This article is the fifth in a series that looks at how suppliers can successfully navigate these uncertain economic times in the age of coronavirus.
Now that most of us have experienced what it’s like to work from home for the last 6 to 8 weeks, it’s a strong possibility that this way of going about our business is here to stay. According to a recent article in The New York Times, What if You Don’t Want to Go Back to the Office?, most Americans would rather continue to work from home than return to the office when the economy fully reopens. This shouldn’t surprise us, as there are a host of benefits to working from home for many office workers. Many of those include no commute, spending more time with our children, greater flexibility to work out, eating healthier and more. In short, many workers now operating from home cite a better overall quality of life compared to the way things were.
It’s fair to say that operating remotely is not an option for a large portion of the American workforce, especially those in manufacturing and service positions. In addition, there are workers who also believe that operating from home is highly overrated. When some things return to normal, some of us will jump for joy at the opportunity to return to the office.
The ripple effect
While some debate the pros and cons of working remotely, there are a number of long-term implications working remotely will have on various segments of our economy.
Commercial real estate
Global Workplace Analytics estimates that 25-30% of the workforce will be working from home by the end of 2021 as a result of the pandemic. There are others estimating that number may be closer to 60%. Regardless of that final percentage, organizations can save approximately $11,000 per year for each employee working remotely. It’s not a stretch to believe many companies are looking at these numbers since COVID-19. If anywhere from 30-60% of workers no longer return to the office, the commercial real estate market could be severely impacted. Why invest in 30,000 square feet of office space for 200 people when you can simply have most of them work from home?
LoopTeam, a startup endeavoring to disrupt the video conferencing space, has positioned itself as an enabler of virtual offices. For companies whose workforce is made up of distributed teams, LoopTeam facilitates fast, spontaneous communication similar to an in-office working environment. With companies like LoopTeam and Zoom pushing the remote workplace envelope, companies are finding the necessary tools that make working from home easier without a decrease in productivity.
Coinciding with the global pandemic, gas prices have plummeted to levels we haven’t seen in more than 10 years. Although the cause for the fall in oil prices had more to do with the price war between Russia and Saudi Arabia, the pandemic created a perfect storm where we even saw oil prices dip below zero. While this is great for many who can now fill up their vehicles for as little as $10, the long-term implications are not good for those who work in oil production. The administration’s attempt to resolve the price war appears to be helping oil prices rebound. Nevertheless, fewer cars on the road because of the pandemic and its aftermath could continue to create volatility with gas prices.
Many restaurants, especially those near a high concentration of offices, rely heavily on the daily lunch crowd. If many of those offices close or house significantly fewer workers than before the pandemic, many of those establishments could be hit particularly hard. Due to social distancing practices, that impact could extend to other eating establishments not necessarily dependent on mid-day business. Restaurants only have so much floor space. If only half of it is used, can they still operate and make a profit?
In a previous blog titled Has Invoice Submission Changed Forever After COVID-19?, I discussed how invoicing might change going forward. Considering how other areas of doing business are changing, the real question is whether the entire invoice-to-cash process will be different. Paper invoicing, and its delivery by the United States Postal Service and other couriers, could be severely impacted due to the additional stress on postal workers and the inability for many to incorporate social distancing while they work. Needless to say, postal carriers, and those who sort the mail, cannot work remotely. With that in mind, invoice submission will likely rely on electronic means now more than ever before. In terms of cashflow and how suppliers get paid, fewer checks could be in the mail and electronic payments such as ACH could be the overwhelming standard.
While a good portion of our economy is in shambles, it’s worth noting that this current recession (I hesitate to use that term, as a recession is typically two consecutive quarters of a fall in GDP) is somewhat artificial in nature. The challenges were not due to market forces; they were the result of a lockdown due to health concerns. While I do believe the administration will soon remove barriers for startups and implement initiatives to get the economy up and running again, one of the outcomes could be the easing of restrictions for acquisitions and mergers. Under normal circumstances, some large organizations would be blocked from buying or merging with other large organizations if antitrust concerns arose (think AT&T’s failed acquisition of T-Mobile in 2011). With economic recovery moving into hyperdrive, it would not be surprising to see the current administration relax some restrictions if some of the recovery burden were transferred to the private sector rather than the federal government. But wait! Even if more mergers occurred and companies on the verge of liquidation were saved by healthier organizations, the inevitable layoffs would again place more people in the unemployment line. In this scenario, the current economic downturn could be the gift that keeps in giving.
It’s difficult to predict with certainty how life will be 6 to 12 months down the road. There are a number of consequences, good and bad, to be realized once this economic ambiguity is sorted out in earnest. If we can be sure of one thing, it’s that companies will operate differently next year than they did last year.
Ernie Martin is Founder and Managing Director of Receivable Savvy. He brings over 25 years of experience in financial supply chain management, marketing and communications and draws upon his extensive experience to share knowledge and best practices with AR professionals. He previously chaired the Vendor Forum of the Federal Reserve Bank of Minneapolis and his resume includes time at several well-known brands and companies such as Tungsten Network, Delta Airlines, CIGNA Healthcare and Georgia Pacific, as well as a number of years as an independent consultant.