Maybe it’s a recession!
“Should I stop spending on IT?”

by Henri Morris, CPA
President, Edible Software
www.ediblesoftware.com

The market plummets; corporate earnings crater and housing prices go wild. There is little doubt that we are either in, or approaching, a recession – and operating a business in this climate is tricky, to say the least.

It doesn’t help that a slump in discretionary spending has prompted some of the country’s top stock pickers to identify the food industry as one of the most vulnerable during a recession. I am therefore not surprised to hear wholesale food distributors ask the question: Is now the time to stop or reduce my IT spending?

It’s easy to say yes, but is this the wise response?

Recessions are tough and the knee-jerk reaction is to pull back. Yet there are shrewd business owners just standing by, waiting to grab the opportunities that lurk in the shadows. This is why I believe the name of the game is to protect and if possible, even increase profits during tough times.

There are three BIG reasons to beef-up IT spending – even during a Recession!

1.) You can buy it cheaper now. Everyone is hungry for business during a recession and that includes software companies. Don’t get me wrong – quality, industry specific inventory control software packages will never be ‘cheap’, regardless of the economy, but you will never find a better time to invest in one than now.

2.) Profits are more important now than ever. Wholesale food distributors measure profits in pennies per item not in tens of dollars, so if fewer sales come through the front door, it is more important than ever to control the costs going out the back door. Put another way, if a sale is lost or a fine is levied due to non-compliance (such as with the USDA’s new Country-of-Origin labeling act); if a sale is unknowingly made at or below cost, or if an item goes bad in the warehouse, two unfortunate scenarios can happen. Profits will decrease and often, business will go along with it. Quality, industry-specific software can come to the rescue by providing a precise knowledge of inventory, costs and revenues associated with each item and customer.

3.) You can save on hiring costs. Although everyone knows that the biggest expense a company faces is staffing, many food distributors spend huge amounts paying people to do jobs that a well-designed, accounting and inventory control software package could execute with the click of a key. For example, instead of paying a person to verify and file returned and signed customer invoices for future reference purposes, a quality software package will enable you to automatically scan them into a computer and then be able to instantly retrieve and fax or e-mail them as needed. Imagine the savings in salary, health insurance and other benefits. This is not to suggest that you should substitute software for a hardworking employee’s livelihood, but if a specific job can be done faster and more accurately by a computer, then it makes sense to re-assign that person to another part of your organization where help is needed, thus eliminating the need to hire another employee.

Like it or not, we must deal with the reality of an economy gone bad, and a recession can put a terrible load on businesses. But don’t forget what every optimist knows instinctively – remarkable opportunities abound in times of trouble. By beefing up your company’s software today, you can increase your opportunity for a profitable 2009.