Is a recession coming? Even a brief Google search on the word reveals dozens of articles that say unequivocally that there will be a recession. Although the press is reading tea-leaves to try to define when the recession will hit, businesses should be battening down the hatches.

There are as many ways to do this as there are individual businesses in the UK today, but one thing companies don’t need when their backs are against the wall is snake oil – trendy new technologies like NFTs in 2021 that ultimately provide little or no value. In this tumultuous environment, the promise of artificial intelligence (AI) to automate rote tasks and potentially save companies money is alluring – who wouldn’t want their business to run on autopilot, with no need for employees? However, it's crucial to separate AI's reality from the hype and understand its current limitations, especially when those limitations can erode the trust that your company depends on. In this article, I’ll delve into the state of the economy, the cashflow crisis, AI's potential, and alternative solutions that could provide the key for businesses.

The current state of the economy…and the looming recession

The global economy is in a state of flux, with various factors contributing to uncertainty. Trade tensions, geopolitical conflicts, and the ongoing COVID-19 pandemic have created a volatile economic environment. These uncertainties have led to concerns about the possibility of a recession, which could impact businesses across industries.

During a recession, businesses often grapple with reduced consumer spending, increased unemployment rates, and tighter credit conditions. These factors can significantly affect a company's cashflow, making it imperative for businesses to seek innovative solutions to survive and thrive in such challenging times.

The cashflow crisis for businesses

Cashflow is the lifeblood of any business. It enables companies to pay their bills, invest in growth opportunities, and weather economic storms. However, maintaining healthy cashflow can be a daunting task during economic downturns. Reduced revenue streams, delayed payments, and increased expenses can strain a company's finances, potentially leading to insolvency. If one company isn’t paid by one customer then they risk not being able to pay their suppliers, who can’t pay their suppliers and so on.

According to one estimate, companies with annual recurring revenue of more than $100 million spend around 20% of that revenue on ‘General and Administrative’ expenditures, which could include anything from office space to accounting and payroll. There are also direct payroll expenses: if, for example, the company has a telephone helpline that needs to be staffed with customer service representatives, then this department and its attendant costs will grow with the company. You may question whether adding another customer service rep for £20,000 per annum is going to add £20,000 of value compared to keeping that £20,000 as cash in case of a downturn. Of course, there will still be the demand for customer service, so what if there was a way to offer customer service and a variety of other services without hiring new staff, to have your cake and eat it? This is what AI promises.

AI's promise to automate and save money

AI has been hailed as a game-changer in the business world, promising to automate tasks that were once considered the exclusive domain of skilled professionals. Machine learning algorithms and neural networks have the ability to process vast amounts of data, recognise patterns, and make predictions. This capability can be harnessed to streamline operations, reduce costs, and enhance efficiency.

One of the most significant advantages of AI is its ability to automate repetitive and time-consuming tasks. For example, in financial services, AI-powered chatbots can handle customer inquiries, freeing up human employees to focus on more complex tasks. AI-driven data analysis can also help identify potential fraud and anomalies in financial transactions, mitigating risks and losses.

However, it's important to acknowledge the current limits of AI. While AI can excel at automating certain tasks, it has a limited ability to mimic human judgment and intuition. Complex decision-making processes, creative problem-solving, and tasks that require empathy remain largely outside AI's realm. Moreover, the implementation of AI systems can be resource-intensive and may not yield immediate cost savings.

Perhaps the most important aspect is trust: despite the sheer quantity of press coverage we still don’t know whether the public fully trusts AI. We may be in another situation in which, like NFTs a year before, the tech press is excited about a new product but the public is wondering what’s in it for them.

Alternative solutions: fixing payments systems

While AI holds promise, it's not a panacea for all business challenges, especially in the midst of a recession. In many cases, focusing on improving existing systems and processes can be just as effective, if not more so, in saving money and ensuring the smooth operation of a company.

One critical area where businesses can make significant improvements is their payments systems. Inefficient or outdated payment processes can lead to unnecessary costs, delays, and errors. Bespoke payment systems are a prime example of how technology can make a difference for companies.

By tailoring payment solutions to businesses needs, it can help them optimise their payment processes, reduce transaction costs, and enhance customer experience. These systems are designed to adapt to the unique needs of each business, ensuring that payment workflows are efficient and reliable. And by streamlining payment operations, businesses can improve their cashflow management and reduce the risk of financial disruptions during economic downturns.

The vast potential of AI

In conclusion, while AI holds promise in automating tasks and potentially saving companies money, its current applications have limitations. Businesses must carefully assess their specific needs and circumstances to determine if AI is the right solution for them, especially when it comes to trust in your company.

In the face of a recession and cashflow challenges, alternative strategies, such as improving payment systems, can be equally effective in safeguarding a company's financial stability. Bespoke payment systems are a tangible example of how technology can be harnessed to address immediate business needs, offering a practical approach to navigating uncertain economic waters.

In the end, a thoughtful combination of AI and targeted improvements in critical business processes may be the key to recession-proofing your company and maintaining the trust that drives it.