When Economic Uncertainty Pops Up, Which Might Be Soon, Finance Needs Better Vision

As of this past July, the U.S. is officially in the longest economic expansion in our almost 250 year history. The current boom officially began in June 2009, which puts us past the 10th birthday of this ongoing economic growth spurt. But even casual news readers have likely noticed more and more financial pundits starting to say the same thing: the end is nigh.

If you’re under the age of 30 or so, chances are the next downturn will be your first. If you’re a bit more seasoned, you know the drill. Either way, finance will be in the hot seat as budgets are tightened, revenues and profits get squeezed, projects are evaluated with more precision, cash conservation and deployment becomes even more critical, production and operations are placed under a microscope, and nearly every other area of the business is impacted in some way.

But as with most economic change, no one knows for sure when this one will begin, how long it will last, nor what exactly it will look like. It could be anything from a minor bump in the road to a full-on recession. The only thing certain is uncertainty, and that makes life pretty tough for finance. But fear not! Because these are the times when brilliant finance minds shine.

How can Finance be Better Prepared for the Coming Economic Uncertainty?

First, you need more accurate, granular, and timely insights into your business. This gives finance the ability to quickly recognize changes and trends, understand their impact and size, and make better and faster decisions about what to do. Obviously the necessary data has to be found, collected, and consolidated before comprehensive insights can be developed. But then that data has to be easily analyzed, rolled up, and reported on without costing finance a fortune in money or hours.

Next, finance needs the ability to quickly disseminate those insights out to the business and the board. The business needs the granular insights to know when, where, and what to cut or pull back, and by how much. The board needs to see the bigger picture and know not only how to guide the organization through the uncertainty, but also how to set expectations with investors, shareholders, lenders, customers, and influencers.

Finally, finance has to continuously track and monitor overall business health while also analyzing the impact of any decisions. Standard reporting, periodic audits, and monthly closes won’t stop, so automation can help reduce the burden of those necessary activities while leaving more time for finance to focus on strategic items. Any actions taken as a response to a shifting economy should also be closely monitored to constantly evaluate effectiveness, determine if more or less changes are required, or if attention should be focused on different areas.

What Finance Needs to be Prepared for the Downturn

Finance needs all of this now so they’re prepared when a downturn eventually happens. An effective response to a changing economy isn’t a constant guessing game. Finance needs fast access to data and insights as the market shift starts to appear, and then changes course and pace, hits different sectors, or otherwise lives up to its intrinsic uncertainty.

“…introspective downside scenario planning, helped about 10% of companies, including Costco, increase earnings before interest and taxes at a compound annual growth rate of 17% on average during the 2007-09 recession, compared with zero growth for those that weren’t as proactive, Bain said.” – Wall Street Journal

The Host Analytics FP&A Platform gives finance everything it needs to gain more insights on any economic eventuality. Our solutions accelerate and automate financial planning and reporting activities, while also giving finance real-time insights into how the business is performing. Host lets you see more warning signs and see them earlier, but also gives you the vision to know which levers to pull as you steer your business through any economic storm.

But, hey, look on the bright side: every downturn has an end, and each one is full of hidden opportunities for those smart enough to know where to look. Just as the Host platform helps finance minimize the impact of a slowing economy, we also give finance the ability to quickly recognize and capitalize on growth when the economy eventually turns around.

If you want to get ahead of the economy and your competitors, or simply want to cut days off of your monthly close cycles and have better insights into your business, give us a call. We can’t stop the economy from making unpredictable moves, but we can help you steer your business in a better direction.

For other best practices in modernizing your financial processes download our eBook, The Complete Guide to Modernizing Your Financial Processes.

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