It has been 10 years since the financial crisis in 2008. We have been enjoying an environment of low interest rates and high economic growth.
However, speculations are rife that the next recession is just around the corner.
Some economists speculate that huge corporate debts might trigger the next recession. True enough, businesses have been borrowing more money than they ought to. In fact, businesses are borrowing against their net worth instead of their cash flow and income.
It is of course hard not to for businesses in such debt accommodating environment. This is why the global debt is reported by S&P Global to be $6.3 trillion. Under normal circumstances, servicing debt would be manageable if companies have a lot of cash. The problem is that this is not the case for most businesses. Only the biggest companies have enough cash to service their debts. The debt to cash ratio right now is higher than it was during the great recession.
In addition to high corporate debt levels, there are trade war fears, Brexit worries, Italy´s budget worries, progressing quantitative tightening, and increasing interest rates. All these lumped together spells recession waiting to happen.
Then we turn to CFOs – when that next recession comes, will your business weather through it?
It is never a bad idea to brace the business for challenging times. In fact, this is one of the main responsibilities of a CFO – to ensure that the business can not only grow but that it can survive during tougher periods.
There is no telling of course how bad the next recession will be and exactly what its impact will be to the business but having a good grasp of the business financial health is not a bad start.
A business must have good visibility of its figures especially its balance sheet and income statement. It must be able to do unlimited what if analysis, so they can look at various scenarios and test the impact of potential decisions. It must be able to test their assumptions, it must be able to forecast their income to an acceptable degree, and it must also be able to allocate effectively among other things.
All these can be done with the aid of financial planning & analysis tools like Epicor Financial Planner.
EFP will not only afford full visibility of your real-time figures, it will also empower your finance department to perform deeper analysis so that threats and opportunities can be easily spotted in the horizon. With EFP, you will not only save a huge amount of time and effort when it comes to budgeting and reporting, you can also enforce accountability to the stakeholders in the process so that your figures can be relied upon.
Curious how EFP streamlines and automates your budgeting and reporting process? Visit www.dsp.se or email firstname.lastname@example.org to request a free product demo.