessary, making devaluations on receivables,
- Examination and, if necessary, devaluation of inventories and fixed assets,
- prompt activation of support measures,
- Liabilities of mandatory provisions.
It is not uncommon for the CFO to be faced with the challenge that the urgently needed figures cannot be delivered or cannot be delivered in the desired quality because accounting employees have been absent due to quarantine, childcare or illness. The topic of “employee absence” or “employee replacement” should therefore also be “at the top” of the CFO’s agenda for the time after the Corona crisis. Partial outsourcing or complete outsourcing of accounting tasks to a BPO partner should be considered.
Threat to existence – avoid insolvency due to Corona
It cannot be ruled out that companies will temporarily become over-indebted or insolvent as a result of the consequences of the Corona pandemic
. This can be done, for example:
be the case if subsidies applied for or granted are paid
out late. Due to a change in insolvency law, the legally
prescribed obligation to file for insolvency (3-week period) will be suspended until 30.09.2020
. This is to avoid premature insolvencies. However, there are a few things to consider with
this new legal regulation in order not
to subsequently become liable as a managing director. As soon as an existential situation
Result
If one follows the statements from science and politics, the Corona pandemic will continue to have a significant impact on economic (and social) life for many months to come. The impact of this pandemic on a large number of companies will probably be more lasting than the distortions of the financial crisis in 2008. Therefore, the CFO has a key role to play in the current situation – in addition to securing liquidity, the timely delivery of reliable and well-founded figures for the management decisions to be made on a daily basis is one of his current core tasks.
What consequences do you expect from the coronavirus for your company? What other aid measures do you expect or would help you? We look forward to your comments.
Image source: Pixabay, Photographer: Jordy_Nijenhuis
Interesting topics:
Coronavirus: This must now be taken into account in the 2019 annual financial statements!
Goodbye resource problem! – No more personnel bottlenecks in accounting
