Navigating Potential Economic Recessions
By: Rich Uphus | June 20, 2023
ARTICLE- As financial planning leaders and administrators (FPL&A), your ability to mitigate the effects of economic downturns is crucial to the longevity of your organization. Predictive models suggest a likely economic recession in 2023, which poses significant challenges and impacts on budgeting and financial planning. This article discusses these challenges, their budgetary consequences, and how automated budgetary control software, such as PyanGo Budgetary Control for NetSuite, can address these difficulties.
Economic Recession 2023: The Challenges and Budgetary Impacts
The most immediate challenge in a recession is revenue reduction. With lower consumer spending, revenues can shrink significantly, creating a domino effect on the organization’s finances. According to the U.S. Bureau of Economic Analysis, consumer spending, constituting approximately 70% of U.S. GDP, dropped by 12.2% during the Great Recession of 2008. Such a drastic reduction can cause a similarly severe impact in 2023, disrupting organizational cash flow and potentially causing liquidity issues.
The second challenge lies in cost management. Recessionary periods often lead to increased costs, from interest payments on loans to redundancy payments. Companies must balance the need to cut costs without sacrificing product or service quality, customer satisfaction, or staff morale.
Finally, the complexity of financial planning and analysis (FP&A) increases dramatically during a recession. The uncertainty associated with downturns requires FP&A professionals to build and work with multiple financial scenarios, pushing their bandwidth to the limit.
Automated Budgetary Control Software: The Solution
Amid these challenges, advanced technology provides a beacon of hope. Automated budgetary control software, such as PyanGo Budgetary Control for NetSuite, presents an effective solution to the inherent challenges of an economic downturn.
Efficient Cash Flow Management
PyanGo’s system offers real-time financial tracking and robust cash flow management. Monitoring financial data in real-time allows for faster and more accurate decisions, essential during a recession when financial situations change rapidly. A recent Association for Financial Professionals survey found that companies that use automated cash management systems were 60% more efficient at maintaining liquidity during economic downturns than those that didn’t.
Spend Management and Cost Reduction
PyanGo’s system automates tedious administrative tasks, freeing resources and reducing operational costs. An Accenture report indicates that automation can reduce business process costs by 60%. Additionally, the software’s ability to accurately track expenditures enables FPL&A to identify potential areas for cost reduction and eliminates the risk of overspending.
Effective Scenario Planning
The software supports sophisticated scenario planning, enabling FPL&A to construct and analyze various financial scenarios quickly and efficiently. McKinsey reports that companies using advanced scenario-planning tools were 20% more likely to respond effectively to the 2008 recession than those that didn’t.
Enhanced Accuracy and Compliance
Lastly, automated budgetary control software ensures accurate financial reporting and compliance, which is vital during scrutiny from stakeholders and regulatory bodies. A study by Gartner suggests that automation can reduce errors in budgeting and financial reporting by up to 37%.
The impending 2023 economic recession presents considerable challenges for FPL&A. However, with the right tools, such as PyanGo Budgetary Control for NetSuite, these challenges can be met and even become opportunities. By enhancing cash flow management, reducing costs, enabling effective scenario planning, and improving accuracy and compliance, automated budgetary control software offers a comprehensive solution to navigate through economic downturns.
In this age of digital transformation, integrating such technology into your financial strategy is not just a smart move but an essential one. With automation, the daunting prospect of the 2023 recession becomes less of a threat and more of an opportunity for growth, resilience, and future success.
PyanGo’s Automated Budgetary Control for NetSuite
PyanGo Automated Budgetary Control for NetSuite is a native Built for NetSuite application that controls spending at the transactional level against budgets in real-time. It allows enterprises to regulate and track expenditures against predefined authorized budgets and encumber expenses throughout the procurement lifecycle. This application tracks hard and soft commitments via purchase requests or purchase orders. It also extends NetSuite standard and advanced procurement, expense reports, and journal processing modules.
Click here to schedule an online product demonstration.