In a challenging economic environment, strategic financial planning is key

In a challenging economic environment, strategic financial planning is key

Steve Vitale, Valley Bank’s Regional President, Commercial Banking

By Steven Vitale, Regional President, Commercial Banking, New Jersey, Valley Bank

Like the rest of the country, New Jersey is managing a challenging economic landscape as a result of rising interest rates, concerns about inflation and uncertainty about the future. However, New Jersey’s port state status – with Newark International Airport and the seaports – and its status as a focal point for transportation between Pennsylvania, New York, and Connecticut, gives it advantages to navigate the current landscape.

Despite the challenges, there are bright spots.  We are fortunate that Amazon and other ecommerce companies are driving the growth of warehousing and distribution in the state. Robust construction for Amazon ancillary businesses including freight carriers who take consumer goods from warehouses to homes is fueling this growth.

However, business owners are rightfully uneasy as the economic outlook remains volatile and unpredictable. Inflation is high, which is keeping prices lofty. Rising interest rates impact the ability to borrow money which can halt or postpone projects or large purchases.

That said, how should owners and senior executives be thinking about the present, as well as the future?

Be aware and understand what is happening in the economy. Keeping a finger on the pulse will help you plan ahead and be prepared for a variety of scenarios.  Think about what is essential to manage your business as well as what you need to put into place for short and long-term growth. Do you need new equipment to achieve greater efficiencies?  Do you need to expand your space to accommodate growth?  Do you need to hire more staff? Determine how much capital you need to facilitate this growth and whether you can manage the associated costs.

Be realistic about your business goals. Determine how you can adapt and reevaluate your capabilities to maintain stability and grow during unpredictable times.  Take a hard look at your expenses and determine what you can cut that won’t negatively impact the business.  Maintain strong cash reserves so that you have flexibility if costs increase or customers cut back.

Establish close and strong relationships with your financial partners. It is critical to cultivate these relationships now while business is thriving so that if a downturn occurs you have trusted partners by your side.  As soon as you hit a bump in the road, reach out to your CPA, banker, and lawyer.  They can help you find, evaluate, and decide on solutions. Do not wait until the problem escalates, as then it may be too late.

You are the expert in your business, but you may not be an expert in capital markets and commercial banking. This is why it is so important to leverage your bank’s expertise. They can help you understand the programs available to protect your business. These can include:

  • Interest rate protection strategies: including interest rate lock to help you plan for projects that are being developed
  • Defensive cyber and fraud programs: programs like Positive Pay can help protect your business and provide dual control, with multiple people in the organization reviewing and approving payments
  • Foreign exchange solutions: to protect you from volatile exchange rates when doing business internationally
  • Strong guidance: your bank can help you understand the percentage of deposits insured by the FDIC and make sure that you have diversified your accounts

While there are no guarantees, if you stay focused on your goals, have a solid financial strategy in place and maintain a close relationship with your financial team, you are positioning your business for success.