From XU Magazine, 
Issue 23

New ways to survive and prosper in this extraordinary pandemic recessionary marketplace

In a recessionary market, it is much easier to reduce costs than it is to generate more sales

Neil Robertson, as a veteran of multiple recessions, identifies key tasks that finance leaders should address now to immediately evolve their focus by adopting automation to sustain control of cash...
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In these uncertain times there are two commercial certainties.

Lockdown and social distancing have already precipitated a growing global recession and those organisations that take immediate action to evolve their business to reflect this “brave new world” will be the most likely to survive and prosper as the market recovers.

Today, cash flow is king.

Every CFO is now fully focused on planning and executing all the necessary steps to conserving corporate cash in order for their business to survive. Whilst most businesses expect a downturn in new revenues and increased bad debts as some of their customers fail or falter, the pandemic has made it extremely difficult to predict just how significant this downturn will be, and every geography and sector will be different.

Unlike previous recessions that are usually driven by a decline in market confidence over time, the global lockdown happened almost overnight. The difficult question now is how many businesses will rise from the ashes as social distancing is eased, and how many of those will survive in the long-term?

We are already witnessing the massive growth in global unemployment as businesses shed costs through staff redundancies. Whilst this is extremely painful; the brutal reality is that finding these cost and cash savings is fundamental to survival.

Taking financial management to the next level

The new financial priorities are to control all corporate spend to necessities only, to make sure that we maximise the effectiveness of every $ spent and to increase staff productivity to achieve more with less resources.

In a strong market, businesses focus on revenue growth in preference to very tight cost management, as it is more profitable to invest to make more money than invest the time to make savings.

In a recessionary market, the opposite is usually true. It is much easier to reduce and control costs than it is to generate more sales.

As a direct result of the good times past, most businesses have generated an amount of resource and spend “fat”, whether by adding resources to address growth in volumes in preference to automation or, due to an understandable lack of focus due to other priorities, paying more than we need to for what we already buy.

For CFO’s to gain full visibility and control over all corporate spend, reduce the costs of what they must buy and increase the productivity of everyone involved in the purchasing process (both inside and outside the finance department), they should seriously consider automating the entire process.

Purchasing and AP automation enables remote working for everyone involved in the process. This is important, as people that are particularly vulnerable to Covid-19 must be given the option to continue social distancing reflecting literally a life or death decision for them.

For smaller businesses, two simple changes can achieve a financial transformation.

The first is AP automation, usually delivered and taken live in a single day.

By digitally capturing supplier invoices and automating the approval process, every organisation will achieve a 60% - 90% productivity gain - all while delivering total visibility and control over the entire process both inside and outside the finance department to everyone that needs to know.

The second is to re-think how the business buys the high volume of low value “stuff” that clogs up every AP department.

A very large proportion of this “stuff” can be bought online through marketplaces such as Amazon Business. So why not enable the business to buy everything it can from Amazon and encourage everyone to do so -  PROVIDED THAT finance has total visibility and control over the entire process?

For the people that do the buying, purchasing online makes the process simple, fast and convenient, saving time to focus on what is important to them.

From a cost saving perspective, buying online will almost always be cheaper than what you currently pay, either making budgets stretch further to achieve more or improving both corporate cash flow and profitability.

From an AP perspective, fully integrated buying online will immediately reduce the number of suppliers being used and all of the issues and time that it consumes to capture, code, approve, post and pay them. Up to 70% of all purchases by volume can be through a single supplier that requires a single payment each month.

For larger businesses that spend more, full purchasing automation now enables the delivery of “digital procurement” specifically to cut the costs on what you already buy, delivered as a service. This is achieved by capturing all of the invoice data from every supplier, every invoice and, critically, every line item  and then processing this data into spend categories to identify the savings potential.

Then provide the procurement expertise as a service to quantify and deliver those savings which can run into $100k’s year on year for larger businesses.

For those of us that offer accounting software and related services to businesses, purchasing and accounts payable automation provides the opportunity to address every CFO’s top priorities to control costs, maximise the effectiveness of spend and increase productivity, at a time when changing their accounting software is no longer top of their to do list.

For all of us in business, our ability to immediately evolve, micro-manage cash flow and control costs will increase the probability of our survival and our ability to participate in the rapid market growth as the global economy recovers.

Why leave it there?

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