Better Data and Inventory Management Can Help Firms Offset Sales Uncertainty

The best laid plans of mice and men, wrote the poet Robert Burns, oft go awry.

Add businesses of all sizes to that roster, as planning is one thing, uncertainty’s another, and somewhere in the middle, reality rears its head.

Uncertainty’s a fact of life, and it plays havoc with companies’ top lines and bottom lines, and sometimes with their very viability.

In the latest survey released this week from the Federal Reserve Bank of Atlanta, focused on business uncertainty, sales growth expectations as of this month — looking ahead through the next year — have returned to their pre-pandemic averages. But firms, the Fed noted, “remain more uncertain about future sales growth than before the pandemic.” The September respondents said (as the report baked in various levels of uncertainty) that they anticipated forward sales growth of about 3.9%, with employment growth of about 4%.

Sales and staffing are interdependent, and uncertainty over one variable cannot help but affect the other — and the fortunes of the firm itself. Having some certainty about sales — because there is visibility into end customer demand — gives companies the confidence to ramp up staff, or keep the same level of staff on hand. On the other side of the equation, not being able to calibrate the right level of staffing means that there’s 1) either a higher cost structure in place than is warranted by sales or 2) there’s not enough staff on hand to meet a spike in demand.

Forecasting that demand may have just gotten incrementally tougher, even though the business world, generally speaking, has been cheered by the Fed’s recent 0.5% cut to interest rates. The rule of thumb is that capital will be cheaper, and that slowing inflation and cheaper credit card debt would spur market demand. But there’s no guarantee how reality will run its course.

The Costs of Uncertainty

PYMNTS Intelligence has detailed the costs tied to business uncertainty. Overall, more than a third of middle-market company leaders have said that business uncertainty has led to missed opportunities.

Among the biggest challenges: Excess inventory costs. In addition, uncertainty about customer demand, PYMNTS found, led to a 7% revenue loss.

Data, down to the transaction level and for more efficient payments, with digitization of back-office functions — can solve several of these pain points. Roughly two thirds of the companies that we surveyed said that they’d been deploying analytics to aid them in forecasting end user demand. Process automation, leveraged by more than a third of companies, has helped with payments and supply chain integrity.