With many economists predicting an imminent recession and sluggish consumer spending, CFOs need to be prepared to weather the storm.
“We are headed into another change,” Sharon Bhalaru, partner at national accounting and consulting firm Armanino LLP, said in an interview with CFO Dive, noting that many companies are right now wrestling with a difficult period marked by volatility, uncertainty, complexity and ambiguity — the concept known as VUCA.
While the Great Recession from 2007-2009 was fueled by the collapse of the housing market, this time around it is “a little bit unique because we're in this post-pandemic world, and one of the things that is going to be very different in this economic downturn is really the focus on the people's side of things,” Bhalaru said.
But Bhalaru sees technology, and enterprise resource planning (ERP) — software used by a company to manage key parts of operations, including accounting and resource management — as a key means of getting CFOs and their respective organizations through the looming recession because the systems enable companies to integrate and track all of their financial metrics under one roof, or that is, under one business application.
“ERP solutions and business applications are really there to help executives understand the health of their business and make better decisions,” said Bhalaru. Here are three main ways she sees ERP as a key tool in a downturn:
Empowering operations, or tracking the money coming in and the money going out, is totally dependent on data, Bhalaru stressed.
“When you have vendors that you need to pay, having the data and understanding what it is exactly that you're spending, which products you’re buying, will really help reduce the money going out of the business,” she said.
When it comes to accounts receivable, Bhalaru explained that because CFOs are very cautious about cash flow, an ERP system can be helpful with timely invoicing and getting those invoices out to customers, while also tracking how the money comes back in.
With finance chiefs’ responsibilities growing, the financial and accounting realms are only a portion of the job. ERP systems allow those sitting in the CFO seat to have data at their fingertips. “These systems allow for there to be a single source of truth in data,” said Bhalaru.
“Many times we work with executives, and they'll be in a conference room debating about what data is the right data, and that is a waste of time,” she said. Focusing on the right data allows CFOs to look to the future challenges they need to navigate, the geographies they need to invest in and the talent they need to hire, Bhalaru explained.
Moving to the cloud
CFOs often lead these digital transformations at their respective organizations, so they see what they need for their accounting systems as front and center, said Bhalaru. “Having closets and physical locations to store information has really gone away,” she said.
Having a single source of data and information is essential for businesses, and moving ERP systems to the cloud allows for access from anywhere.
“We're seeing a lot of CFOs and executives come to us looking to move into the cloud, and asking what does that roadmap look like? They're being very deliberate and they understand that it's not an easy undertaking,” said Bhalaru.
Digital transformation and ERP systems also play into talent retention concerns which are top of mind for CFOs right now as well.
“I’m noticing a lot of my clients are coming to me asking for automation so that their employees don't have to do mundane, boring, routine tasks that a system or digital worker can be automated to do, while they can focus their energy on serving their clients or being innovative and doing value add work,” explained Bhalaru.
Re-imagining the people strategy
During economic uncertainty as such we are experiencing today, “we encourage our CFOs and our executives to re-imagine their people strategy and to not lose focus on improving the employee experience and the employee journey,” said Bhalaru, and ERP systems can help CFOs achieve this.
As we have seen, things like attracting and retaining talent — which Bhalaru sees as a key metric to look out for in the midst of a looming recession — have remained top of mind for CFOs. ERP systems can track the lifecycle of an employee, as well as subcontractors, from hiring to retiring.
“In an ERP, you can also align employee skills so you make sure that people have the right skills for the role and are able to help them upskill through certifications and training programs,” said Bhalaru. This idea of upskilling can also save businesses in turnover costs.