In many companies, the current budget has been done in December 2019 without any knowledge of the pandemic or its economic impacts. These budgets are predominantly not valid for operative planning anymore. In most cases, fixed costs remain unchanged or decrease only slightly while the turnover is experiencing a significant drop. Stable and cash rich companies can cover the fixed costs and keep paying full wages and meet other financial commitments. This will lead to recurring losses, but rich companies can sustain it for some time. Companies with poor liquidity or existing debts will find it challenging to sustain their operations with external funding.
Economic impact of COVID-19 pandemic
If the pandemic persists, almost all companies will face serious economic issues. During normal operations, companies strive to maintain a 2 – 3 months buffer to to ensure that temporary cash flow issues due to e.g. strikes or accidents are not visible externally as financials difficulties. If the pandemic continues for more than three months, most companies will run out of these reserves. During autumn, decisions must be made about which companies will be saved and which will go bankrupt. The situation is already critical for many companies.
Enter financial forecasts
SBB Financial Analyzer AI enables comprehensive analysis of the financial situation of a company. Furthermore, detailed forecasts can be created quickly and accurately. During times of crisis, forecasts need to be updated frequently as the situation changes quickly. With SBB Financial Analyzer AI you can create a forecast with updated assumptions in a matter of minutes. A quick forecast based on turnover change will forecast the next year assuming that productivity remains otherwise unchaged. This forecast will reveal the magnitude of restructuring that the assumed turnover will require. Detailed forecasts can be leveraged to investigate the effects of any changes that are planned for adapting to the new reality. The detailed forecasts can incorporate custom assumptions for as many financial statement items as necessary, while artificial intelligence will ensure that productivity metrics will be kept otherwise at a comparable level and the forecasts are always fully reconciled.
With SBB Financial Analyzer AI you can create a new budget as often as needed. It is critical to be able to determine how fast the company will face serious financial issues if cost savings are not implemented. Many companies implement cuts too late as they are generally undesired and unpopular options.
SBB Financial Analyzer includes several automatically calculated bankruptcy indicators. It is important for company leadership to recognize the risk of bankruptcy. Bankruptcy indicators are also vital to investors as they risk losing their investment. On the other hand, bankruptcies cause market share to be divided between the remaining companies. During times of crisis, successful companies may be able to increase their market share. According to a famous quote from Warren Buffet, investors need to follow only two rules: 1) Do not lose money, 2) Do not forget rule 1. SBB Financial Analyzer helps avoiding investments in crisis companies or bailing out from crisis companies in time.
Please see the SBB Financial Analyzer products page for a full overview of features!