In the face of rising inflation and turbulent economic times, business leaders need to find ways to not only survive, but to thrive. Although this may sound like an oxymoron during an economic downturn, there are ways your organization can be protected against an unavoidable recession. If you’re a decision-maker in your company, you’re probably facing the pressures that come with cutting costs while still somehow trying to realize a profit. If you don’t have the right tools in your belt, you could be making bad business decisions that can ultimately cost your business even more money. However, if you lean on technology to help guide you, you’ll make smart cost reductions, operate more efficiently, and keep your company running at optimal levels.
This is where ERP software enters the picture. When you choose the right ERP software solution for your company, you won’t be forced to blindly make cost-cutting decisions that might not actually make sense in the end. Instead, you’ll achieve both short- and long-term success by improving efficiency and employee productivity across the board You’ll be able to manage those critical areas of your organization that take you from survive to thrive.
How, you ask? Great question! Let’s dig a little deeper.
Holding too much inventory costs money, while not having enough stock on hand costs even more. Finding the balance of not-too-much-not-too-little is a tough act, but it’s far harder than it has to be if you’re not using an ERP software for your inventory management needs. ERP systems let you see the costs of overstocking versus the costs of producing or purchasing in line with actual demand. This big-picture view helps you eliminate waste in inventory, transportation, storage, and production because you’re able to see the entire supply chain from beginning to end.
Cash Flow Management
When you have less cash coming in during a recession, it’s more important than ever before to know how much is really in the bank, how much is available on short notice, and which revenue sources are coming in when. You also need to know which resources are going out and when those resources will be used.
An ERP system makes managing your cash flow easy. You can craft a cash flow plan that lets you get control of your existing cash balances and monthly sources and uses of money. You can then fashion a rolling cash flow forecast for future quarters, so your management team has a guide. This will give you an early warning system that alerts leadership when variances arise.
Before a recession hits, you should:
- Eliminate your debt, if possible.
- Minimize costs and expenses.
- Avoid new financial liabilities.
- Grow a cash reserve.
An ERP system will offer the visibility you need to identify and eliminate debts. It can also help you re-assess and reset your budget using accurate, up-to-date data.
ERP systems immediately improve external communications because they automate transactions and eliminate costly duplication errors. You can import sales orders, for instance, which easily streamlines the process through authenticated electronic data interchanges (EDIs) with your customers. For other transactions with suppliers, your ERP system can use business objectives to configure rules so these transactions flow seamlessly between your organization and the outside world, leading to fewer mistakes and better delivery.
Improved communications are not only applicable to your external customers; your internal customers (employees) also need to know what’s going on. With a centralized ERP system, you can keep staff members informed through open communication, collaboration, and visibility that keeps them in the loop and reassures them that you have a plan for riding out the economic downturn. When you give employees insight into what’s going on, they’re more likely to stay with you and face these challenges together.
Understanding and Outlining the Most Valuable Areas of Your Business
Here’s the thing—not all areas of your organization are equally valuable. Sure, each department contributes in its own way, but some areas should be classified as absolutely indispensable, while others might need to be re-examined.
ERP provides you with the visibility you need to easily identify your company’s most (and least) profitable sectors so you can classify them for development or pruning, depending on the outcome of the data. When pruning is necessary, you’ll be able to streamline the supply chain, reduce or eliminate outside professional services, close facilities, or move to less expensive buildings if you need to cut costs.
Diversified Revenue Sources
When a recession arrives, everyone is affected, including businesses and customers alike. Since nobody is immune to economic decline, it’s likely that a portion of your customers won’t be able to pay on time (or at all). You don’t want to find this out when it’s too late; the ideal time to prepare for this concern is before it actually happens. The ideal way to alleviate this concern is to diversify your sources of revenue.
If you rely on a niche audiences or a single customer, it’s time to expand your reach. This might mean you seek customers in other markets or increase your marketing endeavors.
To ensure you’re not wasting time and resources on ineffective approaches, your ERP solution can help you find patterns and trends in your audience information, thereby preventing you from overextending your organization.
Ready to Get Started?
MIBAR can help you put an ERP system into place that works for your company. If you’re worried about the current state of the economy, don’t wait until it’s too late. Legacy ERP may be costing you more. Start making plans now to ensure you’re set up for success in the future. Reach out to us today!