How to Navigate Inflation and a Changing Economy
Inflation is the highest it’s been in decades, standing at 8.3% as of August 2022. Sky high prices have plagued the United States economy for months, pinching the wallets of millions of households and forcing the Federal Reserve to hike rates in attempts to cool it all down. Consumer budgets have been hit hard by everything from housing costs to filling up a gas tank. For businesses, the bottom line can be impacted drastically. And we’re all left wondering…what’s next and what can we do to prepare?
This is the first part in our two part series about navigating inflation. ??
Here are some ways to set your company up for success.
Cash is king, especially now ??
Higher interest rates, increased inventory costs, and reduced consumer spending have put cash flow into question for many businesses. Times may be uncertain, but the importance of cash flow remains constant. To survive economic downturns, businesses must have excellent visibility into their cash use and unit economics of the goods and services they produce.?
Assessing your cash flow through in-depth cash flow analysis and creating forecasts through smart financial management are crucial to helping you dynamically adapt to economic changes.
?? Cash flow analysis reveals your working capital- the amount of money available to run business operations and complete transactions.?
??Maximize cash on hand by identifying ways to reduce your expenses and improve product margins. Ideally, your company should have 12 to 18 months of cash and debt capacity to cover the gap between income and expenses as recession looms. Take a close look at changes in unit economics due to inflation and evaluate the contribution of each product to the bottom line.. If some products are not operating at a positive contribution margin, you are burning cash on hand.
??Proactive financial management is paramount when staring down inflation or recession. Especially as conditions change, waiting for the end of the month to understand your financial position isn’t good enough.? You need access to real-time financial data to understand how your business is faring and where changes need to be made. Tracking the right KPIs and implementing technology that constantly tracks financial health are key to maximizing cash on hand, determining your top revenue drivers, and forecasting business performance.
?? How NetSuite Can Help ??
Managing and optimizing cash flow can be daunting, especially in economic downtimes. Investing in software that automates important financial processes is crucial.?
NetSuite AP Automation helps organizations improve profitability by making it easier and faster to process bills and pay vendors all from within NetSuite. That means better control of outgoing cash flows and easily scalable end-to-end accounts payable processes.?
??Capture bills more quickly and accurately by automating the entire bill capture process
??Avoid overpayment, duplicate payments, or fraudulent payment of vendor bills
??Increase the accuracy and speed of payment processing
??Improve the accuracy of accounting data by eliminating error-prone manual processes
Learn more about NetSuite AP Automation.
NetSuite Cash 360 helps organizations better manage cash flow by providing a real-time view of their cash position while generating fast and accurate near-term forecasts. Cash 360 simplifies cash management by providing a configurable dashboard that includes links to key cash management activities including reminders of tasks to be taken care of, current cash balance, accounts payable and accounts receivable balances, cash flow trends, and more.
Learn more about NetSuite Cash 360.
Forecast, then reforecast ??
Inflation is bad, but it’s also very industry dependent, which means your business must be willing to change in unique ways as the Fed works to lower inflation. Once you understand your cash flow position, it’s time to build forecasts that consider the unique circumstances of your company.?
??Updating your FP&A strategy to include copious scenario planning keeps you proactive instead of reactive. Run “what-if” analyses –?just three scenarios is a fine place to start – to see how possible continued effects of inflation, such as wage increases for key positions and rising costs of raw materials, could play out at your business.?
??Investing in an FP&A tool can increase visibility across the business while easily modeling projected revenue, operating expenses, capital expenditures, cash flow, and sales. A cloud-based solution will do so without the risk of formula errors posed by manual system updates or monthly maintenance.
?? How NetSuite Can Help ??
NetSuite Planning and Budgeting automates labor-intensive processes so finance teams can quickly and easily produce budgets and forecasts, model what-if scenarios, and generate reports. Since all data is entered using the same processes, all changes are tracked, boosting transparency. NetSuite Planning and Budgeting also allows businesses to perform multidimensional planning with any number of dimensions, such as location, product, customer, or expense.?
Learn more about NetSuite Planning and Budgeting.
Stay tuned for part 2 of our series on how to navigate inflation. The next newsletter will dive into pricing and inventory management strategies.
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Manage Cash Flow With NetSuite’s Multiple Budgets Feature
Looking for an integrated solution with the capability to compare and analyze actual versus projected financial results? Use NetSuite’s Multiple Budgets feature to help with projections and forecasting. Multiple Budgets allows you to create several budgets with the same classifications such as department, location, project, etc.
Use the Budget Category field to facilitate the creation of multiple budgets for each forecasted scenario, whether for a year of surplus or deficit.
You can also import legacy budgets into NetSuite using the NetSuite Import Assistant. This uploaded budget data can be used for forecasting and projections.
?Then, get more insights using standard reports.The Budget vs Actuals Report, for example, allows you to select your Budget Category and compare it to live financial data recorded in your NetSuite environment.
Check out the “Budgets” topic within the Financials First Tutorials course in the NetSuite Learning Center, using your Learning Cloud Support Company Pass. Visit Customer Learning Cloud Support (LCS) for more about the LCS Company Pass.?
???Important Announcements:
We had a BLAST at SuiteWorld 2022! We laughed, we learned, we danced, we sang, we went FULL SUITE AHEAD. We can’t wait to do it all again next year. Mark your calendars for SuiteWorld 2023 happening October 16-19 at Caesar’s Forum in Las Vegas.?
Here’s a look back at this year’s event:
?? Upcoming Virtual Events:
Increase the Accuracy and Speed of Processing Invoices and Making Payments
Thursday, October 13, 2022
10:00-10:30 a.m. PST
Register here.
Customizing NetSuite Reports
Tuesday, October 18, 2022
11:00 a.m-12 p.m. PST
Register here.
Tips for Expediting Common Accounting Tasks in NetSuite
Tuesday, November 1, 2022
11:00 a.m-12:00 p.m. PST
Register here.
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