Disaster plan

Technology is the best line of defense in surviving a prolonged and deep recession, says Russ Cereola, as it provides the foundation from which key employees make decisions that affect the bottom line. For many businesses, 2009 and 2010 will be financially troublesome and significantly less profitable than previous years. In fact, many companies will not survive what appears to be a deep and prolonged recession. As the banking industry becomes less reliable and is increasingly pulling once ample lines of creditÔÇöeven for well-established, low risk customersÔÇömany executives are wondering how to ÔÇ£recession-proofÔÇØ operations to survive. The writing is on the wall.   Businesses face a turbulent future and it is imperative to devise a disaster plan to weather this economic storm. Business executives must focus on resource allocation, streamlining operations and reducing excessive expenditures. A careful, thorough review and justification of every expense incurred is absolutely necessary. A profitable business can quickly lose its footing if decision makers are not acutely aware of how budget dollars are spentÔÇöa line-by-line budget analysis should be a top priority. This exercise will quickly reveal where to cut, but how much to cut may be less clear. While cuts may be necessary, using a scalpel to extract unnecessary expenditures is far smarter than carelessly wielding a butcher knife. Specific areas of reduced spending will greatly depend on the type of business, its financial strength and its ability to bring new products to market. To conduct an objective review, a company should create a formal process to analyze expenses, with the understanding that nothing is untouchable, even if the business is not currently suffering. Naturally, when considering issues of resource allocation, perplexing matters such as hiring freezes and employee layoffs are on the minds of top executives everywhereÔÇöregardless of the industry or annual revenue. Executives tend to believe that laying off workers in anticipation of a perceived future reduction in demand is the answer. In fact, it really comes down to holding a core team of key employees. Identification of vital employees, understanding their strengths and utilizing them to the fullest capacity will provide a strong base of talent from which to operate a business during lean times. There are many creative ways for employers to avoid letting employees go. Perhaps cutting hours is an option, or going to a four-day workweek. The solution is less important than the necessity of having a plan in place to deal with these issues before they become problems. Part of a businesses economic disaster plan should include a strategy to operate with the minimum number of employees. It may never reach a point when this becomes necessary, but understanding exactly how business operations will continue when laying off staff becomes essential is invaluable knowledge. Particularly in tough economic times, only those firms with access to the best and brightest employees and timely, accurate information to make the right decisions will survive this highly competitive environment. One area that some companies miss when looking to cut costs is better utilization of existing resources. Streamlining business operations by leveraging technology and understanding the customersÔÇÖ needs in relation to market trends should be a high priority. In general, companies must have a contemporary information system in place to help predict demand and accurately measure costs, thereby facilitating a rational decision-making process. If a comprehensive system is not in place to manage the internal processes and procedures that serve as a companyÔÇÖs foundation, executives have little way to garner the information required to make critical decisions. An enterprise resource planning (ERP) system helps to alleviate pressures on the enterprise by integrating all data and processes into a unified system. This unity allows decision makers to understand, from the warehouse floor to the call-center, exactly what makes the company tick and prevent difficult situations from turning into time bombs. As the recession deepens, newer clients will be harder to come by, so maintaining revenue streams by tapping the existing client base is a strategy worth pursuing. Understanding exactly what services or products your existing client base needs, and fulfilling those, is critical.ERP systems help achieve efficiency by providing one integrated solution for real-time access to information. For example, if a product order is entered via the call-center, that same information is immediately sent to the warehouse floor, where the order is filled and inventory counts are automatically adjusted, providing an accurate display of what product is available for saleÔÇösignificantly streamlining operations. Simply stated, this saves time, money and effort.Most importantly, a good enterprise system will provide access to data that reveals a companyÔÇÖs economic stability, which is so pertinent in todayÔÇÖs economic climate. If a business has an accurate understanding of all costs, then it knows exactly how low it can offer its services or products without losing money. It knows if bonuses can be distributed, if pay cuts are needed and if additional lines of credit are required.┬á However, as banks tighten access to credit, an accurate, complete knowledge of a businessÔÇÖs cash flow capability will ensure that resources do not dry up when most needed. Still, it is imperative to assure lines of credit during difficult cash flow periods. CFOs should be in constant contact with the banks as open lines of communication are integral in times of economic stress. The ability to respond to business demands quickly is essential in a competitive environment and access to money can tip the scales in favor of the competitionÔÇöeasily. Banks require current information updated periodically during the year in order to keep a companyÔÇÖs credit lines open. They want to see detailed financial information that can only be easily obtained via an ERP system.Additionally, technology is now more crucial than ever to identify costs and reasonably predict market demand. Technology remains the best line of defense for businesses to remain competitive during this period of economic strife, since it provides the foundation from which key employees make decisions that affect the bottom line. The right system offers the knowledge needed for executives to develop and implement a disaster plan that determines if layoffs are needed, what budget cuts are necessary and if cash flow capacities are diminished. Effective enterprise management hinges on the ability to address these three areas of concern. Without this necessary knowledge, many businesses will simply not survive. ┬á