The UK seems to be officially heading for a recession and in this blog we will be discussing how you can prepare your business for the coming months.
Before we evaluate the steps you can take to protect your business in a recession, it’s important to highlight that a recession is part of a normal economic cycle, and there will be easier and better times ahead.
A recession can in fact, focus your attention on cost control and have a long-term positive impact on your financial processes and disciplines. (We like to focus on the positives where we can!) So let’s take the perspective of a challenge that we are ready to complete with the following tips and advice from our expert panel of accountants.
1: Cash flow is King. Cash flow is the number one priority in surviving a downturn in the economy and this requires stringent financial management. Remember, if you don’t often speak with your accountant, now is the time to take a look at the business accounts together.
2: Manage your debt. Companies with higher debt are more vulnerable in a recession as your outgoing commitments are higher. Can you consolidate your debt into one payment? It may require a longer term at a higher interest rate but could that be less impactful on your business and retain more cash In the business? Whatever you do don’t bury your head in the sand – more that likely something can be arranged to help manage this better.
3: Credit control needs to be tighter than ever. It is likely that your customers are facing the same financial issues, therefore it’s more important than ever to get a tight control on credit. This is something your accountant can help you with if you prefer to outsource invoicing so as to keep your professional relationships stress-free.
4: Overheads. Can you cut back on any overheads? If sales are down, can you cut back on staff or staff hours? Business owners are often reluctant to do this, but it could be essential to your business surviving or not.
Maybe now is the time to invest in automation and IT systems for your business to ensure a smoother running and less staffing overheads.
Can you outsource more jobs so you don’t have to employ an in house staff member? For example HR, Payroll or bookkeeping? This can be higher in cost yet more cost effective as they will be experts, likely more efficient and you won’t need to absorb employer obligations such as holiday and sickness pay.
Are you on the best deals for your utility bills? Take some time to look at all of your expenses and ensure that you aren’t overpaying in places.
Do you still need that big premises? Can you move to remote working? Can you make better use of space and downsize?
5: Re assess your marketing strategies. A recession is not the time to cut back on your marketing spend. In fact, your voice needs to be louder than ever and your customers need to know why they need to choose you over your competitors when they are having to tighten their belts.
Take time to assess your marketing strategies and ensure you are really talking effectively to your consumer – focus on them. Offer meaningful deals and promotions, but don’t compromise on quality.
6: Prioritise networking events.
Post pandemic networking is on the up – not surprising! And it’s more important than ever to make those all important business connections and lasting business relationships. These connections can likely offer business opportunities, offer collaborative ideas and usually you can gain advice and support from other like minded business owners. Collaboration is key.
This list is not exhaustive and as always, please do give Soldi Partners a call if you’d like a chat. It’s always jargon free – and its always no obligation.
Theresa x
