With the votes tallied across states and the national political lineup settled (at least for now), politicians, businesses and analysts alike are all focusing their attentions on one date: December 31, 2012. That's when, if Congress does not act, a combination of spending cuts and expired Bush-era tax cuts totaling more than $600 billion will go into effect, ostensibly pushing the U.S. economy back into recession.
During the first press conference since his re-election, President Barack Obama addressed the impending fiscal cliff and called on Congress to act on extending some Bush-era tax cuts while allowing others to expire and rise at the end of the year. The jury is still out on whether the two groups will arrive at a last-minute compromise, or will be stuck in a political deadlock that pushes the country over the fiscal cliff.
Regardless of analysts' and pundits' speculations, signs indicate that many businesses are concerned. A recent poll of small businesses by the Small Business Majority found that nearly eight in 10 small-business owners are aware of the fiscal cliff, and the majority are worried about the negative impact the spending cuts would bring. The responding owners indicated that their decisions about hiring, expanding and making business investments hinged upon how tax rates affect consumer demand.
Gathering business intelligence may become more of a focus for many organizations in the coming weeks, as they not only strategize for how to survive in their own markets, but how to insulate themselves from the anticipated economic turmoil and adjust to government policies and regulations.
How companies are preparing
Technology has come to play a greater role in how companies forecast risks and challenges down the road. The merging of IT and finance will likely come to play in the coming months, as organizations not only prepare for the end of their fiscal years, but the anticipated disruptions that may come from a perfect storm of spending cuts and tax increases. Finance technology may even come to be a vital asset as corporations prepare themselves to survive the turmoil of the fiscal cliff debates between Congress and the White House, as well as the myriad risks that they face on a daily basis over the normal course of running a business.
As the Small Business Majority research indicated, almost 70 percent of responding small business owners are worried about the effect on contracts if the expected government funding cuts are realized. A report from Navigant Consulting, "Preparing for Sequestration's Storm," outlines how companies that rely upon government contracts could be adversely affected by the billions of dollars of spending cuts that would automatically go into effect if the country does indeed fall over the fiscal cliff.
Knowledge is power
It will be vital to review current dependence on contracts, survey those deals chances of survival, assess their own performance and strive to improve in weak areas, Navigant advised. No matter what size or whether organizations are dependent upon government contract work, having a better sense of their current positions within their sectors and the economy as a whole can provide more insight for CEOs, presidents, CFOs and executive boards. Armed with information, they can conceivably make smarter decisions for hiring, growth activities and more.
Eric Fearday - the general manager North America, analytics for SAP - explained during Proformative's last conference, CFO Dimensions, that the amount of data that businesses are expected to manage, analyze and apply to their businesses will change drastically in the coming years. This can apply to internal operations (like machine data) as well as determining how external factors - such as consumer sentiment, market shifts and other risks - will impact the company's performance in the months, quarters and years to come.
Within the recent technological advances in the world of business and finance, corporations may find a solution to better equip them to align their strategic initiatives, responses to turbulent environments and address the challenges inherent in their markets. The upcoming ProformaTECH conference in San Francisco offers insight on how businesses can use technology when budgeting, planning and developing forecasts to ensure the future success of their firms.