There are at least two places on the planet called “Blackout Zones” where a magnetic compass doesn’t work—very near the north and south magnetic poles.
A magnetic compass has long been the most common navigational tool and is still used so extensively that the World Magnetic Model is published and regularly updated by the US and UK governments, including information on the Blackout Zones where alternate methods such as satellite GPS are required.
Similarly, navigating the economic landscape has been pretty straightforward the last several decades because everyone knew “the compass points” to predict the direction the economy is moving: interest rates, unemployment, stock market performance, GDP growth, etc.—and they moved in agreement with each other.
However, now they’re not! Our economic compass no longer works as interest and bond rates are up, but GDP is also up. Meanwhile unemployment is down while labor participation is down, but the stock market moves significantly both up and down. And looming behind all of this, is the federal deficit which, at some point, will have to have an impact—right? Right?!
Without a corollary to “satellite GPS” in this Economic Blackout Zone, it’s impossible to point to the future—but we can at least recommend three simple first steps to best position your company for inevitable economic shifts while we all work to come up with new ways to get our bearings, like looking for moss on the north side of trees.
- Keep a Close Eye on Your AR Aging: One of the first direct impacts to your business would be customer payments slowing down. Surprisingly, we’ve had numerous clients be surprised when, as a step of validating the Balance Sheet, they begin validating the validation reports and find SIGNIFICANTLY old customer invoices. We’re glad to discuss setting up automated dunning notices to inform both you and your customers of past due invoices, which typically increases compliance with your payment terms.
- Implement Cash Flow Forecasting: It’s also surprising how many clients don’t look at their cash flow forecasting. This is built-in functionality to recent versions of AccountMate, so we hope you’re already using it. Hone your knowledge about cash flow, and use those forecasts to help you consider making money management changes sooner, when you have more visibility and options than later.
- Efficient Inventory Management: Everyone with a warehouse knows the adage that “every dollar lost in inventory comes straight off your bottom line,” yet many clients still have inaccurate (or non-existent!) inventory counts and large adjustments when performing physical counts—and have them year after year with the situation never improving… Why is that? Implementing consistent, accurate, and efficient inventory control processes is paramount to maintaining operational control of your business.
This is only a short list, purposefully simple in the first two steps to make them easy to follow through on, while the third step is a never-ending process but one that yields results now and well into the future. We’re always here to help, so don’t hesitate to reach out with your questions.