Uncertain economy provides opportunity: the current environment is the perfect time to position your company for growth when the economy improves. And, CFOs are best positioned to lead this charge forward, say these consultants from Grant Thornton.

• Author: Lyman, Steve
• Position: STRATEGY

The state of the economy in the first part of 2008 seems be growing bleaker. In a recent survey conducted by Sourcemedia, more than 66 percent of respondents said they believe the U.S. is already in a recession, while another 16 percent believe the country will slide into recession during the year. On top of general economic concerns, credit markets are in turmoil.

As a result of these two influences, companies are faced with a tightening credit market with less liquidity and often more expensive debt that is available only with more strings attached.

When viewed through a different lens, however, all of these factors present a greater opportunity and a necessity for Finance to play a bigger operational role for keeping the company focused on its core business issues. When faced with a down economy and limited access to financing, companies often focus on short-term issues rather than on executing longer-term strategies. So, what better time for CFOs and Finance to step into the role of catalyst for innovation and operational improvement across the enterprise?

Consider that the myriad activities that occur in any business all flow through Finance in some manner, and as such, the CFO truly understands and influences what's going on within the company.

Grant Thornton has identified seven strategies that CFOs and finance professionals can employ to help their companies weather the downturn and, in some cases, put the organization in a leadership position when economic conditions improve.

Focus on Margins

When faced with the prospect of deteriorating performance, many companies' first reaction is to cut costs, while maintaining sales levels. However, improving margins through selective trimming of customers and/or products often produces a larger increase in net income than simply cost-cutting. Re-examining what they sell, who they sell to and what price they get will lead to better decision-making around sales efforts.

The downturn can be used as the catalyst to re-evaluate customer profitability and product profitability, especially in light of pricing pressures. This analysis provides a platform to re-examine direct and indirect spend, which can lead to significant margin improvement. Focusing on margins by reducing unprofitable sales may result in significant institutional resistance, but a clear analysis of the financial realities is one of the key ways the CFO can add value.

Follow the Money

Cost containment is another key area that requires the CFO's attention and focus on how to quickly identify areas that would provide the most substantial savings. Look no further than the financial statements and the trial balance. Cost containment and performance improvement opportunities pour from almost every...