Research from Coupa Software, a leader in Business Spend Management (BSM) reveals that almost all (96%) UK businesses are finding it difficult to maintain a competitive edge and, should a recession hit in the next 6-12 months, just under a third (27%) will reduce their workforce.
There is no single dominating issue driving this outlook, rather businesses are facing a so-called polycrisis. Right now, UK finance leaders cite the rising costs of goods and services (41%), rising wages (37%), and rising energy prices (32%) as the top issues. However, over the next 6 to 12 months, UK finance leaders are most concerned about the impact of rising wages (40%) and employee attrition (32%).
Despite the threat of layoffs looming large this year, the data suggests that businesses are grappling with the need to manage their costs and to retain their employees, with half (50%) most concerned about meeting payroll in the face of economic uncertainty.
The majority (84%) of UK finance leaders stated that layoffs are a last resort to cut costs, with 77% believing that while they may solve an immediate problem, they would create further issues in the long-term. In addition, over a third (36%) are concerned about retaining employees in the face of economic uncertainty.
Finance leaders are trying to avoid the layoff last resort
Currently, nearly three quarters (72%) of UK finance leaders are seriously concerned about the impact of a recession on their company’s financial performance. However, insights from Coupa’s research indicates that they are exploring how they can boost profitability, helping to prevent potential layoffs. Their top three strategies to achieve this are digitisation (56%), increasing productivity (53%) and efficiency (51%).
Digitisation was underscored in the findings as a key strategy that could help businesses manage the ongoing economic challenges. Nearly half (45%) of respondents said that increasing digitisation is one of their top three strategic priorities in 2023. Coupled with this finding, nearly all (93%) finance leaders agree that more automation would help their company.
Digitising and automation can improve both productivity and efficiency, while giving finance leaders the critical tools to increase visibility and control over business finance. This enables them to make more informed, and ultimately more effective, strategic decisions for the company.
Currently, 18% of finance leaders admit that their lack of visibility into company finances is a top concern. Less than half (47%) currently have financial processes that are unified, allowing them to manage their spend comprehensively. While over one-third (37%) have fully digital processes in place, but they are individual for each function such as procurements and payments. A further 27% admit that their financial processes are still manual.
What’s more, only 43% are able to use proactive and predictive financial forecasting and risk management, highlighting that they are lacking the necessary tools to plan for the future. While the top areas that they believe their business would benefit most from automation include financial planning and analysis (46%), tax (41%), and accounting (37%).
But they need to be heard at the top table
To ensure that long-term thinking prevails, finance leaders need to be heard at the top table. Over three quarters (76%) say they are facing an increasing amount of pressure from other leaders at the company to make sacrifices for immediate relief without them considering the long-term impacts. While almost all (97%) agree that they need to be meeting with leaders at the company to discuss long-term growth goals more frequently, given the constantly changing economic environment. Furthermore, nearly half (48%) say they feel most tension in the organisation from their CEO.
Tony Tiscornia, Chief Financial Officer at Coupa said, “Economic volatility calls for a strategy of managing costs intelligently, rather than hurrying to cut costs reactively. The ability to do this hinges on having a wealth of data that is accurate and timely to inform decision making,” said Tony Tiscornia, Coupa CFO.
“Resilient companies use intelligent spend data to execute in the present with urgency, but in a way that reduces the risk of unintended long-term negative consequences.”
“Automation technologies allow CFOs to chart a course through the storm and emerge stronger,” continued Tiscornia. “With a potential recession on the way, it’s absolutely critical that CFOs optimize for financial health by equipping their organization to respond faster and more strategically to disruption. It’s how CFOs will help their companies survive a recession and come out of it ready to accelerate growth.”
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