Nothing is certain about the UK economy at present, but with the Bank of England warning of a recession looming, businesses need to be prepared.
When there’s uncertainty in the economy, business owners need to take stock of their assets and control whatever they can to weather the impending storm.
This means ensuring your AP processes are efficient. Streamline your internal operations, so everything will run as smoothly as possible under challenging circumstances. Accounts payable is a good place to start when you’re assessing your company and preparing to tighten your belt financially.
One thing you must avoid during an economic crisis is disruptions in your supply chain. Businesses all over the UK will be doing their best to attract and retain customers who are strapped for cash and facing their own challenges.
Even when your own income may have dipped, the timing of payments to suppliers remains fundamental to running your business. Cashflow issues shouldn’t mean you are keeping a vendor waiting for payment.
Managing your accounts payable system efficiently means discovering the right balance when it comes to paying invoices and keeping your business well-stocked. You must have transparent communication with suppliers and a complete understanding of cash flow.
You also need the ability to streamline and improve AP processes that aren’t working, rather than settling into a familiar routine with potential blips. Turning a blind eye to issues because you feel you have enough to deal with already isn’t the way forward.
Your accounts payable processes will fuel your business and help you to move forward in a time of great economic uncertainty. Get it right now and it will become a key driving force to surviving the recession.
Get a complete view of your business’s cash flow by first focusing on the basics. Run a fresh projection on your estimated income and expenditure. Estimating how much cash you expect to flow in and out of your company during the changing economic climate is the first thing you should do.
Consider the size, sustainability and general health of your business. Consider whether there are any possibilities for growth, or whether it will be a case of survival, rather than expansion.
A new projection might bring about small, but vital, changes in your operations. It may lead you to revisit your strategic plans and adjust your approach accordingly to take into account a potential recession looming.
Using the appropriate accounting software can help business leaders to keep on top of cash flow by having accurate and timely information at their fingertips.
Surveys have revealed almost 70% of employees believe their company CEO has made important decisions based on information that isn’t accurate and up-to-date. This is a shocking number at any time, but in particular during a period when the nation is suffering an economic downturn.
During times of great turmoil, having an accurate, complete picture of your business’s cash flow is crucial to forecast and plan effectively.
Clear and proactive communication
Communication and relationships are vital to the success of any company, whether there is a recession or not. When you’re making changes and revenue is at risk, communicating in a clear and transparent way with your suppliers and contractors is the key to maintaining good relationships.
This is where accounts payable comes in, as keeping your finances up-to-date and estimating where there will be a potential rough patch will eliminate any nasty surprises.
The better your line of sight to AP processes, the more chance you have of keeping things on track internally. This will help keep your good relationship with partners and suppliers on track too.
Being proactive means communicating any economic changes that result in a change in your priorities or strategies to your suppliers right away. You must be open and transparent at all times, including communicating any changes to all stakeholders.
While it’s natural for everyone to feel nervous during a recession, including your suppliers and partners, having accurate information about the state of your finances is vital. If you’re still working on a manual accounts payable system, your processes will be slower and there will be a greater chance of human error sneaking in along the way.
When there is a recession, you may be short-staffed in general, but won’t be able to take on any more staff due to financial constraints.
Any tedious manual approval processes will add additional work to already overstretched employees, at a time when they’re probably struggling with extra responsibilities to combat a shortfall in resources.
This can result in extra stress on your financial team in the accounts payable department. Any processing delays will also cause more stress for your suppliers and partners when manual processes cause delays in payments.
Having a streamlined and efficient automated AP system can eliminate delays and reduce stress for everyone.
When you process invoices manually, it tends to be more expensive in terms of employee hours worked. Research by Levvel Research has revealed the cost of manual processing is, on average, around £13 per invoice.
This covers the cost of labour throughout the whole process. It doesn’t take into account the potential for mistakes and the possibility some work may have to be done again due to human error. It also doesn’t cover the time spent on reconciliation.
Keeping a lid on costs is vital in today’s climate and processing invoices manually isn’t the most cost-effective way of running a business. Surprisingly, despite manual AP processes making less sense today, a staggering 86% of small businesses say they still have some manual processing elements to their accounts.
While we’re heading towards particularly challenging times today, if you take a proactive stance now and look at your accounts payable processes, you will have a better chance of easing the uncertainty and setting yourself on the right road to survive.