COVID-19’s impact on the CFO office – professional services
The coronavirus pandemic has disrupted businesses around the world on an unprecedented scale. How did delaware and its customers cope with the immediate challenges during the lockdown, and how do they plan to advance in the months and years to come? We asked their CFOs and documented their stories in a series of CFO Connect blog posts.
To wrap up this series, we asked Luc Priem, CFO – and since January 2020 also CEO ad interim – of security and safety expert G4S Belgium and our own CFO, Isabelle Janssen, how they coped with this unprecedented crisis.
More than in any other sector, professional service providers like G4S and delaware are highly dependent upon people as their biggest assets and revenue drivers. Does that mean that a pandemic, with the resulting need for physical distancing and reduction of nonessential operations, has a greater impact on this industry?
How did your company react when the authorities imposed the lockdown on 13 March?
Priem: “For us, the impact was huge: 90% to 95% of our people work in the field, providing security services (manned, as well as via security systems) in places that were severely hit by the lockdown, like the airport, events, non-food retail, etc. So, much to our regret, we’ve had to put 30 to 35% of them on technical unemployment. The people who kept on working needed protection as they come into close contact with other people. Moreover, they had to set the example when it comes to safety and security – they are the face of our company. So, we immediately provided them with the required protective gear and kept repeating the safety measures, stressing the importance of washing hands, wearing protective gear and respecting physical distancing. From day one, our crisis management team gathered daily to discuss our approach, our communications and the measures needed.
"Some customers decided to defer or cancel running projects. Others felt this was the right time to accelerate digitization, as they had more time to update their ERP system or even launch new IT initiatives."
Isabelle Janssen, CFO delaware
Janssen: “We immediately shifted to remote working, both for everyone at our own offices and for our consultants working at our customers’ offices. As in the past few years we had set up the infrastructure to allow everyone to work remotely, the ‘new way of working’ – in the cloud, with Microsoft Teams – wasn’t that new to us. Many of our people are even used to occasional teleworking. One of the first things we did was contact all our customers to gauge how they were tackling this new reality, whether they planned to defer or cancel running projects and how we could help. Their responses differed greatly. Customers who had difficulties ‘virtualizing’ their workforces overnight, called in our help to take the leap. Others decided to suspend their projects for the time being, while a third group felt this was the right time to accelerate digitization, as they had more time to update their ERP system or even launch new IT initiatives. As the outlook of this crisis changes week after week, plans kept – and keep – changing, which makes it quite challenging for us to plan and forecast.”
How did all this affect your sales?
Janssen: “The new initiatives of some customers did not fully compensate for the ones that were put on hold, so our business did shrink: we experienced a 7% drop in turnover in April, a drop of around 10% in May and we expect to close June at about the same level. More than a reduction in billable hours, the number of software licenses for SAP or Microsoft, for example, has dropped significantly – as there have been hardly any new projects launched in the past months. To make up for that loss, we introduced temporary unemployment: our consultants take one day off per week. That almost corresponds to the actual drop in activity, so we felt like this is the right thing to do. All in all, we manage to resist the crisis. It is difficult, however, to forecast where we will be by the end of 2020.”
Priem: “Security is a low-margin business as our income is mainly based on billable hours, which dropped dramatically. 850 G4S employees, for example, ensure security at Brussels Airport. That part of our business came to an immediate standstill, just like our security guard services for the events sector, non-food retail stores. Our alarm systems business sputtered too, as the on-site installation of alarm systems became impossible. Last but not least, the G4S Academy also had to shut down. Only our safety solutions business was left largely untouched. Apart from the income loss, we had to invest big in protective gear and disinfection gel in the first weeks – that was an unexpected extra cost of EUR 275K by the end of May.”
Most of the CFOs we talked to in the past weeks highlighted the importance of developing scenarios to prepare for the future and of securing cash flow. Were these your main concerns too?
Priem: “Cash has always been king at G4S: we always keep a very close eye on our cash flow. Yet it became more king than ever during the crisis. In the first days, rolling forecasts were made and we kept monitoring our cash position every day. That implied looking at how we will pay our invoices and, most importantly, how our customers will react. Our credit control team contacted our customers to gauge the impact of the crisis on their business and discuss possible payments issues. That was a very time-consuming, yet valuable job: it led to good results. In addition, we are monitoring our costs closely, but as we are a real people business, our main costs are our personnel.”
Picture: Luc Priem, CFO G4S
Janssen: “First and foremost, we aimed to ensure enough cash and liquidity for delaware to keep operating. So, we took steps to secure and control liquidity and manage receivables. With the help of the business, we monitored billing and customer payments more closely to mitigate the risk of payment delays. In addition, our finance team developed business scenarios – from today to the end of the year – and modeled cash flow to estimate how many weeks of liquidity we would have under particular conditions. From the outset, we have been in permanent contact with the banks: during weekly status reports, we discuss our situation openly with them. Thanks to that close bond, we should be able to react quickly if our cash flow came under pressure by securing additional lines of credit, for example. We will probably apply for extra credit for the last quarter's cash flow. The banks are, however, bound by very strict measures imposed by the government: any new credit is a corona credit and can only be granted under very strict conditions.”
Priem: “We are grateful for the governmental measures to delay payment of VAT, social security benefits, etc. As for investments: we haven’t put any project on hold yet, but we try to clearly make a difference between the need-to-haves and the nice-to-haves – especially as the outlook for our sector remains difficult.”
The role of the finance office has been changing for a while now. Did the COVID-19 pandemic accelerate that shift?
Priem: “Our finance and procurement team is composed of 26 people and we’ve always worked very closely with the business. Since January 2020, I’ve also been appointed CEO ad interim, so that means that responsibilities easily blend together. In fact, the role of the CFO has changed significantly over time. While we used to focus on getting the bills right and closing the books, today’s CFOs can really impact the strategy of a business. The forecasts and OCF simulations we make clearly illustrate that: we help steer the company in the good direction. At present finance and business both still have their seats in the crisis management team, which now gets together twice a week.”
Janssen: “We interact much more closely with the business now. From the outset, we have increased the pace of reporting to be able to monitor our turnover on a daily basis. All consultants are asked to complete their timesheets every day, which allows us to closely follow up on how things are evolving. Based on those insights, we then draw up monthly forecasts. In addition, the business also reviews the results of every department on a daily basis, together with finance and a scheduler. Last but not least, we also joined forces to follow up on outstanding invoices. So, the relationship between the finance team and the business has clearly been strengthened – which is very positive. I really hope to keep that up in the future!”
Picture: Isabelle Janssen, CFO delaware
When asked how they see that ‘future’, most CFOs we interviewed mention teleworking, less travel and plans for more digitization. Do you agree?
Janssen: “I do. Many of our consultants and other staff are still teleworking today. In fact, we have launched a global employee survey to find out how our people have experienced these months of teleworking. Based on these insights, we might allow people to work remotely more often. I expect that not everyone will want that, though. Now that the offices are open, many people are happy to return to the office – they miss connecting with colleagues. As for digitization, this crisis has clearly revealed the weaknesses of companies that were falling behind on their digitization journeys. So, we expect the coronavirus pandemic to drive technology investments – even in our department! In the past few weeks, we’ve experienced how crucial it is to build speed and flexibility into forecasting. We were already doing pretty well, but our forecasting would have been faster and more flexible if we had already implemented the automated cash forecasting tool that has been on our agenda for a while. We’ve now accelerated its implementation.”
"We expect an increased focus on health protection and social awareness, plus a dramatic reduction in travel in the short term. Based on these insights, we are already reinventing ourselves."
Luc Priem, CFO G4S
Priem: “We’ve also launched a survey to ask our staff how they experienced these past months and will take into account their feedback. To set the stage in our sector G4S has prepared a report titled ‘How will our security industry change in a post COVID-19 world?’. We expect a huge change in our societal habits, such as an increased focus on health protection and social awareness. Based on these insights, we are already reinventing ourselves, thinking about how we can help our customers ensure safety and security in the new physical distancing world. Together with APK, for example, we’ve developed a temperature monitoring solution. Of course, we are aware that while new opportunities arise, security activities may be rationalized and it will be more important than ever to provide solutions that are lean and efficient. So, as a company, we will have to carefully monitor margins, keep drafting scenarios, etc. We plan to make use of more advanced technology, including AI, to help us raise efficiency and reveal insights. Nobody has a crystal ball to look into the future, but I am a pretty optimistic person, so I’m sure that positive things will emerge from this crisis, even if it may take a while.”
G4S in numbers (2020)
- Activities: security, safety and hospitality services
- Founded: 1911
- Head office: London, UK
- Belgian office: Vilvoorde
- Employees Belgium: 5,000+
delaware in numbers (2020)
- Activities: IT services
- Founded: 2003
- Head office: Kortrijk, Belgium
- Employees Belgium: 1,500
This is the last one in a series of three interviews on how the COVID-19 pandemic is affecting finance teams in various sectors. Read our previous articles covering the impact of COVID-19 on transport and logistics and manufacturing.