Economic indicators point to a high risk of recession. While there’s a good chance it won’t be prolonged, businesses still need to prepare for a deeper recession. Technology can often put businesses in a better position to respond to the changing dynamics of today’s marketplace.
Experts may be divided on whether we are heading for a global recession, but the odds appear to be growing by the day.
Recession risk indicators are almost everywhere. On the one hand, Europe is particularly vulnerable. Energy shortages and economic sanctions related to the Russia-Ukraine war could push up inflation on the continent and increase the risk of a recession across the euro zone. China’s zero-virus policy and associated lockdowns continue to disrupt its economy, making it difficult for the country to maintain positive growth — so much so that the International Monetary Fund downgraded its growth forecast to 4.4%.
The U.S. is on a similar downward trajectory. Consumer prices are rising at a rate not seen in 40 years. Despite a strong labor market, indicators of recession risk such as rising inflation, supply chain disruptions and higher interest rates did little to quell fears of an economic downturn.
Adding to the uncertainty is two consecutive quarters of negative GDP growth. For many analysts, that’s the definition of a recession. However, the National Bureau of Economic Research (NBER) said the slowdown would have to be “significant” and “sustained” to truly qualify.
Striking the right balance financially
If the 2008 recession taught business anything, it’s that no one is too big to fail. Look at the auto industry. Manufacturers that have existed for decades or even more than a century are on the brink of bankruptcy. Ford, Chrysler and General Motors are all at risk of default.
Countless financial institutions were also in trouble, not least Lehman Brothers. Founded in 1847, the financial services company filed for Chapter 11 bankruptcy after the subprime mortgage crisis (though Lehman Brothers could also be cited as a cause of the Great Recession).
In short, even the largest companies struggle to predict the next major disruption. Predictability has become an illusion as the market moves again and again into seemingly unprecedented territory. Regardless of the risk of a recession or a global pandemic, businesses must prepare and find practical ways to increase efficiency, increase agility and manage cost control. Today, one of the more practical approaches is technology.
Technology not only opens the door to enhancing operations to combat future economic downturns, but it also opens the door to efficient expansion in the future. Making your business smarter is a smart move.
It all starts with building the right technology stack, which directly relies on the idea of improving efficiency, increasing agility, and managing cost control. Even in non-recession times, it doesn’t make much sense to invest in solutions that don’t cover these bases.
Accounts payable automation alone can provide countless benefits, chief among them being a reduced reliance on headcount. With automation, you don’t need that many people at all. You can transform your finance function into a lean machine focused on value-added activities. You can also greatly reduce the chance of human error and improve data quality while saving time and money. You know exactly how your business’s financials are, allowing you to make better decisions when faced with uncertainty.
Become more resilient through technology
Preparing for a recession depends heavily on the finance function of your business, which is why fintech is so important. You can only do so much downsizing and outsourcing before operations become unmanageable. If you explore your technology options and finalize investments, proper integration is critical to preparing for recession risk. Here are just a few ways automation can help:
- Minimize manual processes.
This should go without saying, but automation frees employees from many manual processes.
In fact, finance teams spend up to 84% of their time on manual, repetitive tasks. With technology bearing the brunt, your team can focus on cost-cutting opportunities and negotiate new payment terms with suppliers and suppliers. Better interest rates and payment terms can do a lot for cash flow. In addition, automate the management of most invoicing duties, which can be of great benefit during times of economic uncertainty.
- Reduce risk and errors.
Automated processes are more accurate and efficient.
A single human error can lead to late payments, which in turn lead to late fees, strained supplier relationships, and more time needed to complete a single payment or transfer. However, with fewer mistakes, the right person will receive the right payment at the right time.
- Reduce unnecessary costs.
AP Automation allows suppliers and suppliers to choose an early payment discount program.
While it’s tempting to slow down payments (a tactic many companies employ at the first sign of a future recession), it’s not a good use of money. The right automation solution not only ensures that payments arrive on time, but also earlier when needed, enabling your suppliers to take advantage of payment plans and early payment discounts, such as NetNow Early Payment Opportunities.
- Gain greater visibility.
A good solution gives you a clear picture of your finances, allowing you to make real-time decisions based on real-time data. You know where operations can reduce costs or use available resources more strategically and efficiently. You no longer waste money or time on things that don’t move your business forward or foster growth. Likewise, you can operate lean.
Lately, everyone is thinking about preparing for a recession. While the risk of a recession may be a normal part of doing business, that doesn’t make the idea any less troubling. Technology puts businesses in a better position to respond to the changing dynamics of a recession — or any business disruption, for that matter.
Written by Amit Chen.
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