By Guest commentary Friday, January 20th, 2023

By Nora Sobottka

California finance executives have redefined adaptability with warp-speed reconfiguration of capital investment plans in the wake of a global pandemic. Adaptability is currently a key consideration for the state’s business owners, given that a potential economic slowdown is on the horizon in 2023. With that in mind, how can California businesses prepare?

Between supply chain stagnation, rapid inflation, rising interest rates, and one of the tightest labor markets to date, California business leaders continue to operate in an environment that many haven’t seen in their professional lifetimes.

While escalating interest rates are no longer a surprise, with each Fed announcement, I’m having more conversations with California business leaders to help them develop creative financing solutions to meet their short and long-term goals.

Automate operations

One short-term goal that many California middle-market companies are considering, or implementing, is business automation. Many companies are investing in technology to mitigate the impacts of labor shortages. There are several factors to weigh when considering automating and streamlining operations, including:

• Consider upgrading ERP or inventory management systems to provide the automation you need today and in the future.  As companies grow, often systems lag behind, which requires more human capital to get the job done.

• Analysis of companies’ treasury management services can also help improve cash flow and save on labor costs by optimizing digital payments and streamlining account receivables. 

Solving the supply chain conundrum

Significant inventory challenges and supply chain delays continue to impact numerous markets. California companies facing these issues may consider:

• Working capital or supply chain financing to help bridge inventory and account receivables gaps

• Interest rate hedging and foreign exchange services to help mitigate rising rate impacts

Bank on long-term relationships

Regardless of the kind of operating environment business owners are working in, it’s imperative to work with your financial institution to maintain adequate cash flow and strong liquidity positions. Working with your commercial banking relationship manager early and often can help avoid unwanted surprises while improving the flexibility of your business. The beginning of a new year is a great time to conduct a thorough financial review, including cash flow projections, and have frank conversations to make any necessary adjustments to loan structures and working capital lines of credit.

It is equally important to work with a bank that has comprehensive, industry-specialized capabilities to support your growth over time. This can mean finding a financial partner with industry expertise and premium services like treasury management, investment banking, foreign exchange, and wealth management tools.

Furthermore, borrowers should seek a financial partner with robust capabilities and a proven commitment to supporting your industry over an extended period. Your bank should be committed – not just to providing capital at attractive rates – but also to helping you and your company succeed financially.

California business leaders know standing still is not an option. Through it all, our goal for clients remains the same: ensure that their financial future is deliberate, stable, and successful – not reactive based on current market variables.

Nora Sobottka is Wells Fargo’s Central Valley Commercial Banking Market Executive. She can be reached at [email protected].