As the economy continues to worsen, many businesses are feeling the squeeze, with global growth expected to go from 3.2% in 2022 to 2.7% in 2023. Costs are going up while profits are going down, and it’s often the CFO who is left to manage the fallout. But what can they do in these times for their organization, and how can they prepare for the future? By taking some proactive measures, even a Part Time CFO can help weather the storm and even come out ahead.
There are many things that a CFO can do if the economy continues to worsen. One is to protect operations and profits by making adjustments to pricing and managing exposure to input costs. Many businesses are feeling the pinch as costs rise, but there are ways to offset these increases. For example, if a company can increase its prices without losing too many customers, this can help boost profits. Alternatively, if a company can reduce its exposure to input costs, such as by sourcing from cheaper suppliers or using less expensive materials, this can also help to improve the bottom line.
Another measure a CFO can take is to cut costs in areas that are not essential to the business. This can be a difficult decision to make, but in times of economic hardship, it may be necessary to keep the company afloat. For example, a company may choose to reduce its marketing budget or reduce employee benefits. These cuts may be painful in the short term, but they can help to reduce expenses and improve the bottom line. To make up for these changes without the organization losing the benefit of what was cut, the CFO should focus on automating and digitizing as much of their operation as possible.
Automation, Digitization, and Outsourcing
A CFO can reduce costs by automating, digitizing, or even outsourcing operations. This helps to improve efficiency and reduce the need for manual labor, both of which can save money. By digitizing operations like invoicing and payroll, a company can also save on paper and printing costs. And by automating tasks like customer service and data entry, a company can reduce the need for expensive human labor. Automation can also help to improve accuracy and reduce errors through automation of things like quality control. Saving the company not only money but also time.
Outsourcing is another cost-saving measure that a full or Part CFO can take. By outsourcing tasks to an outside party, a company can reduce its labor costs by decreasing the total number of employees needed to maintain operations. This can be a controversial move, but in times of economic hardship, it may be necessary to stay afloat. When you outsource, professionals take on the task and bring a level of experience and knowledge that your in-house team may not have. In combination with other aspects of streamlining operations, CFOs can reduce costs and overall labor while ensuring that the company still has access to the necessary skills and expertise.
Building Resilience for the Future
In addition to taking measures to protect operations and profits in the short term, a Full or Part Time CFO should also be thinking about ways to build resilience for the future. One way to do this is to invest in long-term projects that will improve the efficiency of the company. For example, a CFO may choose to invest in new technology or manufacturing processes that will reduce costs in the long run. This can be a risky investment, but if it pays off, it can help to make the company more resilient to economic downturns.
Diversifying the company’s revenue streams also helps build resilience and can drive long-term value creation within a company. For example, a company that relies heavily on one type of customer may be at risk if that customer base decreases. However, a company with a diversified customer base is more likely to weather the storm. Diversifying the products and services offered can also help to insulate a company from economic downturns. For example, a company that offers both luxury and budget products will still be able to appeal to customers even if they are cutting back on spending.
The role of the Full or Part Time CFO is changing in today’s economy. In addition to being responsible for the financial health of the company, CFOs must also be able to navigate economic downturns. Taking measures to reduce costs and improve efficiency can help to weather the storm in the short term but investing in long-term projects that build resilience can help to ensure the company’s long-term success during these economic times. By diversifying the company’s customer base and product offerings, even a Part Time CFO can help to insulate the company from economic downturns and drive long-term value creation.
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