Even though the UK narrowly avoided going into recession in 2022, it remains clear that there are tough prospects ahead for businesses in 2023.
The economy is precarious. We are suffering double-digit inflation, there is widespread impact from industrial action and there is still a very real threat of recession this year. Managing a business though a volatile economy like this is challenging. But there are several strategies you can use to help mitigate risk and ensure the long-term success of your business.
Manage Your Finances Cautiously to Preserve Cash Flow
In a volatile economy, it’s important to maintain a strong cash flow. You can do this by carefully managing your finances, including by reducing costs, increasing efficiency, generating more revenue and seeking new sources of funding.
A proactive approach to reducing costs is a first step. One cost-reduction strategy is to undertake a full review of all expenditure to identify areas where savings can be made. Renegotiating supplier contracts might achieve better prices or payment terms. And an energy review could see you finding ways to save on utilities costs. You might be able to lessen other expensive overheads through outsourcing of non-core business functions, like payroll or IT support. And to reduce office rents and the associated costs, then a move to smaller premises and an increase in remote working can bring savings too.
To increase efficiency, look to streamline your operations. By identifying and eliminating inefficiencies in your business processes, you can optimise and automate your workflows, reducing errors and saving both time and money.
You have several options to help drive more revenue. The first is to put up your prices, although you need to do it in a way that does not risk alienating customers. You might also consider diversifying your products or services, to offer ones that are less sensitive to economic fluctuations, or which are more profitable. You can investigate expanding into other markets too, to reduce your dependence on a single source of revenue. You might be able to successfully serve international markets with less volatile economies.
Finally in terms of revenue raising, you might implement a new business models, such as subscription models, which evenly spread your customers payments and may help improve retention for those struggling to pay in one go. Even if you sell goods, the servitisation of your products could add enough value for your customers to move them from transaction-based purchasing to a subscription plan, generating predictable revenue streams for your business.
If you are enduring a cash flow crisis that you are certain will be overcome at some point, additional funding may be the answer. Raising more capital may be sufficient in bolstering your ability to absorb the impact of economic volatility. You might apply for a business loan or seek additional funding by way of external investment. And you should investigate whether there are any government funding schemes or grants that you qualify for.
Build Agility and Flexibility in Your Business
Businesses that can meet volatility with agility and flexibility will be more successful. This means continuously reviewing and revising strategies and plans to adapt to the changing market conditions.
The leadership team of a business should stay informed. In keeping up to date about economic conditions and trends that may impact the business, you can be better prepared to quickly adjust your strategy and plans where necessary.
To become more agile, you may have to rethink anything that is already too rigid: workflows and processes that you have followed for years, policies that slow down decision-making and bureaucratic operational activities.
Having a focus on continuous improvement can help too. Seeking ways to improve your business processes and offerings can help you stay competitive and adapt to changes in the market.
Much of a business’s ability to be nimble and adaptable comes down to culture. Companies that empower their staff, distribute decision-making across the organisation and simplify procedures can act more quickly. This coupled with a culture of knowledge-sharing and employee collaboration drives agility in the workplace.
Agility helps your business adapt its plans so it can cope with the unexpected. So, despite volatile economic conditions, you can be flexible in response. You can devise cost-saving strategies and implement revenue-boosting plans that will improve your prospects and mitigate the damaging effects of inflation, energy surcharges and an uncertain economy.
Invest in Technology
Using technology, such as an ERP system, can help you streamline and automate processes, reduce costs and improve efficiency, which are particularly important in volatile economic times.
An ERP can help with your accounts receivable. Not only does it manage the invoice process so that you bill clients more quickly, but you can also automate payment reminders and other financial processes. This helps speed up payments, reducing costs and boosting your cash flow position.
With real-time data insights, an ERP provides a comprehensive view of your business and how you are performing against targets and KPIs. This can help you respond quickly to changes in the market.
With the ability to gather, process, and analyse large quantities of data, an ERP system can improve your forecasting and help you make more accurate predictions about future market conditions. Financial planning functionality also means you can run models and scenarios to test how strategic changes will affect cash flow and profitability, allowing you to adjust your plans accordingly.
For distribution business, an ERP helps provide better supply chain management. Inventory management is improved so you avoid out-of-stock situations yet are not hampered by having too much money tied up in stock.
For increased operational efficiency, technology helps by optimising your operations through the automation of manual processes. This makes your employees more productive, while reducing errors, which reduces costs and increases business efficiency.
Better decision making is vital in volatile market conditions. Here, an ERP is invaluable. It provides a centralised repository of data that can help you and your team to make more informed business decisions. An agile system can help you adapt to rapid changes and manage your business more effectively.
NetSuite ERP can ensure the stability and success of your business in today’s volatile economy. To find out more. contact us today.