We live in difficult times. Inflation has hit a 40-year high, the stock market is fluctuating wildly and consumer confidence is low. Experts expect several quarters of negative growth and higher unemployment rates. For many businesses, survival is not a certainty.
In a softening economy, businesses need to be especially vigilant in managing their finances, reducing costs and conserving cash wherever possible. However, that doesn't mean you should try to cut costs indiscriminately. The savviest organizations lean on the data to determine when to trim and when to ramp up spending to capitalize on new opportunities.
One in-demand opportunity that businesses are jumping on is Finance-as-a-Service. FaaS can replace traditional approaches to your accounting strategy, giving you access to the right expertise, at the right level, at the right time, with a model that can shift with unprecedented speed and scale.
Here are five ways in which FaaS can help your business weather an economic downturn.
We learned from previous slowdowns that a surprisingly high number of companies continue to build their budgets and cash flow projections on the assumption that they will return rapidly to previous performance. They may or they may not. But one thing is certain – it’s important to critically challenge your assumptions on performance to ensure you are prepared for the months ahead.
FaaS can give you that critical edge. Using the as-a-service model, you’re given access to a consulting CFO whenever you need one to serve as a confidential sounding board and a neutral voice in the room. Your CFO can take a critical look at your business and ask uncomfortable questions like:
They can even be the fall guy for unpopular but necessary decisions, allowing your executive team to sustain existing internal relationships while still making the tough calls.
In an economic downturn, businesses need to be extra vigilant about managing their cash flow. This means having a clear understanding of what's coming in and going out, daily if possible. It also means having a strong handle on your relationships so you're not extending terms to customers beyond what is prudent, are prioritizing which vendors should be paid more slowly (or quickly), and are well placed to survive a dramatic uptick in nonpayment.
FaaS brings both tech and team to the table. The tech pulls all your information together and gives a real-time view of your cash flow, so you can access your financial position at any given moment. The team is a cross-functional task force of accountants, financial planning and analysis experts, AP/AR specialists and other specialists. They act as your war room to examine cash flow-related mechanisms and help you make informed decisions about where to allocate resources. These insights can give you a competitive advantage over others that are making off-the-cuff or reactive decisions throughout the downturn.
What's more, your FaaS team is built to be nimble. They can rapidly bring in the right specialist and adjust their focus as new information arises or priorities change on a dime — something that a conventional outsourced accounting service cannot do.
In uncertain times, businesses need to be able to adapt their forecasting models on the fly. This means having a flexible system in place that can anticipate the short and long-term effects on your organization and accommodate different scenarios and "what if" planning.
This is an area where FaaS shines. Unlike regular outsourced accounting services, which are fundamentally about recording the past, FaaS is focused on planning for the future. Seasoned FP&A specialists can utilize current financial data and industry knowledge to simulate and plan for a variety of possibilities that your company may encounter in the future months and years. These plans might assist in decision-making about cutbacks, right-sizing the workforce, and when to make planned business investments. Business leaders can use these projections to better position the businesses ahead of economic shocks.
Many companies choose to outsource their entire finance function to a FaaS provider like Ventura. This can be especially helpful if you don't have the internal resources or expertise to build an agile forecast model and steer the ship to maintain it long-term.
A FaaS provider can help you identify inefficiencies and process improvements in your organization. They will work with you to design and implement solutions that can help improve your bottom line. In some cases, these solutions may be as simple as automating manual processes or implementing new accounting software. In other cases, they may require more complex changes such as redesigning your organizational structure or changing the way you do business.
Operational improvement is not one job but many, and it's not often possible to find a role in one person. FaaS can give you two or three people to fill the need, augmenting the skills you already have in your finance team.
For every company that's entering survival mode, there's another that's using the downturn as an opportunity to seize market share. To do this, you need to have a clear understanding of your financial position and be able to make informed decisions about where to allocate resources.
With the full range of financial specialists on hand to assist you, FaaS is designed to support a range of strategic initiatives whatever your situation. Instead of just keeping the books, we can help you orchestrate funding, recover receivables, extract value from suppliers, streamline investments, reevaluate your portfolio, develop counter-cyclical approaches to R&D, and evaluate acquisition targets so you're ready to pounce when the time is right – these are just some of the things we do.
You won't overpay for services either, as we put the right people in the right roles. You only pay for the level of assistance you need, when you need it. You're not paying an inflated fee for a CFO you're not using, for example. The ability to save costs is another way that FaaS can help you weather the storm.
If you're feeling the effects of the current economic climate, or are concerned about what the future may hold, now is the time to consider how the FaaS model can help you thrive. By refocusing on a playbook of best practices, you can minimize expenses, optimize profits, and continue to perform well in every economic climate.