Editor’s note: This article is part of A Year of Evolution: CFOs on 2021 series featuring insights from finance leaders across industries, and their COVID-19 lessons and 2021 plans. This interview has been lightly edited for clarity. To receive weekly updates on this series, sign up for our CGMA Advantage newsletter.
Richard Knight, FCMA, CGMA, is the CFO of Argility Technology Group, a software provider based in Johannesburg, South Africa. With six technology businesses under the Argility umbrella, the organisation provides proprietary software and applications to the retail, supply chain, and financial services sectors and incorporates cloud computing, predictive analytics, and the internet of things technology in its offerings. The privately held organisation has 125 employees.
The pandemic’s spread was a mixed bag for Argility. On the one hand, the company’s customer base of retailers needed to make immediate technology adjustments around supply chain and logistics, but the mandated lockdowns made it more challenging for Argility’s customers to pay for new and ongoing projects.
Knight recently spoke to FM about how he and his finance team navigated the delicate balance between customer demand and the economic realities they were facing, how maintaining open communication with customers helped mitigate the budgetary restraints of COVID-19, and how he is preparing his team to deal with upcoming risks.
What were the first signs that COVID-19 may be an issue, and how did it first start to impact your business?
Richard Knight: It hit South Africa a bit later than the Northern Hemisphere so we had the ability to see what was happening in February and March. South Africa only went into official lockdown the 27th of March. About the week before the president announced that major lockdown we started to receive calls from customers panicking, not sure of what future lay ahead for them.
The thing we focused on was work from home. We were all ready for that; our teams had been doing this on and off, so that really helped us. And I think the key was just communication in the beginning.
As customers started calling, how did you see that impacting your revenue, budget, and business continuity?
Knight: In the retail sector, specifically the warehousing and supply chain side, some of our key customers set up calls with us to discuss where we had projects already planned to look at cutting their initial budgets. Initially, we did see a knock on our revenue but not materially. We were lucky that what we had a lot of discussions with customers, talking about providing them with one- to three-month payment holidays for certain customers as opposed to pure credits.
We explained that we also have fixed costs, mainly our people. And we didn’t want to let go of them. We've invested a lot into our people and the intellectual property that they hold. Our customers understood that. We've got really good relationships with a lot of them because we are open and we communicate. We were willing to assist and not just push it off and allow it to become their problem. We did look at how we can help.
As the crisis becomes both more global and more far-reaching, how does that change your priorities and your strategic planning?
Knight: For me, it's definitely been a lot more focus on cash flow. Going forward it will be a lot of focus around cash forecasts and managing new risks.
But we've just got to manage the risk very carefully. I think you almost take a real deep look into each business and ensure you understand all the different mechanisms and what are the different scenarios, low road, high roads, that type of thing, and manage it from there.
What were some of the steps that you took to conserve cash, and how are you managing cash differently now than you did at the beginning of this?
Knight: The key is zero-based budgeting and a keen focus on cash flows. And a lot of focus is on, “What is the cost we're adding in, how’s that going to help us generate more revenue, or manage the current revenue, and keep customers happy?” For that, we're growing our focus around our digital marketing.
And then managing any sort of risk that we could foresee and having a plan for when revenue didn’t come through. Across teams, we also discussed the need to understand not only the top line and bottom line but also what’s going on in the cash side of the business.
Given that COVID-19 has had such an impact on supply chains, has this in any way presented opportunities for your products? Or has it been a net drain on your customer base?
Knight: It’s actually been a bit of a mix. Some customers have really pushed forward in terms of looking at what they can do for digital transformation.
That’s played to our strengths with a lot of the products we offer in supply chain and retail. More businesses are realising they can’t run their businesses on Excel anymore and that they need systems like warehouse management. Our fleet management system has also really picked up in terms of interest and deals that are now starting to close.
Even a few of our newer products, like one that’s focused on last-mile delivery, have really gained a lot of traction in the retail and supply chain space. Everyone’s realised that online buying is just taking off and businesses need a means to deliver on those sales and provide customers with a seamless experience. That’s also played to our strengths because our focus is also about providing our customer’s customers with a good experience.
You mentioned digital transformation. Do you have plans to either accelerate or hold off on digital plans?
Knight: It’s sped up all of our projects, and we haven’t held back on any internal projects. Our focus has been on operating as efficiently as possible through the use of technology. And knowing that none of us are going to be returning to the office any time soon on a full-time basis.
In the finance space, we accelerated our plan to upgrade our ERP system and also our payroll system so that they were both fully cloud and not on premise. Upgrading our ERP was also done to ensure that staff can operate a bit more efficiently and have more time to spend on analysing rather than processing. There’s also been a goal of mine to get my finance team thinking that way.
Do you see risks and threats to your business now, and if so, what are they? And how are you managing and overcoming those risks in 2021, 2022?
Knight: Luckily, we’re quite stable. The biggest worry in my mind is if there’s a second or even a third wave in South Africa and we go back into lockdown. I think our biggest risk is that the economy shuts down and that affects all our customers. And if that affects our customers, what does that mean for us? Are we going to have to drop revenue that we were expecting?
So that will start affecting our ability to expand as a business, what we spend on our marketing, and how we expand our sales, and obviously how we look after our people. I’d say that’s the biggest worry.
And it’s difficult to protect yourself against economic collapse, apart from ensuring you’re not overleveraged. If you do have debt, managing it to your best ability and conserving overspending and keeping tough budgets in place and spending on the things that, hopefully, will create that top line growth so that you can create cash and or revenue that can convert to cash for the business.
How has this crisis changed your role as CFO within the company and your relationship with the rest of management?
Knight: My role has shifted into focusing on advising the group on future outlooks and value creation for the group. I’ve spent a lot of time analysing different scenarios and advising the rest of the team and our board on what the different scenarios could look like. And on top of that, also looking at how we create value. Looking at which of our products generate the biggest contribution to our bottom-line margins. And when looking at our investments, analysing our startups and subsidiaries in our group that have the best ability to generate revenue and grow quickly.
It's about value creation for CFOs: looking at how the businesses can create value and being able to show that and communicate it across to management.
Rapid fire questions
What has been your biggest lesson from this pandemic?
Knight: Ensuring that my finance team is upskilled by accelerating our project plan and studying various new courses. You need to ensure your staff are actually skilled and aren’t falling behind anywhere.
Is there a must-have piece of technology in your budget for 2021?
Knight: For us, it's to finish off our complete move to cloud. That’s one of the big overall projects we want to finish up and also help our customers move into that operating environment.
What’s the one soft skill you want your team to develop or to strengthen in 2021?
Knight: It definitely is around emotional intelligence. It’s important that each team member knows that they can be open to everyone else, communicate the problems they’re going through, and talk about the wins. It's good to celebrate any wins whether big or small; it keeps everyone motivated and takes your mind off some of the tougher things going on.
— Drew Adamek (Andrew.Adamek@aicpa-cima.com) is an FM magazine senior editor.