Three Surprisingly Simple Tips for Mastering Financial Agility
September 25, 2020
Reaping what you sow is far from a sure thing, as Iowa farmers know all too well. The 700-mile path of destruction from this summer’s derecho included more than 10 million acres of Iowa’s corn and soybeans. These crops were planted with great care, strategy and investment. Yet, they won’t yield anywhere near what their growers expected.
Of course, Iowa’s farmers are not the only strategists confronting losses from surprise events. COVID-19 threw millions of families, educators, business owners, healthcare providers and others for an unprecedented loop. Had they seen the challenges ahead, many would have planned for the year quite differently.
Let’s be honest, though. Even the most crystal ball-like contingency plan may not have turned out as expected. Think of it this way... even when the world isn’t coping with the shock and awe of pandemic-era crises, natural disasters and social unrest, we still experience disappointing outcomes. It’s a fact of life.
Knowing that the best laid plans are sure to go awry, agility becomes a crucial skill, especially when it comes to finances. Mastering financial agility is surprisingly simple. Here are a few practices business leaders can put into place now to maintain the dexterity necessary to thrive amid unforeseen trouble.
Review contracts frequently
Particularly as businesses of all types confront a new normal, it makes sense to check in on the mutual benefit of your contracts. What felt like a healthy give and take six months ago may no longer make sense for your business or the business of the entity with which you’ve contracted. Costs may no longer fit with your budget or theirs, and terms may need to be adjusted to reflect the ongoing challenges of 2020’s various nightmare scenarios. The pace of business (and life!) is beginning to resemble speeds of six months ago. Be sure to check in on those annual contracts at the 6-month mark; multi-year contracts should be reviewed at least annually.
Visit vendors often
Aside from reviewing the black-and-white legalese of your business relationships, it makes sense to stay connected on a human level, as well. Although various social distancing and quarantining circumstances my prevent you from visiting in-person, it remains vitally important to stay close to the people who support your operations and help you exceed the expectations of customers. One day soon, if you haven’t already, you may need to ask your vendor for a favor, a cost reduction, a terms extension or some other form of flexibility that goes outside your agreed upon scope. Those requests resolve much more smoothly among people who actually like doing business together.
Move money around
If there’s a business leader whose budget was not impacted in 2020, I’d certainly like to meet that individual. As we’ve all seen, budget impact isn’t always negative. COVID-19 presented many savings opportunities to businesses, from a dramatic reduction in corporate travel expenses to the virtually disappearing costs of special events and entertainment. Financially agile owners were able to convert money that had been flagged for these and other expenses into some pretty smart investments. The key is to sustain that flexibility for the long-term, checking in on the corporate budget at very frequent intervals. The other important cultural key is empowering employees to make on-the-fly changes that boldly (and soundly, of course) move the business forward... in good times and in bad.
Above all, though, stay close to your banker. Each of the three tips above comes with its own nuances and risks. Your bank partners – if they are doing their job – will have a good sense of your goals and will be able to walk through the particulars of contracts, vendor relationships and cash management. While they may not be able to predict the future, they have enough experience with financial agility to get you moving in the same way.
Mark K. Phillips is vice president of treasury management services for Bank Iowa, Iowa’s second largest family-owned financial institution. He can be reached at email@example.com. To learn more, visit bankiowa.bank. Member FDIC.