4 Ways Technology Can Help Your Business Prepare for the Risk of Recession

Economic indicators are showing signs that the risk of recession is high. While chances are good that it won’t be prolonged, businesses still need to prepare for a deeper economic downturn. Technology can often put a business in a much better position to respond to the changing dynamics in today’s marketplace.

Experts may be divided on whether we’re heading toward a global recession, but the chances appear to be increasing by the day.

Recession risk indicators are almost everywhere. Europe, for one, is particularly vulnerable. Energy shortages and economic sanctions associated with the Russia-Ukraine war threaten to drive the continent’s inflation higher and increase the risk of a recession throughout the Eurozone. China’s zero-COVID policy and related lockdowns continue to disrupt its economy and have left the country struggling to sustain positive growth — so much so that the International Monetary Fund lowered its growth forecast to 4.4%.

The U.S. is on a similar downward trajectory. Consumer prices are increasing at a rate not seen in 40 years. Although the labor market is strong, recession risk indicators such as elevated inflation, supply chain disruptions, and interest rate hikes have done no favors in quelling the concerns of an economic downturn.

Adding to the uncertainty are the two consecutive quarters of negative GDP growth. For many analysts, this is the definition of a recession. However, the National Bureau of Economic Research (NBER) has stated that the slowdown must be “significant” and “sustained” to truly qualify.

Striking the Right Balance Fiscally

If the 2008 recession taught businesses anything, it’s that no one is ever too big to fall. Just take a look at the automotive industry. Manufacturers that were around for decades, if not over a century, were on the brink of bankruptcy. Ford, Chrysler, and GM were all at risk of defaulting.

Countless financial institutions also found themselves in trouble, most notably Lehman Brothers. Founded in 1847, the financial services firm filed for Chapter 11 bankruptcy following the subprime mortgage crisis (though Lehman Brothers could also be considered one of the reasons for the Great Recession).

In short, even the largest corporations struggle to predict the next big disruption. Predictability has become somewhat of an illusion, with the marketplace moving into what seems like unprecedented territory time and again. Whether they’re at the risk of recession or a global pandemic, businesses must be prepared and arrive at practical ways to improve efficiency, increase agility, and manage cost controls. Today, one of the more practical ways would be technology.

Technology opens the door for not only strengthening operations to weather future economic recessions, but also scaling efficiently for the future. Making a business smarter is, well, the smart thing to do.

It all starts with building the right tech stack, which directly leans on the idea of improving efficiency, increasing agility, and managing cost controls. Even during non-recession times, investing in a solution that doesn’t cover those bases doesn’t make much sense.

Accounts payable automation alone can provide myriad benefits, chief among them being less dependency on headcount. With automation, you simply don’t need as many people. You can transform the finance function into a lean machine that’s focused on value-added activities. You also substantially reduce the chances of human error, improving the quality of your data while saving time and money. You know exactly where your business stands financially, allowing you to make better decisions when faced with uncertainty.

Becoming More Resilient Through Technology

Preparing for an economic downturn relies heavily on your business’s finance function, which is why fintech is so critical. There’s only so much downsizing and outsourcing you can do before operations become unmanageable. As you explore your technology options and finalize the investment, proper integration will be essential to prepare for recession risk. The following are just a few of the ways automation can help:

1. Minimize manual processes.
   This should go without saying, but automation relieves employees of many manual processes.

   In fact, up to 84% of a finance team’s time is spent on manual, repetitive tasks. With technology shouldering the brunt of the load, your team can focus on cost-cutting opportunities and negotiate new payment terms with vendors and suppliers. Better rates and payment terms can do a lot for cash flow. Besides, automation manages much of the invoicing duties, which can be of great benefit during times of economic uncertainty.

2. Reduce risk and errors.
   Automated processes are simply more accurate and efficient.

   One human error can lead to a late payment, which then leads to late fees, strained vendor relations, and more time needed to complete a single payment or transfer. With fewer errors, however, the right people receive the right payments at the right time.

3. Curtail unnecessary costs.
   AP automation allows vendors and suppliers to opt in for early payment discount programs.

   While it’s tempting to slow down payments (a tactic practiced by many companies at the first hint of a future economic recession), it’s just not a good use of funds. The right automation solution ensures payments not only arrive on time, but also arrive early if needed, allowing your vendors to take advantage of payment schemes and early payment discounts such as NetNow early payment opportunities.

4. Gain greater visibility.
   A good solution will give you a clear view of your financial standing, allowing you to make real-time decisions based on real-time data. You know where operations could mitigate costs or use available resources more strategically and effectively. No longer are you wasting money or time on things that don’t drive your business forward or promote growth. Again, you’re able to operate lean.

Being prepared for an economic downturn has been on everyone’s mind recently. While the risk of a recession might be a normal part of doing business, it doesn’t make the idea any less unsettling. Technology puts a business in a much better position to respond to the changing dynamics of an economic downturn — or any business disruption, for that matter.

Written by Chen Amit.
Have you read?
How the Need for Stronger Network Security Will Impact the Future of Tech Startups by Lu Zhang.
Strategic Communication and Human Resources by Fotis Pantopoulos.
Does Your Family Business Have a “Family Employment Policy?” It Should by David C. Bentall.
America’s Hidden (and Much Better) Economy by Corey Rosen, Ph.D.
5 Reasons Why Entrepreneurs Like Elon Musk Are Choosing Purpose Driven Education by Parul Agrawal.