Businesses are at a critical point. Global financial markets are under stress; they are not following fundamental economic principles, and companies cannot get loans and financing easily, if at all. On top of that, demand for products and services is falling, and risk avoidance is paramount.
As a result, businesses are refocusing on short-term, financial imperatives -- cost savings, cashflow preservation, meeting financial covenants, maintaining access to financing, and better risk and credit management.
All of that might make you feel like a mouse in a house full of traps and cats. But if you can identify the key issues -- with the help of a good enterprise resource planning (ERP) or e-commerce system -- you can still assemble a solid financial management solution for hard times.
Take expenses, for instance, which your existing ERP or e-commerce software can help to identify in detail. "If a business can reduce debt by 20 percent, they have effectively increased their income by 20 percent," says Norm Bour, a California-based financial manager. He recommends: "Negotiate everything." Examining debt items can help "to review every expense and determine if it can be reduced, eliminated, or replaced."
The worst thing is to do nothing. "No question, businesses are facing more risk that is outside their control than ever before," Bour says. “Even well run businesses with long track records and astute management are prone to circumstances much bigger than themselves. With that said, I think the biggest risk that most businesses take is to do the same thing they've always done because it's the easiest way to not be proactive."
Greg Maddux, managing director for RSM McGladrey, an accounting and consulting firm, agrees with the need to assess expenses -- and he takes this idea one step further. "Take a look at the cashflow trade balance between your organization as compared to your customers and suppliers. Then, use your negotiated contracts as strategic levers to help you create a competitive advantage... Periodically review and renegotiate contract terms and discounts."
Maddux recommends looking at the entire value stream and doing an "end-to-end analysis of key activities that impact the timing of cashflow. Challenge how and when processes are initiated, which eliminates delays and reduces elapsed time for handoff between departments and companies. This will help you identify where automation can be used to accelerate cashflow conversion results."
Speaking of automation, have you made the most of the systems you already have in place? Maddux observes that "many organizations have made significant investments in systems which are not fully deployed. Many ERP and e-commerce systems have capabilities to help shorten process times when adequately leveraged." He thinks firms should investigate existing processes to ensure they're really getting the most out of them.
Squeezing every bit of value from your existing infrastructure and debt is a suggestion that Jason Jepson of Grander Financial, a financial services company, agrees with completely. Jepson says, "Before companies invest, before they look for funding, before they look at credit management, they need to look at cost containment... Like buying a car, every company believes they got the best deal. The reality is no one gets the best deal until an outside firm comes in to audit."
Ultimately, you may not be able to control when your customers will finally start coming back, but these experts agree that you can get more from what you already have and gain more control of your debt. There may be no miracle way to increase your accounts payable, but the Internet can help you take some action on the bottom line -- even in these bad times.
— Steven J. Vaughan-Nichols, a.k.a. sjvn, has been writing about business and technology since you couldn't get fired for buying IBM; CP/M-80 was the cutting-edge PC operating system; 300 bit/s was a fast Internet connection; and WordStar was the state-of-the-art word processor.
Your points are good ones, Mike. I think when management goes for the short-term fix they miss the boat.
These problems call for, as Steven points out in the article, more strategic management with a sharper focus throughout the organization in knowing how dollars are being spent and identifying where costs can be cut effectively.
Smart management uses these times to totally "manage" better; which actually puts them in the forefront coming out of the hard times.
Financial market stumbled as recession hit the world and since everything seems to be uncertain proper managing of personal expenses is a must. In fact some people are opting for completely eliminating credit card debt as a response to the economy. If consumers think this is a route they want to take, they first must evaluate their habits and see where their money is going. It's simple to track money and where it goes with a little research. Problem areas will show themselves and consumers should immediately find ways to eliminate them
While I'm a technologist, and not an economist, I do see that the short term focus of our capital markets in the last 20 years sure seems to have driven us to the brink here. I do think that looking at our expenses in tough times is appropriate, I think it requires a longer term focus as well. Sure, you can't take too long a term look after hitting an iceberg--but too short a look ends up with too many bodies floating in the water, so to speak.
I watched several companies in the last few years try to squeeze those last few pennies out of the cost of doing a transaction with their customers, only to drive their customers away with call menus and websites for customer service. My long term provider of security software lost me as a customer when I couldn't install the new version of the software purchased as an upgrade, because I had previoulsy installed the prior version! That took multiple trips to a website, multiple reinstalls of the OS, and multiple attempted installs of the product to figure out--with no human intervention at the vendor side unless I was willing to buy service to help me install it (not mentioned on the box, of course).
Reduce costs, find new sources of revenue or markets to tap--but keep a longer term view than the end of this next quarter. Some of my old colleagues will remember that the thinking behind "This is the most important quarter in the company's history" when applied to every quarter, may indeed bring about "this is the last quarter in the company's history" sooner rather than later.
I tend to agree with you that this recession is not over. For many industries, it could last a decade or longer. Bernanke, Geithner and Obama tend to think it is over. But ask the real estate industry, manufacturing, automobile, housing, construction and finacial services if they even see light at the end of the tunnel....I bet I know what they'd say..."What tunnel, its just pitch black"
You may have done all this a while back, alas a lot of people still haven't, which is why I wrote it now. As for the recession nearing its end... well, I hope you're right, but most of the business people I know would disagree.
Is it as bad as it could have been? Nope. Is the stock-market improving? Yep. Is that translating into better times for most companies' bottom line? I'm afraid not.
Stephen, You have made some excellent observations concerning belt tightening opportunities. Many of the streamlining and budget saving software deployment initiatives seem almost academic. Now that both of us have pointed out the obvious, why wait till the end of the recession to point out these procurements?
At current times, necessities become luxuries and every extra but of idle capacity shows itself in red in the bottom line. But this is also the time when new frontiers of efficiencies are explored. Internet for sure was not invented in a recession, but I believe that current times would push organizations to view internet as a cost saving tool: video conferencing, B2B exchanges, profiling through SNS for direct selling, crowd sourcing; the possibilities are endless. What is fascinating is that these opportunities are equally available to SMEs/SMBs as well.
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Recently, the Obama administration has been of two minds where privacy rights are concerned. On one hand, you have an administration that vowed to veto CISPA and mandated open data for government websites. On the other hand, you have an increasingly out-of-control Department of Justice on a fishing expedition at AP and demanding legislation to let the FBI wiretap private, encrypted communications and levy fines if a company fails to comply.
The apartment and house sharing service, Airbnb, now requires members to verify their identities by demonstrating a presence on the web, and by either scanning a government ID or entering detailed personal details. Other enterprises should take a close look at Airbnb's verification policies.
Facebook advertising is a lightning rod. It seems neither brands nor consumers are 100 percent happy about the social media site's policies, placement, or procedures. But the real controversy about Facebook ads and promotions is over whether they work.
By now, you've most likely heard about the 3D-printed gun that Texas-based Defense Distributed demonstrated last week. But we haven't heard the last about the censorship war that began soon afterward.
New York's Metropolitan Transit Authority is conducting a pilot test of digital kiosks to guide subway users to where they want to go more efficiently and at lower cost.
The whole Amazon.reader debate is a double-stupid. It's stupid to think that there's any e-book buyer who doesn't know Amazon's URL, and it was stupider to let ICANN launch the whole free-form TLD initiative to start with.
While NFC's original goal was to enhance mobile commerce applications, it is finding its way into a number of other uses, which is creating both opportunity as well as challenges for IT departments.
Enterprises would like to move to cloud computing but are hesitant because they are concerned about providers’ ability to secure company data. Here are some tips that help to ensure that if breaches occur, the business is not left holding the bag.
Edmunds separates customers into segments based on the info it collects on its site and from partners, and uses that to push out custom content, said Brian Baron, director of business analytics for Edmunds.com, at Predictive Analytics Innovation Summit.
The automotive website uses propensity modeling to target ads and customer registration forms, said Brian Baron, director of business analytics for Edmunds.com, at Predictive Analytics Innovation Summit.
Subsidized handsets, rather than locked handsets, should be the focus of regulators. We're not getting good deals, not fostering innovation, and weakening our power as buyers.
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