If you’ve read the news, talked to other business owners or in general just seen the way the economy has been going in the last year you’ll be sure to be thinking that a recession is very likely on its way.
During August, official figures came out showing that the GDP dropped 0.3%, if this continues for two quarters in a row this is then an official recession. This could be the reality so it’s very important to make sure your business is prepared for this as best it can be.
Is it likely, well experts who were from the EY ITEM club have predicted that it will happen and it will likely start around mid 2023, meaning you don’t have too long to prepare but you do have a decent enough time.
So where do you start, well one great place is to have a chat with your accountant, they will have the latest information in relation to the government, taxes, grants, ways your business can be set up to help weather the storm if it comes. As many say it’s much better to be prepared for something than to go into it with blinkers on hoping it doesn’t happen.
Deal with Debt and make sure your cashflow is in a good place
Cashflow is king, this phrase is often said across business and if you’ve ever had any cashflow issues then you’re more than likely to agree with this. It can be seen as the lifeblood of your business, if you don’t enough cash coming in to cover the costs that need paying then you can find yourself in a position where is extremely hard.
Therefore when a recession comes and it’s likely that there will be difficult times ahead its now worth trying to keep your cashflow as healthy as possible. This can be done by chasing payments, making sure that invoices are paid, if you know that certain companies often are late paying invoices or sometimes don’t then it can be worth looking into invoice factoring to help your cashflow, this means you’ll only get 80-90% of the invoice but it will help your cashflow which could be vital.
The next step is to try and reduce the amount of debt that you have within your business, reduce loans if you can as paying interest on them during a recession can be tough. If you have reduced your debts when a recession is over you’ll be in an even better position to grow rapidly.
Protection by reducing your costs
Although quite obvious, it’s always a good idea to try and cut your costs in your business wherever you can, especially when a recession is on the horizon. Whether it’s limiting how much overtime you give your staff, reducing working hours, reducing your utility usage, cutting back on costs during production within your business or anything else that can help to reduce your overall costs can really put you in a much better position for when a recession actually starts.
One hard decision that is never ever one that is done lightly is to think about cutting your staff numbers, although a thing that many business owners hate doing, if it means you can save over jobs in the future then its something that should be considered. Making your business as lean as possible so that it can survive is essential. This option to reduce staff should be one of the last options you look at within your business.
How Velocity Accounting can help you
Whether you want to discuss one of the options above, need a second opinion on something or in general want to improve your cashflow and cut your costs, get in touch with us and we can help you to help your business get recession ready.
