Nicky Tozer, SVP, EMEA, Oracle NetSuite, provides SMEToday’s readers with some pointers on how to navigate economic uncertainties in 2023.
As we head into the new year, the instability of the past few years is set to draw out in a potentially lengthy downturn in the UK economy. Under the strain of supply chain issues, geo-political tensions and cost-of-living crises, businesses are being pressed to accomplish more with less resources.
But how will this affect British businesses in 2023? Organisations can expect a closer examination of finances, with policymakers placing a high priority on recession-proofing. Business leaders should try to stay adaptable, take advantage of technology, and learn new skills.
- Stay flexible to market developments
Smaller, emerging companies should prioritise agility as they deal with the effects of the recession. Market and pricing changes brought on by these financial difficulties are inevitable, and businesses must act quickly to protect narrower 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.
- Make the most of cloud technology and automation
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 routine operations. Cloud users are more able to automate key processes and avoid manual work (e.g. 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 may 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.
- Evolving to cope with supply chain changes
Building a flexible, reliable supply chain that can withstand interruptions and shortages has become essential to ensuring business resilience. Organisations have been forced to act swiftly in response to ongoing 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.
- Acquiring new skills and expertise
Technology is only one part of the solution. A key factor for leaders is their ability to remain agile and reactive in the face new challenges, this can help them develop new skills as their organisations grow. 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.
Most 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. Many have increased their resilience and adaptability and 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.
Faced with the uncertainty of recession, businesses should refocus their priorities for the year ahead to improve the bottom line. In order to navigate economic challenges, it is vital to adopt flexible strategies, utilise cloud and automation to enhance workforce productivity, minimise supply chain disruption and develop varied skills.