How Can Enterprises Weather Economic Downturns? 7 Steps to Prepare for Growth During an Economic Slowdown!

Economic experts at the World Economic Forum predict that the global economic growth rate in 2024 will decrease by 2.3% compared to pre-pandemic levels. Against this backdrop, it is natural for business leaders to feel some anxiety when looking at the economic situation this year. Below, we will introduce 7 steps that enterprises and their CFOs can take to deal with an economic recession. In the future, even if a recession does not occur, many of these measures will help businesses become more flexible and prepare for any potential issues.

 

7 Steps for Enterprises to Cope with Economic Recession

 

01

Assess Cash Flow and Implement Rolling Forecasts

In the face of a potential economic downturn, businesses first need to analyze their cash flow, assess their working capital, and then carry out rolling forecasts to dynamically respond to market changes and economic fluctuations.

 

02

Conduct Tiered Forecasting and Precisely Cut Costs

Develop appropriate spending plans based on the possible economic situation and your company's cash flow, and control costs. A simple method is to conduct tiered forecasting and prepare cost-cutting measures for scenarios of 10%, 20%, and 30% revenue reduction.

 

03

Conduct Customer Segmentation Analysis

When the economy is declining, businesses should pay special attention to changes in customer demand and supply availability. ERP systems can provide rich data to help businesses measure the financial status of their customers. Businesses can assess metrics for each customer, including the latest accounts receivable, Return on Sales (ROS) / Operating Profit Margin, and sales growth rate, to understand changes in purchasing patterns and explore potential increases or decreases in product/service demand. At the same time, businesses can also analyze, based on ERP data, which customers they can proactively target.

 

04

Re-evaluate the Supply Chain

When a recession hits, customers may stop buying, and suppliers may cancel orders and delay deliveries. Therefore, during an economic downturn, it is more important than ever for businesses to understand the risks in their supply chain, which can be approached by mapping the supply chain, weighting and ranking suppliers, identifying improvement areas, increasing supplier diversity, and making full use of supplier management software.

 

05

Re-evaluate Inventory Management Strategies

Excess inventory during a recession can lead to higher losses than at other times. Different product lines face varying degrees of demand contraction. In the demand planning process, please focus on identifying products with low popularity and low profitability, and then reduce production and inventory accordingly. In addition, be prepared to lower inventory as much as possible while being able to respond to customer demand fluctuations or deal with supplier delays/interruptions, and pay attention to financial management.

 

06

Use Automation Technology to Ensure Employees Focus on High-Value Work

Salaries remain the largest item on the enterprise balance sheet. A more economical approach is to enhance the skills of existing employees. A recession is a good time for businesses to invest in technology to automate manual work, improve employee skills, and put employees into more strategic work. Automation technology can "fill" some vacant positions and help existing employees learn new skills in areas such as warehouses, finance departments, or customer self-service.

 

07

Make Full Use of Innovative Technology for Planning

When growth slows down, business leaders need a comprehensive view to ensure that the organization runs as efficiently as possible. Excellent scenario planners will use technologies such as ERP and financial software to explore the future path of the enterprise through a three-step process.

1. Order Too Much Inventory. In times of crisis, financial leaders quickly clarify key data and develop crisis response guidelines. Enterprises can model scenarios based on assumptions of facts that can affect the survival of the organization and develop action plans.

Oracle NetSuite can provide the following support:

• Optimize cash flow. Oracle NetSuite financial management software supports real-time access to bank and credit card data, which can speed up the reconciliation process, greatly improve the efficiency of the accounting team, and provide accurate and up-to-date cash position information.

• Planning and Budgeting. By using Oracle NetSuite planning and forecasting software to automate the labor-intensive planning and budgeting process, the finance team can easily and quickly generate forecasts, perform What-if scenario modeling, and create up-to-date reports.

• Automate Cost Processes. By using Oracle NetSuite procurement management software for procurement management, enterprises can ensure that purchase orders are sent to certified suppliers at the right time, purchasing products and services at the right price based on pre-signed contracts.

2. Develop Multiple Simple Scenarios. Finance teams are often troubled by a series of complex potential outcomes. Please focus on two to three main uncertainties, such as the demand for the number of employees or the risk of accounts receivable, and develop scenarios based on this.

Oracle NetSuite can provide the following support: 

• Closely monitor customer conditions. By identifying risky customers in advance, businesses can proactively coordinate payment plans with customers and adjust customers' credit ratings accordingly. For this, Oracle NetSuite CRM can provide an in-depth view of each customer.

3. Develop an Agile Response Strategy. Enterprises should include sufficient detailed information in each scenario to ensure the correct assessment of the success probability and risk of failure of each strategic option. On this basis, financial leaders can create a framework to help the executive team make decisions, and then track the results in real-time to ensure that the enterprise continues to respond agilely.

Oracle NetSuite can provide the following support:

• Monitor KPIs. Scenario planning can ensure that enterprises track meaningful and effective metrics in the present. Subsequently, businesses can use SuiteAnalytics to understand the operational and financial performance of all business functions throughout the organization in real-time.

• Optimize inventory and order management. Oracle NetSuite inventory management software can provide a single, real-time view of all inventory locations and sales channels, helping businesses respond agilely to changing sales patterns. At the same time, Oracle NetSuite's intelligent order management and fulfillment functions can reduce the cost of goods sold.

 

Be Prepared and Plan for the Long Term

All enterprises should always remember to "be prepared." A slowdown in growth will prompt businesses to re-evaluate their business processes. However, the best time to make plans and implement improvements is before a recession occurs. Please take action now to ensure that your enterprise is prepared for the coming storm.