Strategies for SMEs to overcome economic obstacles
As we make headway into 2023, the threat of a drawn-out-recession dominates the UK business landscape. Further impacted by supply chain disruptions, geo-political issues, and cost-of-living crises, organisations of all sizes will be under increased pressure to gain a competitive edge.
Though the economic uncertainty will prove tough for businesses, especially SMEs, this is also the best time for leaders to re-evaluate finances and make necessary actions to recession-proof their companies. The best approach for this is to remain flexible, open to learning new skills and make the most of the technology at your disposal.
Always expect and prepare for change
For growing businesses, staying agile to changes in the economic environment needs to be a top priority to sustain growth during a recession, increasing the need to respond swiftly to market changes to mitigate any negative ramifications.
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.
The power of cloud technology lies at your fingertips; now is the time to grasp it
Many crucial aspects of running a business are dependent on a level of data visibility only available on the cloud. Processes like financial reporting, management, and other manual processes can be automated – and cloud users are more able to automate key processes and avoid manual work (e.g. 85% vs. 37% of non-user), helping overcome data siloes. 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.
Take steps to strengthen your supply chains
Product shortages, delivery strikes and port delays are just some of the ongoing issues that have affected supply chains across industries, and show no signs of slowing down. As such, businesses need to focus on developing agile and robust supply chains that can endure the effects of disruption and shortage.
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.
Pick up new skills to meet the current needs of your business
Technology is just one part of the puzzle. To remain agile and be able to react quickly to new challenges, one of the most important factors is the willingness of leaders to pick up new skills as they expand. 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.
This period of economic uncertainty will undoubtedly put British businesses to the test; yet it is times like these that bring out the ingenuity and innovation of leaders. Refocusing priorities, maximising cloud technology, building supply chain resiliency, and remaining adaptable to the demands of the economic climate will be the key to survival and success.
