Planning for Recession? Experts Weigh in on the Top Financial Forecasting Questions to Ask Right Now
Businesses of All Sizes Can Now Look Ahead with Financial Forecasting Software. Will You Use This to Your Competitive Advantage?
As the saying goes, “In the country of the blind, the one-eyed man is king.” Luckily, when you have the right financial forecasting software you have more than the proverbial “one eye.” You can become the king (or queen) of your industry with the unprecedented ability to see far into your business’s financial future.
Successful leaders use this predictive knowledge to act fast and stay ahead. Ready to get started? Here are a few questions you can answer right now using modern planning tools, so you can see your way through this recession with confidence.
4 Financial Forecasting Questions to Ask RIGHT NOW
It doesn’t matter if the economic experts have officially declared a recession yet. You can trust your expertise to tell you when a recession is looming. You see the signs: rising interest, increased unemployment rates, stock market volatility, worrisome inflation, and reduced consumer confidence and spending. You’ve had to deal with this before.
As you’ve experienced, smart, quick action can save the day in a recession. When you see the signs of a downturn, make sure you have hard data about where you stand currently and where you can leverage strategic opportunity.
Use your financial forecasting software to answer these questions first:
1. Where can we strategically cut overhead?
The days of blanket rulemaking are over. Instead of stating that “all departments must cut spending by 15%,” you can choose to cut expenses only where it makes the most impact. In other words, you can use a scalpel instead of a machete.
Using an expense forecasting dashboard, you can quickly and easily identify your top predicted expenses. Then, using your financial forecasting solution, you can run ‘What If’ projections with adjustable drivers that look into your future. This way, you can see in advance what the impact would be if you cut expenses in various areas.
We recommend using your software to forecast your OpEx 3, 6, and 12 months out at different levels of granularity (such as daily, monthly, quarterly, annually, or for multiple years). That way, you can drill into your overhead costs and understand where your money is going in the short-, mid-, and long-term.
2. Where can we improve our margins?
The old “80/20” rule states that 80% of your time and energy goes toward generating 20% of your revenues. In a recession, it’s a good idea to get rid of your least profitable activities — the ones that take up 80% of your time without suitable return.
Using a customer dashboard, you can identify your top and bottom 5 customers by profitability, and then cross reference the associated labor hours to see which customers you should “fire.” You can do the same for your products or services by drilling into a revenue analysis dashboard. If you connect your planning solution to your ERP, you can even track supplier scorecards, which showcase the suppliers your company trusts to deliver on-time and hassle-free.
Once you know which customers, products / services, and suppliers to fire, it’s a good idea to use your financial planning and forecasting solution to run multiple scenarios based on various drivers and inputs. Running a range of scenarios helps you “peer into the future,” so you understand the financial results of your decisions and can be confident in your choices.
3. Should we worry about our top revenue drivers?
Here’s a good rule of thumb to follow: If any one buyer constitutes 10% or more of your revenues, or if the top 5 constitute 25% or more of your revenues, you should seek new opportunities immediately. Especially since those buyers may be slower to pay their bills in a recession.
A revenue forecasting dashboard will give you the power to look ahead and anticipate issues that can result if your top buyers are slow to pay you. It also helps you see when you should begin an all-out focus for building your pipeline, as lead times may be longer in an uncertain economy.
Here’s a quick tip: With the answer to Question #2 (above), you can combine the information about your best customers and your best-selling products or services with your current sales process. This can help you target new buyers similar to your favorite customers and to offer product / service combos that will earn you the highest profits.
4. What is our cash position?
Revenue forecasting is important, but cash is still king. In other words, cold, hard cash still underpins your ongoing success. To paraphrase another parable: “$1 million of cash in hand is worth $2 million of revenues in the bush.” (Perhaps that wasn’t the best paraphrase, but you understand our meaning. 😉)
Using your financial forecasting software, you can forecast 3, 6, or 12 months out (or multiple years out) to see when cash might be tight due to annual or quarterly expenses. The right planning software can use multi-year forecasting to alert you about those expenses coming up a few years from now. Using a cash flow simulation dashboard, you can plan expenditures accordingly because this dashboard will provide clear insight into how different changes in your cash flow affect your bottom line.
See a potential cash flow issue? Good thing you were able to spot it ahead of time! With your financial planning and forecasting software, you can run driver-based forecasting scenarios to understand your total costs over time when you borrow additional capital at varying rates or terms. You can use your findings to shop around for the loans that make the most sense for you.
It Takes an Active Approach to Thrive in a Recession. Are You Prepared?
Large enterprises have spent years “looking ahead” with planning tools. These gave them the competitive edge over smaller companies… until now. Finally, midsized companies like yours have affordable access to powerful financial planning and forecasting solutions too.
SMBs that quickly adopt this new technology will have a unique advantage against their competitors. This is because their competitors may not yet have the modern planning tools that will help them survive and thrive in a recession.
Want to start answering your recession questions immediately? You can! Solver’s financial forecasting solutions are seamlessly integrated with today’s most popular ERPs and our QuickStart Rapid Deployment service provides the quickest time to value in the industry. Solver deployment is so fast, it only takes One Day!
We all know Everything Can Change in a Day, yet only Solver delivers a one-day rapid deployment, including free and instant access to $100K of value available on Day 1 through the Solver Marketplace. Solver is committed to helping you with all your advanced planning and reporting needs, so you can Accelerate Better Decisions and stay ahead of the pack.