How COVID-19 is hurting certain industries, yet accelerating digital transformation
Economic update from RSM
On April 8th, 2020, Billtrust President Steven Pinado was joined by Kevin Depew, Deputy Chief Economist and National Industry Analyst Leader at RSM to discuss the current economic outlook of the COVID-19 pandemic. This blog post is based on their conversation. You can also listen to the full webinar here.
The U.S. economy has suffered a series of simultaneous shocks:
– Supply shocks in the form of closed factories / offices and service industry shutdowns.
– Demand shocks as consumers have sheltered in place, greatly reducing their consumption.
– Financial shocks as volatility overtook our financial systems.
But we’ve also seen a robust policy response along both fiscal and monetary lines including the possible establishment of a Main Street Lending Facility very soon. One thing we can be sure of is that this policy response has not been a single event but will be an unfolding process. That process will evolve as we learn more about the COVID-19 virus and the effectiveness and timelines of possible treatments and a vaccine.
It is RSM’s view that we will not see a depression as a result of COVID-19, but likely a recession lasting 2 – 3 quarters in the U.S.
There are currently 24 million U.S. jobs at risk. The unemployment rate as of April 9, 2020 is estimated to be 10 – 13%, with an estimated peak of 18 -24% later this year.
These numbers are clearly distressing, but there will be a recovery. Whether that recovery will be U or V-shaped is a hot topic of debate, but it is RSM’s view that a V-shaped recovery is unlikely.
What will the recovery look like?
The pace of the recovery will largely depend on the results of scientific and public mitigation efforts, but the U.S. economy should likely begin its path to recovery in June or July of 2020. However, RSM is expecting below average production output in 2020 and 2021.
Fully reopening the economy will require:
– A consistent decrease in the number of cases
– The ability to test the entire population for COVID-19
– Sufficient health infrastructure in case of re-emergence
– Effective therapy and vaccines available to the entire population
Certain industries will face great challenges:
Manufacturing – The international supply chain will face impacts in the form of material shortages and a decline in exports.
Retail – Social distancing will have a negative impact on traffic leading to reduced revenue.
Travel and Transportation – Lockdowns have already majorly affected the airline and hospitality industries.
Commercial Real Estate – Demand for office space will see a near-term lockdown related depression, but the sector also faces long-term risks as companies reevaluate work-from-home policies.
Digital transformation in order-to-cash has become a necessity.
Currently, 42% of all B2B payments are made via paper check. But banks have already issued warnings about their ability to support the lockboxes that many businesses rely on to process and apply check payments. In addition to this, USPS is facing check delivery challenges internationally. And organizations that rely on secure, in-office terminals to manually key in invoices and payments to the growing number of A/P portals have found their processes frustrated by new, remote work practices.
It is not an exaggeration to say that reliance on manual invoicing and payments processes now pose a meaningful risk to businesses and their ability to manage cash flow.
Electronic invoicing and payments will continue to grow and represent an important opportunity to secure business viability moving forward.
If you would like to speak to an expert on how we can help your company’s ongoing efforts in digital transformation, please reach out to Billtrust.