Financial Analysis and Planning — In Pandemic

Financial Analysis and planning form an important part of project management, development, deployment, execution and monitoring of expected outcome. Most of the companies form with an objective to make profits over the period. And rightly so! Company has its own vision, mission and goal to achieve. And this profit can be evaluated by multiple options. But what makes any company unique is its ability to provide a product or service which will help and ease the life of people and the environment sustainably. However, this pandemic (COVID-19) have made to rethink on all the calculations and projections. It has provided us another opportunity to evaluate our functions, formulas and models. Historically and current scenario has proved one thing for sure, that company with sustainable approach can only sustain over a period of turbulence. Now the question arise what makes a company sustainable? Companies into the race of only growth or market capture with no focus on its product development/viability are bound to fail.

The present data published by Data labs provides more insight into it. The report says the most startup companies have only 6 to 12 months of cash reserves to survive what does that mean; it shows how the companies formed spent millions of dollars just for marketing activities more pertinently digital marketing. The idea here is what about the product they have sold, what about the profit from that product which accumulates over the period. Unfortunately, many of them not even makes profit at gross level, which is a grave concern. The data has one more interesting insight Q1–2020 the total funding secured by startups is $4.10 Bn and the expenses incurred by top 50 Indian startups is $13.7 Bn. To interpret it roughly, all the funding received by the company are being spent for the growth purpose without many reserves or base line profit. But what these insights means for us. It helps us to understand that a model which is not profitable at base level will be difficult to survive in these testing times unless there lies a deep pocket to fall back on.

Undoubtedly, this is the most crucial time for CFO’s all around the world. COVID -19 has surely brought in another angle to the financial analysis for investors and stakeholders apart from traditional approach and evaluation of operational, market and credit risk. This will make companies to stress more onto the basic questions then ever before on every project:

· What is the Gross profit for the product?

· Did the product have inherent lucrative factor to be part of human’s life?

· What is the company’s DRS plan?

· What is total constructive loss policy of a company if the product does not sustain?

· Whether company is overly resourced?

· Whether the penny spent is wise, does it add value into the product or have quantified customer increment?

Risk is inevitable in this ever-changing world, but how much is the matter of question for each company to evaluate?

Note: There are many other factors of evaluation and it is purely one of my observation of current scenario.