As we end 2022 in a potentially lengthy recession in the UK, the uncertainty that has characterised the last few years is set to continue. Whilst trying to contend with supply chain issues, geo-political tensions and cost-of-living crises, businesses are under increased pressure to do more with increasingly fewer resources.
But what does this really mean for British businesses moving into 2023? A further scrutinising of finances is to come, with recession-proofing firmly at the front of leaders’ minds. Business leaders should look to remain flexible, use technology to their advantage and acquire new skills.
Remain agile and resilient to market changes
Agility should become a top priority for high-growth businesses as they cope with the ramifications of the recession. These new policies will inevitably bring market and pricing changes, where rapid responses from businesses will be crucial to guard slimmer margins.
Both long- and short-term business plans should incorporate some element of flexibility, working with finance, inventory, and supply chain data to stress test “what-if” scenarios. For example, businesses can test scenarios such as the impact of raw material prices doubling or supply chain disruptions causing 25% of revenue delays. Then ask questions such as, how cash flow will be affected, what evasive manoeuvres can be taken, and how risk can be lowered with preventative measures.
This all relies on visibility of real-time, reliable data that provides a single view of the business. When companies lack a clear view of their financial health, it becomes impossible to adapt and plan for possible scenarios. To ensure that the effects of the recession do not disrupt day-to-day operations and endanger margins, businesses must keep long-term strategies flexible to maintain business continuity.
Use cloud technology and automation to your advantage
Achieving this level of data visibility is only possible in the cloud, essential for running critical aspects of a business, including accurate financial reporting, remote management, and speeding up manual processes. Cloud users are more able to automate key processes and avoid manual work (85% vs. 37% of non-users), with the full potential of automation left largely untapped with on-premise, siloed data. With a laser focus on cost-cutting, automation is a great way for your business to do more with less, while making employees’ roles more fulfilling.
For instance, in finance, automating manual, time-consuming tasks such as month-end close makes data more accurate, and allows finance teams to focus on analysis and respond to market changes. Not only does this mitigate error, with just one incorrect cell having the potential to cost businesses thousands of pounds – but it also frees up teams for value-add work, boosting retention in a time when half of businesses are unable to find people for available roles.
Auto-pricing is another way that businesses can remain flexible and react to shifting market pressures. Further removing the burden from overstretched finance teams and ensuring that international sales rules are met, auto-pricing allows businesses to automatically respond to fluctuating supplier prices and maintain accurate cash flow forecasts. It effectively puts the brakes on if a product or component is getting more expensive or gives the green light to buy at the right price. A key advantage is that these changes happen in real time, not weeks down the line, saving vital funds in increasingly volatile markets.
The evolution of supply chain
Developing an agile, robust supply chain that can survive disruption and shortages has become a cornerstone of business resilience. When considering their supply chain, businesses have been forced to react quickly to continual product shortages, delivery strikes, and port delays, which show no signs of slowing down in this recession.
Moving from just-in-time towards a just-in-case or ‘more stock, fewer deliveries’ model mitigates the risk of unpredictable shortages or shipping delays yet requires businesses to balance out associated overheads of storage, transportation, and management. This helps protect profitability in a forever-changing supply chain ecosystem.
Supply chains can also be strengthened through Service Level Agreements (SLAs), which set the minimum acceptable levels of performance in stone. If there are elements of the supply chain that are consistently failing to meet expectations or demand, businesses can work with finance and procurement experts to re-examine supplier contracts and establish stronger relationships with preferred suppliers.
Pick up crucial new skills
Technology is just one part of the puzzle. To remain agile and be able to react quickly to new challenges, one of the most important factors is the willingness of leaders to pick up new skills as they expand. Business owners and management teams should make time for training despite the new economic pressures, learning from peers, experts, and mentors to further grow and enhance their business.
91% of UK SME founders have developed new skills since starting their businesses. Skills span across customer service, marketing and communication, and finance and accounting processes, with many citing that their personality traits and attributes have changed since becoming an entrepreneur. Over half have increased their resilience and adaptability, and many have developed their financial acumen – all of which are crucial skills when it comes to navigating business challenges presented by the recession.
Stories like this serve as a reminder of the significance of building new skills and maintaining a focus on the financials as margins are squeezed further.
As the recession brings more uncertainty, businesses should refocus and look at the year to come as a time to improve the bottom line. Adopting flexible strategies, using cloud and automation to enhance your workforce’s output, mitigating supply chain disruption, and building varied skills will be vital to navigate economic challenges.