Running a company comes with its fair share of challenges, and in 2021, tackling market changes head-on will be hugely important to business success.

This is particularly true in the UK mortgage industry, where approvals stalled in the first half of 2020, lending criteria tightened and fears about borrowers’ abilities to repay loans increased.

Landbay, a UK lending marketplace focused on residential buy-to-let mortgages, has grown quickly since its launch in 2014, by harnessing digital technologies to drive efficiencies and maintain profit margins. As the mortgage market changed greatly in 2020, the firm had to make tough decisions. The task was uncomfortable for a finance team used to dealing with more predictable market conditions.

Landbay succeeded via a proactive approach to crisis management that included quick scenario planning, the process of examining various potential realities and the impact those scenarios may have on the business. Cloud-based technology and the ability to quickly access accurate, up-to-date data through NetSuite made the process easier for Landbay.

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Reflecting on last year, Landbay Finance Director Runjit Bhopal offered four tips for scenario planning as this year unfolds:

1. Get reliable access to accurate, real-time data.

The massive mortgage market changes in 2020 directly impacted Landbay’s business. With a limited ability to conduct in-person property assessments, Landbay turned to online valuation tools, which allowed the business to drive some revenue. But huge swings in the number of processed mortgages made it difficult to confidently make sales forecasts for the year.

To deal with this challenge, Landbay developed assumptions and scenarios with the information available. Accurate, real-time data about the business itself was critical for this, according to Bhopal.

“If you … make decisions based on bad data, you can damage the business very quickly,” he said.

Access to good data wasn’t a problem because Landbay uses NetSuite OneWorld to track all financials and make decisions around shifting market dynamics, he added. Specifically, accurate financial data flowed into Landbay’s financial forecast models, then the team quickly produced best- and worst-case scenarios. The team ran more scenarios in three months “than we’ve done in a number of years,” Bhopal said.

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2. Keep it in the cloud.

While working remotely, cloud-based ERP was critical in allowing Bhopal’s team to conduct daily business and process mortgages electronically.

“Technology-wise, we have most of our systems in the cloud,” Bhopal said. “We have no servers in the building, and this was a huge help [while working remotely].” The business is built on three pillars: data, technology and people. Remove any one and the structure is weakened.

3. Develop a single view of your liquidity position.

When company growth stalled, Landbay sharpened focus on its 13-week rolling forecast.

“The first few days of the lockdown, we took a snapshot of the business,” Bhopal said.

The team reviewed items like run rate, burn rate and its existing financial commitments to determine how to move forward while preserving cash. Landbay’s accounting system is fully integrated: Bank and invoice transactions feed in automatically based on executed rules, with minimal human intervention. All of this data feeds into a cloud data warehouse for Landbay’s customer-facing and back-end systems. The company references this warehouse as it reports on everything from its loan books to its accounts. The warehouse is also the source of information for financial reporting, management reporting, cashflow management and OKR (objectives and key results) reporting.

4. Create a “cash war room.”

Landbay developed a tight circle of communication between the CEO, COO and finance director, who communicated regularly about all financial aspects of the business. The team also met weekly with managers and held regular board meetings.

“The purpose of this is to have a close, dedicated team to make … rapid decisions about the most pressing cash liquidity questions,” Bhopal said.

The Bottom Line

In times of challenge, a well-prepared finance team will analyze data, run scenarios, create a plan and work to preserve cash. Access to good data, a cloud-based business system, a clear picture of your liquidity position and a tight circle of communication make scenario planning especially powerful.

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