After a rather turbulent 2022, a new year arrives that does not seem to bring much calm in many aspects that will directly affect both personally and professionally. Experts predict an economic recession for 2023, which will affect the world’s major economies. Companies will have to adapt to withstand the impact of this crisis, but how can companies combat an economic crisis? In this article we give you some reasons and tips. Read on!
Table of Contents
1. Context of the economic recession of 2023
In an interview for the American network CBS, the Managing Director of the International Monetary Fund (IMF), Kristalina Georgieva, warned of the forecast that one of the most important institutions in terms of finance and governance has revealed.
According to the IMF, the year 2023, which has just begun, “will be a more difficult year” compared to 2022. The IMF’s main reason for warning of this complicated situation is the simultaneous slowdown in the US, the European Union and China.
This bad omen for the economy comes on the back of a year 2022, which has tried to recover the normality caused by the hard years of the pandemic suffered by the world society as a whole, but which has been hit by more negative issues, starting with the war between Russia and Ukraine, which has generated a rise in prices of many products, from food to fuel.
It is this factor that mainly affects the EU economy. The IMF points out that countries such as Germany and Italy, two of the nations most affected by Russian gas, will see their balance sheets turn negative, while Spain will be the member state that grows the most, with 1.2%. It is worth noting that Spain, despite this rise, is one of the EU countries that will find it most difficult to recover its pre-pandemic GDP.
Given the current context and that predicted by the IMF, nervousness in the markets is noticeable, but with good planning and expense management, companies can mitigate the impact of the possible economic recession in 2023.
Here are some reasons why businesses should start thinking about implementing optimal expense management, not just to cope with an economic downturn, but to remain competitive and grow in the markets in which they operate.
2. 5 reasons to prepare your business
As we have seen, this year begins a little like last year ended, with not very optimistic forecasts. Despite this, we are going to try to look at the positive side of all the negative news that we receive on a daily basis.
If we focus on the economic recession announced by the IMF, we will see how it can help companies to change processes and ways of doing things, with the aim of mitigating the impact of this economic crisis.
2.1 Monitoring and controlling costs as room for manoeuvre
For a company to function, it is essential that managers and employees are on the same page, especially when going through difficult times.
As senior managers, such as CFOs, can appear to be isolated, beyond their department, it is advisable that, in order to know the real state of the company, they talk and work hand in hand with the employees of each department. This will provide an overview of all the processes that take place in a company on a daily basis.
This factor serves to be able to analyse everything that is produced and, above all, how it is produced. The aim is to be able to have valuable information to make decisions for the benefit of the company and its financial health.
But this aspect should not only be carried out in times of economic recession, it is a practice that should be done in stable economic circumstances. It is necessary to understand how a company works in order to manage it.
To do this, CFOs can draw up a list of questions with which to begin an assessment of the company and the procedures that are in place. These questions could be the following:
- What expenses are necessary?
- What is the approval circuit for expenditures?
- Who is responsible for approving expenses?
- What is the company’s spending policy?
- Are departments up to date with trends?
- What prevents teams from having everything they need to work?
- How will an economic downturn affect our purchasing process?
2.2 Economic downturn as an opportunity for internal analysis
As economic growth slows, issues such as cost control and cost analysis become more important. It is very common for companies not to pay detailed attention to processes related to financial management when the context is favourable.
However, in times of crisis and economic recession , these are not necessarily critical moments, when worries and pessimism take over the company. In fact, it is precisely at these times that companies, more specifically financial departments, have the opportunity to carry out an internal analysis of the level of financial efficiency.
The aim of this analysis is to improve the main areas that are affected by cost management.
- Management and documentation: A company may be spending too many resources on processes that are inefficient. An example is the recruitment and onboarding of talent, such as expense management.
- Communication: Within expense management it is very important to have efficient communication channels, which allow the circuit for the approval of these to be fast, but, above all, to be secure and follow the company’s expense policies.
- Tools and solutions: As with any aspect, not only in the professional field, technology offers new ways of proceeding. In most cases, it saves and optimises time and money.
- Purchasing and suppliers: During an economic downturn, one of the most important aspects to consider is what and how you are buying. Therefore, it is advisable to carry out an analysis of active purchases and current suppliers, in order to find out if there are better alternatives.
2.3 The need to upgrade to deal with economic uncertainties
It is more than obvious that business has changed and so has the way it is conducted. Keeping up to date is one of the obligations of business, especially in a context of economic recession.
The creation of new protocols on different topics, such as cost management, not only helps to maintain competitiveness, but also works to cope with periods of socio-economic instability.
Some key points to focus on in these protocols are:
- Maintain a constant review of the expenses incurred. This can be used to check whether internal fraud is being committed.
- Keep a list of suppliers. Companies can have too many suppliers. With an analysis, it is possible to unify the purchase of supplies, as well as to find new suppliers who offer better deals.
- Analyse the most recurrent expenses and check whether there are expenses that can be cancelled or payment options adjusted.
- Make a forecast of budgets and forecasts, always reflecting best and worst case scenarios.
2.4 Analyse and optimise workflows
Due to the socio-economic and health circumstances we have been going through over the last two years, working models have been affected. Many companies have switched from a 100% face-to-face system to teleworking or hybrid working.
Although these working models were initially not widely trusted, the reality is that they have proven to be efficient and can help companies save a considerable amount of money.
Thanks to technology, teleworking or hybrid working is becoming increasingly accessible to many companies. Having the right tools in place can make processes more efficient, saving companies resources, time and consequently money.
2.5 Creating a Business Continuity Plan in an economic downturn
Finally, it is important for companies to be prepared for any situation of instability, such as those caused by an economic recession. To this end, it is advisable to draw up a business continuity plan.
Many companies do not think about this aspect and run their business on a day-to-day basis, without taking into account possible changes and unforeseen events. Once again, and as we have commented throughout this article, a time of economic recession can be a great opportunity to draw up a business continuity plan and be able to face the future with a certain stability and being aware of the risks and opportunities that may arise.
3. Tools to withstand economic recession
An economic recession is difficult to control and even to avoid, as it is generated by different factors over which we have no control. However, we have mechanisms and tools to mitigate its impact on our business.
As we have seen throughout this article, technology is a great ally in maintaining control over a company’s finances. This is why there are solutions that allow 360º management in the control and management of company expenses.
Solutions such as Tickelia make it possible to cope with an economic recession as they are designed so that any corporate expense can be reported quickly and efficiently, digitising and automating processes.
Tickelia uses a collaborative system in which employee and manager are responsible for the expenses incurred, thus creating a commitment on both sides to make good use of the company’s financial resources.
In addition, Tickelia provides a key factor and that is the possibility of carrying out a complete bank reconciliation, with which to maintain control of the different accounts and their respective expenses.
Being 100% integrable with other business management solutions, Tickelia allows you to provide and obtain information from ERP & CRM management software, payroll and HR software or travel agency software, among many others.
If you want to know how to optimise the flow of your company’s expenses and all that Tickelia can provide to face an economic recession, request a no-obligation demo in the following banner!