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Local PNC leader shares how digital innovations and other strategies
are helping businesses manage through inflation.
With inflation recently reaching a 40-year high and interest rates on the rise, business leaders in North Carolina and beyond continue to manage rising prices and confront the headwinds of supply chain challenges and labor shortages. For many c-suite executives, ongoing inflationary pressures are bringing into focus the countermeasure of digital deflation and the return on investment of digital solutions, as well as the business imperatives of other long-term strategies to combat inflation and market volatility.
Donna Perkins, who leads PNC Bank’s Commercial Banking business for the Western Carolinas market, has helped local companies navigate the consequential market disruptions of the past two decades, from the burst of the dot-com bubble, to the Great Recession, to the COVID-19 pandemic and inflationary pressures of the present day. Two prime factors distinguish the current climate from previous periods of disruption, she says. First, the labor challenges that continue to persist in multiple industries. Second, the increased adoption of digital solutions, including those automating key finance processes, which can streamline operations for companies of all sizes.
To address the unique drivers that define today’s market, Perkins shares the following tips for businesses to consider.
■ Leverage technology to optimize cash flow.
Accelerating receivables and streamlining payables are two examples of business processes that took on increased urgency during the pandemic as executives worked to improve business continuity and resilience, says Perkins. “During the past two-plus years, we’ve seen a significant uptick in the adoption of digital treasury management solutions among business leaders, including those previously reliant on paper processes and those who may have once dismissed the idea of automation due to company size or setup. “Today, these companies have better control over incoming cash, which allows them to focus on other pressing business needs. For businesses in the beginning stages of their automation journeys, this is a moment in time when the benefits of digital innovations are becoming increasingly apparent.”
■ Focus on employees.
The Great Resignation and ongoing labor pressures have underscored the importance of delivering competitive employee benefits packages, with many businesses looking to their financial institutions to assist with the implementation of employee financial wellness solutions – such as bank-at-work programs, Health Savings Accounts, online financial education, retirement plan services and personalized banking solutions. At PNC, for example, Organizational Financial Wellness consultants collaborate closely with companies’ human resources decision-makers and benefits managers to design custom programs that meet employees’ financial wellness needs. Additionally, PNC continues to innovate new payment options that businesses can offer workers, including 1099 contractors and employees wanting access to earned pay prior to payday.
■ Build inventory judiciously.
With supply chain challenges dominating headlines and impacting businesses of all sizes, building inventory is understandably top-of-mind for companies in multiple sectors, many of which are stocking up on critical goods to mitigate future fulfillment and delivery disruptions of their own. To help finance these purchases, Perkins notes, many businesses are drawing on their lines of credit. And for companies ordering products from overseas, some purchasers are increasingly conferring with foreign exchange specialists to evaluate the advantages of making payments in U.S. dollars as opposed to the local currency – and potentially securing forward commitments to lock in the cost of funds.
■ Review profit margins and expenses.
Perkins and her team routinely encourage companies to analyze their balance sheets to assess the cost of capital, debt levels, fixed vs. variable rates and potential hedging strategies. One tactic businesses may consider to help manage rising interest rates, particularly when purchasing a piece of equipment that may not arrive for many months, is to lock in the rate upfront – or consider the cost tradeoff of repairing and maintaining existing equipment. Additionally, in this environment, Perkins says, it’s important to evaluate growth goals and special projects.
■ Stay vigilant.
Payments fraud attempts are becoming increasingly widespread across all industry types, with business email compromise and email account compromise scams representing a particularly serious threat to companies of all sizes. In cases of payments fraud via business email compromise, cybercriminals initiate fraudulent payment requests, or requests to change payment instructions, from email accounts that appear to be from a company executive (such as the CEO or CFO) or from a known external partner, such as a supplier. With email account compromise, the sending email account has been hacked by cybercriminals, creating an especially dangerous threat for the recipient. According to the 2022 AFP® Payments Fraud and Control Report, 68% of organizations were exposed to business email compromise in 2021. “It’s critically important for companies and their employees to be able to recognize the warning signs of an email compromise and be empowered to take appropriate actions to help protect against the threat,” says Perkins.
■ Consider strategic opportunities.
Because disruption in the markets can lead to opportunity, business owners who may be evaluating an exit in the coming years should focus on building the valuation of their companies so they are in a position of strength when they ultimately sell – and to help create a path for business continuity. “The events of the past few years have caused many business owners to reevaluate their personal priorities and plans for retirement, so in some cases, we are seeing them accelerate their projected exit timing,” says Perkins.
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